Loan default case: Could Vijay Mallya face criminal proceedings?

By: | Updated: March 10, 2016 11:27 AM

Vijay Mallya has been declared 'wilful defaulter' by a clutch of public sector banks, whom he owes around Rs 9,000 crore.

vijay mallya - loan default caseVijay Mallya has been declared ‘wilful defaulter’ by a clutch of public sector banks, whom he owes around Rs 9,000 crore. (Photo: Reuters)

As lenders moved the Supreme Court to restrain Vijay Mallya from leaving the country, it transpired that he had already slipped out of the country on March 2. The apex court asked lenders “What can be done now?” Mallya has been declared ‘wilful defaulter’ by a clutch of public sector banks, whom he owes around Rs 9,000 crore.

While bringing Vijay Mallya back to the country to face the the law might be a long-drawn and tedious process involving, the question that begs an answer is whether lenders could have been swifter in taking action and preventing Mallya from leaving the shores and initiating steps to get back their dues.

Among the penal provisions provided by the Reserve Bank of India, lenders can, among other things, initiate criminal proceedings against anyone categorised as a wilful defaulter. The central bank, in fact, urges lenders to ‘promptly consider’ initiating such criminal proceedings.

The RBI advised lenders to put in place a transparent mechanism for initiating criminal proceedings.

In fact, in the past, Vijay Mallya had faced criminal cased filed against him by the Income-Tax department for not passing on the tax deducted at source from employees of Kingfisher Airlines, the airline floated by him which later collapsed.

The RBI wilful defaulters’ code also urges lenders to ‘expeditiously initiate’ legal proceedings to recover dues. According to facts placed before the Supreme Court on Wednesday, Mallya’s domestic collateral pledged to banks are around 10 per cent of the Rs 9000 crore owed to banks, while his overseas assets would add up to his total debts.

Here are the other penal measures that banks are required to initiate against wilful defaulters:

-Change of management in companies involved in wilful defaults

– Stopping additional loan facilities

– Debarring from institutional finance for borrowers who have indulged in siphoning, diversion of funds, misrepresentation, falsification of accounts and fraudulent transactions

-Debarring from floating new ventures for a period of 5 years from the date of removal of their name from the RBI list of wilful defaulters

– Initiating legal process for recovery of dues should be initiated expeditiously.

However, the Central Bank has advised that penal provisions should be “used effectively and determinedly but after careful consideration and due caution.”

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