I.P.Mukerji, J. - (1.) I have considered the decision of the State Bank of India dated 1st February, 2014. By it, the first plaintiff has been declared as a willful defaulter. Ms. Rao for the Bank submits that the name of the first plaintiff was posted on the website of CIBIL and other CICs as early as September, 2013. I do not understand how this was done before the above decision was made on 1st February, 2014.
(2.) THE phrase 'willful default' is defined in Para 2.1 of a circular of the Reserve Bank of India dated 2nd July, 2012. It is inserted below. "2.1 Definition of willful default: The term "willful default' has been redefined in supersession of the earlier definition as under: A 'willful default' would be deemed to have occurred the following events is noted: (a) The unit has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity to honour the said obligations. (b) The unit has defaulted in meeting its payment/repayment obligations to the lender and has not utilised the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes. (c) The unit has defaulted in meeting its payment/repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilised for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets. (d) The unit has defaulted in meeting its payment/repayment obligations to the lender and has also disposed of or removed the movable fixed assets or immovable property given by him or it for the purpose of securing a term loan without the knowledge of the Bank/lender." Again what is meant by diversion and siphoning of funds is defined in Paras 2.2 and 2.2.2. These paras are also set out hereinbelow. "2.2 Diversion and siphoning of funds: The terms 'diversion of funds' and 'siphoning of funds' should be construed to mean the following: 2.2.1 Diversion of funds, referred to at Para 2.1(b) above, would be construed to include any one of the under noted occurrences: (a) utilisation of short -term Working Capital funds for long -term purposes not in conformity with the terms of sanction; (b) deploying borrowed funds for purposes/activities or creation of assets other than those for which the loan was sanctioned; (c) transferring funds to the subsidiaries/Group companies or other corporates by whatever modalities; (d) routing of funds through any Bank other than the lender Bank or members of consortium without prior permission of the lender; (e) investment in other companies by way of acquiring equities/debt instruments without approval of lenders; (f) shortfall in deployment of funds vis -a -vis the amounts disbursed/drawn and the difference not being accounted for. 2.2.2 Siphoning of funds, referred to at Para 2.1(c) above, should be construed to occur if any funds borrowed from Banks/Fls are utilised for purposes un -related to the operations of the borrower, to the detriment of the financial health of the entity or of the lender. The decision as to whether a particular instance amounts to siphoning of funds would have to be a judgment of the lenders based on objective facts and circumstances of the case."
(3.) IN the decision dated 1st February, 2014, the following reasons are ascribed to describe the first Plaintiff as a willful defaulter: "(i) The firm diverted funds to its associate concerns PKS Ltd.; (ii) The firm disposed of or removed stocks but proceeds thereof not credited in their account with the Bank.";