New Delhi, Aug 10 (PTI) The Delhi High Court has held that the classification of Ratul Puri, former director of Moser Baer India Limited, and his mother Nita Puri as "wilful defaulters" under the Reserve Bank of India (RBI) Master Circular is "legally unsustainable".

A division bench of Justices C Hari Shankar and Ajay Digpaul passed the order while dismissing appeals filed by the Bank of Baroda (BoB) and the Punjab National Bank (PNB).

The bench held that the "wilful defaulter" declarations were legally unsustainable since the banks had failed to establish, "through verified and objective material, that the transactions in question involved borrowed funds that had been intentionally diverted or siphoned off".

"The authorities, at all stages, have to be alive to the fact that a declaration of wilful default, within the meaning of the Master Circular, results in civil death," the bench said.

It added that such decisions must be based on the objective facts and circumstances of the case and the borrower's overall track record.

The division bench was hearing an appeal against an order passed by a single-judge bench.

The single-judge bench had held that the essential ingredients of wilful default under the RBI's Master Circular were not met.

The banks had then filed the appeals. PTI UK RC

Wilful defaulter designation unsupported when banks cannot prove intentional diversion of borrowed funds, undermining creditor declarations. Declaration as wilful defaulters under the RBI Master Circular is legally unsustainable where banks do not establish by verified and objective material that borrowed funds were intentionally diverted or siphoned off; such a designation requires contemporaneous objective evidence and consideration of the borrower's overall track record, because the declaration inflicts a form of civil death and therefore demands strict adherence to the Master Circular's procedural and evidentiary prerequisites.