Understanding Willful Default
Willful default means that a party does not make a payment out of its will. The Willful default is defined as follows:
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The party defaults in meeting its payment obligations even if it has capacity to repay.
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The party defaults in meeting its payment obligations and diverts the finance away from the purpose it was availed for.
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The funds are available with the firm in other form of assets and has not made a payment
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The party defaults in meting its payment and also disposed off the removable assets / immovable property which was used for the purpose of secured loan, without the knowledge of the Bank.
Willful Default and SS Kohli Commitee
The SS Kohli Committee had recommended some penal measures against the willful defaults. Some of them are as follows:
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The willful defaulters are not able to access the markets, so a copy of the list of the willful defaulters are shared by the RBI to SEBI.
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No facility is provided by a Bank / FI to a willful defaulter till 5 years from the date of publishing its name in the list of willful defaulters.
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Expeditious legal action is initiated against for the recovery of the amount.
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The banks and FIs are required to compile the list of the suit filed willful defaulters and submit the same to the Credit Information Bureau of India Ltd. every quarter, provided the outstanding amount is ` 25 Lakh or more.
