Sebi working on guidelines to check wilful defaulters

Sebi is working on guidelines to deal with wilful defaulters but there is no restriction at present on such entities from raising funds from the capital market, according to the regulator's chief U K Sinha.

“We are working on the guidelines for wilful defaulters. It will take some time,” Sebi Chairman Sinha said. He also said that at present, there is no restriction on wilful defaulters from raising funds.

Earlier this month, United Bank of India had declared Kingfisher Airlines, its promoter Vijay Mallya and three other directors as wilful defaulter citing alleged diversion of funds. Kingfisher Airlines and directors declared as wilful defaulters would not be able to borrow from banks in the future.

 They would also lose director-level positions in companies and criminal proceeding could be initiated against them, if warranted, to recover the money.

Meanwhile, the government is planning to come out with a separate Bill in Parliament to deal with instances of wilful defaults in payment of bank loans. Stringent action against the wilful defaulters in terms of attachment of properties under Sarfaesi Act (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act), change in management and other legal action against the promoters, among others, are under consideration.

For preparing the Bill, the Department of Financial Services has set up a panel for suggesting changes in the existing laws to make debt recovery more effective and frame a statute with harsh penal provisions for wilful defaulters.