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The Supreme Court of India. Photo: Mint
The Supreme Court of India. Photo: Mint

Why personal guarantee of big corporate loan defaulters not invoked: SC to govt

  • The apex court bench asked the petitioner to make a representation to the ministry within two weeks
  • The court also ordered the ministry to respond on the matter within four weeks

NEW DELHI: The Supreme Court has asked the finance ministry to furnish a reply on why state-owned banks have not invoked personal guarantees of big corporate loan defaulters.

The apex court bench, headed by Justice Rohinton F Nariman, observing the importance of the issue, asked the petitioner to make a representation to the ministry on the matter within two weeks. The court also ordered the ministry to respond on the issuwithin four weeks of receiving the representation.

“The Ministry of Finance itself has, by a Circular, directed personal guarantees issued by promoters/managerial personnel to be invoked. According to the petitioners, despite this Circular, Public Sector Undertakings continue not to invoke such guarantees resulting in huge loss not only to the public exchequer but also to the common man," the court said in its order, passed on Monday. The order was made available on the SC website last evening.

Senior advocate Manan Mishra, representing the petitioners, argued that there was a loss of around 1.85 trillion to the public sector banks as they have not invoked personal guarantees of defaulters. He added that managers, chairpersons and promoters of big corporates walk away after huge loan defaults while a loan from a common man is recovered meticulously.

“We allow the petitioners, at this stage, to withdraw this Writ Petition and approach the Ministry of Finance with a representation in this behalf. The representation will be made within a period of two weeks from today," said the bench also comprising Justice Navin Sinha.

The petitioners have sought directions to the central government and Reserve Bank of India to invoke personal guarantees and initiate proceedings against such promoters, directors, and managerial personnel for recovery of the defaulted loans.


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