Banks can take action against wilful defaulters: Karnataka HC | Bengaluru News

BENGALURU: If a bank account is declared to be fraud and account holders ‘wilful defaulters’, then the bank can initiate criminal proceedings as per RBI‘s master circular and invoke the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the Karnataka HC said in a recent verdict, reports P Vasantha Kumar. “Having initiated recovery proceedings before the DRT and having a recovery certificate in their hand would not mean the proceedings cannot be initiated against these petitioners,” it observed, dismissing the plea filed by Associate Lumbers and its directors.
Justice M Nagaprasanna said Clause 8.1 of RBI’s master circular mandates that if the amount involved in fraud is between Rs 25 crore and Rs 50 crore, then the bank should complain to CBI‘s Banking Security and Fraud Cell “irrespective of the involvement of a public servant”.
The judge said as per section 3 of the notification issued by the central government vis-a-vis Delhi Police Establishment Act – which forms part of the CBI manual on the offenses that CBI
can investigate – both sections 420 and 120B of the IPC include a part of the said notification.
The company trades in timber, teakwood, packing cases, plywood, and other related products. Corporation Bank (now Union Bank of India) extended a Rs 23-crore loan to the firm in 2003. The credit limit was extended from time to time on requests from the petitioner. On September 21, 2015, the loan stood at Rs 60 crore.
On declaring their account as fraud, UBI filed a complaint before CBI against the petitioners on February 15 this year. An FIR was registered on February 17 for offenses punishable under the Prevention of Corruption Act, 1988, and the Indian Penal Code.
Challenging the same, the petitioners claimed they faced a cash crunch due to the economic slowdown and they were not in a position to pay the debt in time.


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