Suit Filed Cases & Wilful Defaulters Explained

Reserve Bank of India(RBI) has entrusted TransUnion CIBIL to perform the role of collecting and circulating information on suit-filed accounts & list of defaulters. RBI has also directed banks, FIs & State Financial Corporations to submit a list of all the Suit Filed Accounts to TransUnion CIBIL as well as RBI.

Summary:

  • Suit Filed cases are petition or complaint, made by banks or notified financial institutions or state financial corporations, to a court that initiates a lawsuit
  • Suit Filed cases are cases on companies who are wilful defaulters, and Reserve Bank of India (RBI) has classified “wilful” and “non-wilful” defaulters.
  • It is categorized by RBI for those who deliberately use the banking system to not pay back dues from those who are genuinely fallen on debt trap
  • TransUnion CIBIL Limited maintains a database on suit-filed accounts of Rs.1 Crore and above & suit-filed accounts(wilful defaulters) of Rs. 25 lakhs and above

Filing suit is a formal document called a petition or complaint presented to a court that initiates a lawsuit. In the petition, the person/bank filing the petition alleges a Cause of Action against a defendant/company for which they seek economic relief.

Suit Filed Case

A Suit Filed Case is a case where any bank, or notified Financial Institution(FIS), or State Financial Corporations(SFCS) lends money to a company and when the company defaults in paying back the loan, the bank files a complaint in a court of law.

Wilful Defaulters

Banks and government-owned lenders are coming under heavy pile of bad loans. Most Companies and Individuals who are not able to repay their loans, have a slowdown and are faced with factors beyond their control. However, there are some companies and individuals, who despite having the capacity and capability to pay back the money, do not repay or they divert the funds availed from lenders or they don’t utilise the funds for the specific purpose for which the loan is issued. They are truant borrowers and are alleged to be doing it wilfully. They are called Wilful Defaulters.

As per RBI, a wilful default may occur in four cases:

  1. When there is a default in repayment obligation by a company/ individual to the lender even when it has the ability to repay the obligation. There is a deliberate intention of not paying back the loan.
  2. The funds were not utilized for the specific purpose for which the loan/finance was availed. The money was diverted for other purposes.
  3. When the funds have been siphoned off and not been utilized for the purpose for which it was availed. Further, there are no assets available to justify the usage of funds.
  4. When the asset that is bought with the funds that were given by the lender are sold off without informing the bank or the lending party.

Reporting about Suit Filed Accounts & Directors

At the end of every quarter, banks and financial institutions need to submit the list of suit-filed accounts of wilful defaulters to the TransUnion CIBIL Limited formerly known as Credit Information Bureau(India) Limited. TransUnion CIBIL Limited is the leading credit information company in India and maintains one of the largest collections of consumer information globally. Currently, TransUnion CIBIL maintains a database on suit-filed accounts of 1 crore and above and suit-filed accounts(wilful defaulters) of 25 lakhs and above. This information is available on an application developed with the parameter search process to enable users to access data. It is across banks and companies at various geographical locations.

Banks & FIs are required to report the names of current directors as well as directors who were associated with the company at the time the company account was classified as a wilful defaulter. The list also includes independent and nominee directors. It helps to safeguard other banks and institutions from such directors.

Consequence of a Wilful Defaulter

If a company is labeled as wilful defaulter then, the worst thing that can happen is they do not get any additional credit lending/facility from any source be it Banks or FIs. A wilful defaulter is not allowed to start any new venture till 5 years from the date of being declared as wilful defaulter. Lenders need to initiate a legal process, including criminal proceedings if needed, against the borrowers to get the recovery of dues.

How to check Wilful Defaulter Status

For checking all suit-filed cases you have to visit Suit Filed Cases and search accounts with parameters more than 1 Crore suit-filed accounts and above 25 lakhs suit-filed accounts (wilful defaulters).

You can also approach InstaFinancials, where we provide the latest wilful defaulter status along with list of Suit Filed cases against each company along with company financials and non-financials insights about each company. View our sample InstaDetailed Report.

Reference Links:

  1. Suit Filed Cases Link
  2. https://www.transunioncibil.com/suit-filed-cases/overview
  3. Check Wilful Defaulter Status any Company in India
  4. Check Suit Filed Cases List of any Indian Company
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