₹2,762 crore loan default: HC quashes banks’ move to label CA as wilful defaulter

The bench directed South Indian Bank, Union Bank of India and Bank of Baroda to withdraw notifications issued to CIBIL naming Agarwal as a wilful defaulter and to drop proceedings initiated against him

MUMBAI: The Bombay High Court on Tuesday set aside orders issued by three public sector banks declaring chartered accountant Alok Agarwal a wilful defaulter in connection with loan defaults by Parekh Aluminex Ltd, which owes banks at least ₹2,762 crore.

₹2,762 crore loan default: HC quashes banks’ move to label CA as wilful defaulter

A division bench of justices Bharati Dangre and Manjusha Deshpande held that as an independent director, Agarwal could not be held liable for the company’s loan defaults. The court noted that the Reserve Bank of India has clarified that non-whole-time directors, including nominee and independent directors, cannot be treated as wilful defaulters for a company’s repayment failures.

Agarwal had resigned from the board on November 22, 2014, well before the alleged default period. “The petitioner being an independent director, admittedly, cannot be classified as a defaulter, despite the default committed by the borrower company,” the court observed.

The bench directed South Indian Bank, Union Bank of India and Bank of Baroda to withdraw notifications issued to CIBIL naming Agarwal as a wilful defaulter and to drop proceedings initiated against him.

Separately, the Central Bureau of Investigation (CBI) has registered a case against Parekh Aluminex and its late chairman and managing director Amitabh Parekh, along with others, for allegedly defrauding a consortium of banks.

Parekh Aluminex, which claimed to be the world’s largest manufacturer of aluminium foil containers, rolls and lids, had outstanding dues of ₹2,762 crore when Parekh died on January 6, 2013, at the age of 39.