Wilful defaulters blame clients who haven’t paid, failed IPO plans

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Mumbai | Published: April 2, 2016 8:46:01 AM

The RBI defines wilful default as deliberate non-payment of dues by the borrower despite adequate cash flow and good net worth.

rbi, loan defaultersThe RBI defines wilful default as deliberate non-payment of dues by the borrower despite adequate cash flow and good net worth. (Reuters)

Data from Cibil, the agency which collates information on credit, shows 6,819 wilful defaulters owed banks Rs 74,699 crore until December 2015, up from Rs 22,332 crore that 3,703 wilful defaulters owed until December 2012.

The RBI defines wilful default as deliberate non-payment of dues by the borrower despite adequate cash flow and good net worth.

On Friday, The Indian Express published a list from the Cibil data of the top wilful defaulters. This is what they said when their comments were sought:

Winsome Diamonds

Winsome Diamonds and Jewellery Ltd owes banks Rs 6,800 crore, making it one of the largest accounts to be classified as a wilful defaulter.

The outstanding is much more than what is reflected in Cibil data — Rs 3,969 crore — which is collated from only those banks which have notified the borrower as a wilful defaulter.

Winsome’s troubles began three years ago, when 13 of its UAE-based distributors failed to pay Rs 4,760 crore to the company, according to the firm’s 2012-13 annual report.

In an email to The Indian Express, an official spokesperson of Winsome Diamonds said the firm and its subsidiaries were victims of non-payment by customers.

The company said it is making genuine efforts to recover $1 billion from its 13 overseas customers and has obtained favourable reports from court-appointed experts in UAE “pertaining to the bonafides” of Winsome Diamonds.

But money is yet to reach Indian banks and the company and its promoter are facing investigation by the Enforcement Directorate (ED) and the Central Bureau of Investigation (CBI).

In its response to queries from The Indian Express, Winsome said it has written to the consortium of banks to recall the wilful defaulter tag given to it as it is “misconceived”.

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Harshad Udani, Director of Winsome, said: “The companies (Winsome and its subsidiaries) are taking every possible step to receive the outstanding amounts from the UAE customers, but the companies are facing hurdles and obstacles at every step of the way from the consortium of banks, which are, with mala fide intentions, determined to bring down and destroy the companies despite admitting and acknowledging that the outstanding amounts are due and payable by the UAE customers and not the companies.”

“Unfortunately in this case, banks are not taking steps to recover the monies. They are obstructing the recovery process for vested reasons and have filed baseless FIR based on Kroll (audit) Report which has purported to make a report… without any data, documents or interactions with Winsome or its Directors or executives,” Udani said.

Zoom Developers

Zoom Developers Ltd owes Rs 3,002 crore collectively to 26 state-owned banks. According to an investigative audit conducted by the lenders, Zoom allegedly diverted loan funds to 350-odd subsidiaries, related parties based in India and abroad, and to purchase jewellery for the wife of its promoter, Vijay Chaudhary.

Banks too are to blame for this mess. Several lenders also issued bank guarantees to the company without due diligence and allowed it to roll over bank guarantees for four years until 2009-10, according to those familiar with the case. While the value of bank guarantees was Rs 3,000 crore, the collateral with them was only Rs 150 crore.

Zoom Developers’ main business was scrapping a plant and then relocating it. In 2004-05, the company decided to use five aggregators, mostly from Europe, to get international orders. Zoom used to sign contracts with these aggregators to execute projects for third parties. The aggregators would make advance payments to Zoom and used to secure this with a bank guarantee from an Indian bank for an equal amount.

The investigative audit alleges that these project contracts did not have any clause on final payment of money to the company. Some contracts did not have the name of the third party for which work was being commissioned or the location where work was to be executed.

The CBI has registered six cheating and forgery cases and a CBI special court has issued a non-bailable warrant against Chaudhary who failed to appear before it in one of these cases.

The ED has booked two cases related to money laundering and forex violations, and the Economic Offence Wing of Mumbai Police has registered two cases.

An email sent to the company secretary of Zoom Developers remained unanswered.

Reid & Taylor

International lender Wells Fargo Capital Finance LLC is the latest company to file a case against Nitin Kasliwal led- S Kumars Nationwide, a textile maker whose subsidiary Reid & Taylor India has been declared a wilful defaulter by banks.

