• A Director in default to banks and creditors

We have a Director who has defaulted to the bank, pending recovery case with DRT, pending personal guarantee. later part the bank has written off the amounts. of course the legal proceedings still in progress. now it is found the director, floated fresh companies, doing good business , invested big monies in those companies. other than the normal recovery proceedings can there be any legal hurdles that can be created to make the defaulter director to come to the settlement table further he and his companies also enjoying good limits with other banks in other cities too. 
of course the documentation is available with the bank, no new investments have to be made without the concurrence of the lender bank.
Asked 7 years ago in Business Law

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7 Answers

Hello,

Though the question does not provide all the time details, and it seems that you want to go to HC. If DRT is taking time to decide your case, you can file a writ petition in the High Court for expediting the process.

Regarda

Anilesh Tewari
Advocate, New Delhi
18079 Answers
377 Consultations

5.0 on 5.0

Does the director in question hold shares? If he does the best remedy would be by filing a mismanagement and oppression in NcLT Hyderabad. you may also pursue misfeasance allegations against him.

Saptarshi Banerjee
Advocate, Kolkata
220 Answers
6 Consultations

4.5 on 5.0

1) draw attention of the bank to fact that although director defaulted in repayment of bank loan he has floated fresh companies and carrying on roaring business

2) bank can take recovery proceedings against the director who is guarantor

3) DRT proceedings take around 5 years to be disposed of

Ajay Sethi
Advocate, Mumbai
95215 Answers
7611 Consultations

5.0 on 5.0

draw attention of RBI to fact that defaulter director has been granted fresh credit limits by other banks

2) request that director be placed in wilful defaulter list

Ajay Sethi
Advocate, Mumbai
95215 Answers
7611 Consultations

5.0 on 5.0

Hi

1) The Director who has Defaulted to the bank will be held personally liable if provisions of fraud, oppression and mismanagement have been initiated in the conduct of the affairs of the company.

2) The Provisions of Fraud, Oppression and Mismanagement can be initiated at NCLT any time even when DRT proceedings are pending.

3) According to section 447 of the Companies Act, if found guilty of fraud, a director is punishable with imprisonment of six months to 10 years, as well as a fine of up to three times the amount involved in the fraud. Similarly, under section 447, those guilty of non-repayment of debt are punishable with imprisonment of six months to 10 years and a fine of up to three times the amount

4) It might also be noted that in terms of Section 128 of the Indian Contract Act, 1872, the liability of the surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract. Therefore, when a default is made in making repayment by the principal debtor, the banker will be able to proceed against the guarantor / surety even without exhausting the remedies against the principal debtor.

5) As such, where a banker has made a claim on the guarantor on account of the default made by the principal debtor, the liability of the guarantor is immediate. In case the said guarantor refuses to comply with the demand made by the creditor / banker, despite having sufficient means to make payment of the dues, such guarantor would also be treated as a willful defaulter. This treatment of non-group corporate and individual guarantors was made applicable with effect from September 9, 2014 and not to cases where guarantees were taken prior to this date.

6) If you wish to get the defaulting director to the settlement table you should do the following

a) file a case against the defaulting director with National Company Law Board on the grounds of fraud, oppression and mismanagement.

b) According to section 447 of the Companies Act, if found guilty of fraud, a director is punishable with imprisonment of six months to 10 years, as well as a fine of up to three times the amount involved in the fraud. Similarly, under section 447, those guilty of non-repayment of debt are punishable with imprisonment of six

months to 10 years and a fine of up to three times the amount.

C) Writ might not be possible in your case. However if the amount involved is more than 10 crore you can initiate criminal action by filing complaint with CB-CID and if more than 100 crore you can file a writ at High court like in case of vijay mallya.

Hope this information is useful.

Rajgopalan Sripathi
Advocate, Hyderabad
2173 Answers
394 Consultations

5.0 on 5.0

If the director has defaulted in the bank loan repayment in his personal capacity it becomes his duty to repay or his assets can be attached for recovery by the lender.

The lender has to take steps to attach his assets to recover the outstanding loan.

If the bank has written off the loan it may not reopen the written off bad debts.

If the bank has a check over his assets, it may initiate process accordingly based on the documents in its possession.

T Kalaiselvan
Advocate, Vellore
85416 Answers
2239 Consultations

5.0 on 5.0

Writ petitions can be filed only if the other options are not viable or feasible.

In such things writ petitions may not be maintainable if there are remedies available locally.

T Kalaiselvan
Advocate, Vellore
85416 Answers
2239 Consultations

5.0 on 5.0

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