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Guj HC partially strikes down RBI wilful defaulter circular

RBI’s master circular on wilful default list siphoning of funds, misrepresentation/falsification of records and fraudulent entry of transactions and restricts all directors of defaulting companies from banking services for any other ventures for five years.

The Gujarat High Court has partially struck down the Reserve Bank of India (RBI) circular on wilful defaulters. The RBI notice on wilful defaulters debars all directors of defaulting companies from banking services for any other ventures for five years. The court found RBI’s restrictions “arbitrary and unreasonable.”  

RBI’s master circular on wilful default lists siphoning off funds, misrepresentation/falsification of records and fraudulent entry of transactions. It may be recalled that United Bank of India had declared Kingfisher as wilful defaulter, which was contested by the airline.

In a communication to the Bombay Stock Exchange, cash-starved  Kingfisher Airlines said “none of the parameters constituting wilful default governed by the Master Circular issued by the RBI, apply to the company and the company is in the process of seeking legal recourse against action of UB.”

However, Kingfisher was denied any relief from the Supreme Court which refused to interfere with the order of Grievance Redressal Committee of United Bank of India (UBI) declaring it and its promotor Vijay Mallya as wilful defaulter. 

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