Why aren't Personal Guarantees of Big Corporate Loan Defaulters invoked by PSBs, SC asks Finance Ministry

The Apex Court has directed the Ministry of Finance to respond to a petition which claims Rs 1,900 crore are lost every day due to public sector banks not invoking personal guarantees of big corporate loan defaulters.

On Monday, a bench headed by Justice Rohinton F Nariman observed that the issue is important & hence, the ministry should reply to the petitioner once a representation is made.

"Your petition has mentioned that the Ministry of Finance itself has, by a Circular, directed personal guarantees issued by promoters/managerial personnel to be invoked. But you claim the public sector undertakings are not complying with this circular. We think you should first go to the ministry," the bench told Senior Lawyer Manan Mishra, who appeared for the PIL petitioners in the matter.

Manan Mishra, on his part, had argued that the statistics show there was a loss of approximately Rs1.85 lakh crore in a financial year to the public sector banks while they shy away from invoking personal guarantees of the biggest corporate defaulters.

He added that loans of a common man are recovered very meticulously but promoters, chairpersons & managers of big corporates get away despite making huge defaults of loans.

At this, the bench said that since the Ministry of Finance has already issued a notification in this regard, it is better to first seek a response there & then come back to the Court.

Manan Mishra accepted this suggestion, & requested the bench to issue a specific direction to the ministry for giving its response.

The court agreed: "The representation will be made within a period of two weeks from today. The Ministry of Finance is directed to reply to the said representation within a period of four weeks after receiving such representation."

As the Senior Advocate asked for the liberty to come back after the ministry's reply, Justice Nariman said: "Of course it is open to you to come back once they decide. We will hear you."

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