SC asks MoF to respond why personal guarantees not invoked in case of loan defaulters of big corporates

The Supreme Court has asked the Ministry of Finance to respond to a plea why personal guarantees of big corporate loan defaulters were not invoked in case of their failure to repay the loan amount.

A bench of Justices R F Nariman and Navin Sinha told a PIL petitioners, Saurabh Jain and Rahul Sharma to approach the Ministry with a representation within a period of two weeks.

The petitioners, led by senior advocate Manan Kumar Mishra and advocate Durga Dutt, contended sought a direction to the Union government and the RBI to invoke personal guarantees given by the promoters, directors, managerial personnel of large corporate houses which have defaulted in repaying loans advanced to them by such Public Sector Banks (PSBs) amounting to approximately Rs 1,85,000 crores.

They also sought initiating of proceedings against such promoters, directors, managerial personnel for the recovery of the said loans.

After going through the matter, the bench said, "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 do not invoke such guarantees resulting in huge loss not only to the public exchequer but also to the common man."

The court asked the petitioners to withdraw the plea and approach the Ministry which was directed to respond to representation within a period of four weeks.