Wells Fargo filed a case against S Kumars Nationwide on March 23 in the Bombay High Court, according to the court’s website.

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Over a dozen creditors such as Lakshmi Vilas Bank, ICICI Bank, L&T Finance, IL&FS Financial Services have filed winding-up petitions in different courts against S Kumars Nationwide and Reid & Taylor for defaulting on loan repayment.

S Kumars had a consolidated debt of Rs 4,483.98 crore at the end of March 2013, according to corporate database Capitaline. The firm has not released its annual report after fiscal 2013.

According to Cibil, Reid & Taylor India owes Rs 1,789 crore to lenders. In 2008, GIC invested Rs 900 crore in Reid & Taylor for a 25 per cent stake. But later, the company couldn’t go through with its initial public offering (IPO) of Reid & Taylor.

In its 2013 annual report, S Kumars claimed that the unsuccessful IPO plan, and write-off of overseas investments in joint ventures, affected its loan repayment plans.

At least two banks, UCO Bank and Punjab National Bank, have declared Reid & Taylor a wilful defaulter. In 2013, UCO Bank published an advertisement in newspapers to name and shame Kasliwal, chairman of S Kumars who is the guarantor of a Rs 110.07 crore loan taken by Reid & Taylor.

On April 23, 2015, the Bombay High Court appointed Pratibha Ramaswamy as official liquidator of S Kumars. This, after the company failed to repay a part of the Rs 346 crore it owed to India Debt Management, a unit of ADM Capital. The suit filed by India Debt Management relates to non-payment of debentures issued by S Kumars, according to an order passed by the Bombay High Court.

Reid & Taylor India has also run into trouble with the Income Tax department over non-payment of tax deducted at source (TDS). In July 2015, the company told the Bombay High Court that the tax department had frozen two accounts of the company with Axis Bank and ING Vysya Bank after the firm defaulted on TDS payment of Rs 2.04 crore.

An email sent to Nitin Kasliwal did not elicit any response.

Pearl Vision and Pixion Media

Century Communication, which launched Bhojpuri channel Mahuaa TV in 2008, owes banks Rs 2,000 crore. According to CBI, Century Communication owes Rs 916 crore while its associate companies — Pearl Vision Pvt Ltd, Mahuaa Media Pvt Ltd and Pixion Media Pvt Ltd — owe the rest.

According to a June 2012 caution notice of Indian Bank, the company used to maintain a no lien account with its lead bankers and all the sanctioned loan funds were sent to this account. Funds pooled in the account, the notice claimed, were diverted through fake invoices from suppliers. Some of these companies which gave fake invoices, the caution notice claimed, belonged to promoters of the company.

The Indian Bank notice said investigating officials observed that some of these supplier companies were not registered in those names and the companies were not in existence/not functioning at addresses given in the invoices.

Century’s case is now being investigated by CBI and the ED. The CBI has registered six cases against the company and its promoters P K Tewari and Anand Tewari. The CBI had arrested them in 2012 and they are currently on bail.

An email sent to P K Tewari for comment remained unanswered.

Kingfisher Airlines

The Kingfisher Airlines loan default has become the enduring image of a wilful default case for Indian banks.

According to the SBI-led consortium of banks, Mallya’s total outstanding is over Rs 9,000 crore.

On March 30, Vijay Mallya, founder-owner of Kingfisher Airlines, submitted a proposal in the Supreme Court, offering to repay Rs 4,000 crore of loan owed to the banks by September this year.

Mallya’s counsel submitted, in a sealed cover envelope, a proposal for repayment of Rs 4,000 crore by Kingfisher Airlines as well as by United Breweries (Holdings) Ltd and Kingfisher Finvest (India) Ltd.

Mallya has offered to pay Rs 2,000 crore upfront and the remaining Rs 2,000 crore by September 30.

A bench of Justices Kurian Joseph and Rohinton F Nariman took on record the proposal and gave the consortium of banks a week’s time to respond to it.

While posting the matter for hearing on April 7, the bench told the banks: “If you want to reject it (proposal), reject it… do whatever you want. Just tell us in a week what is your decision.”

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