'Why no criminal case lodged against loan defaulters?', SC asks RBI, Centre

The Supreme Court on Wednesday asked the government and RBI to explain why the lenders should not file criminal cases against loan defaulters and why the recommendations of an expert panel on banking reforms are yet to be implemented.

A bench of Justices Sanjay Kishan Kaul, Abhay S Oka and Vikram Nath gave four-weeks time to the government and RBI to file their response to the contention that despite bank accounts of many big companies having been declared as ‘fraud’, the lenders still hesitated to report such cases to the state police or the CBI.

Advocate Prashant Bhushan, appearing for the Centre for Public Interest Litigation, an NGO, contended that all the banks may be directed to strictly comply with the RBI’s circular of July 1, 2016, that mandated banks to publish a list of defaulters on their websites and also the Central Vigilance Commission’s (CVC) circular of May 9, 2018 for filing of FIRs against defaulters by PSU banks.

“No criminal investigations have been initiated by the PSU banks with the CBI against SREI group or Reliance Group as their bank accounts have been declared as fraud,” the counsel said.

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Bhushan had earlier in 2016 submitted that about Rs 40,000 crore of corporate debt was written off by the lenders in 2015.

RBI, led by senior advocate Jaideep Gupta, submitted that the list of defaulters of loans over Rs 500 crore had already been submitted to the SC in the sealed cover in 2016.

The issue had been referred to a three-judge bench in another 2015 case of Jayantilal N Mistry, he said.

The top court had earlier this year expressed reservation with its own 2015 judgement mandating banks to disclose a list of defaulters and inspection reports under the RTI Act, for failing to balance the right to information with the right to privacy.

It had also decided to examine a plea by banks against RBI circulars issued for disclosure of details, under the RTI Act, in accordance with the 2015 judgement. It also noted the right to privacy was declared a fundamental right by a nine-judge bench in the K S Puttaswamy case subsequently in 2017.

HDFC Bank and others challenged the RBI’s action, claiming that being privy to sensitive information like personal details of their account holders, prospective loans and other financial transactions, they were required to keep such info confidential and maintain privacy. Private banks also said they were not bound to disclose their inspection reports as they were not public authorities under the transparency law.