TaxTMI 
TaxTMI 
2024 (3) TMI 119
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....ner is the Chairman of Hindustan Power Projects Pvt. Ltd., which runs a 1200 mega-watt power plant and supplies electricity to three States namely U.P., M.P. and Haryana. The Petitioner's company has availed loan facilities amounting to thousands of crores from banks and it is stated that there has never been any default in servicing the debt since inception. 3. However, the Respondent Bank sought to declare the Petitioner as a Wilful defaulter with respect to his association in another company known as Moser Baer Solar Ltd. ("MBSL") under the Master Circular, thereby, depriving the Petitioner from availing credit facilities for his present and prospective business enterprises. 4. It is stated that another company namely Moser Baer India Limited ("MBIL") was a company incorporated in 1983 by the father of the Petitioner to manufacture storage discs. MBIL exported discs to large multinational companies like Sony, Hitachi, TDK, Fuji, Mitsubishi etc. 5. As per the case of the Petitioner, around the year 2005, it was realized that the business of storage discs began to slow down due to technological advancement and emergence of new mediums of storage like Cloud. Hence, it was ....
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....hat in 2010, pursuant to a family arrangement, the Petitioner transferred his entire shareholding in MBSL to his father and completely dissociated himself with the day to day working of MBSL. 14. It is also stated that on 30.04.2012, the Petitioner resigned as the Executive Director of MBSL and Form-32 to that effect was filed with the Registrar of Companies ("RoC"). The Petitioner, on 16.11.2022, completely exited MBSL, when he resigned as a whole time Director of MBSL and Form-32 to that effect was filed with the RoC. 15. It is submitted by the Petitioner that as MBSL faced financial decline and there was a looming threat of loan repayment default, the lenders, including the Respondent Bank, considered MBSL's case for Corporate Debt Restructuring ("CDR") in accordance with the CDR Master Circular ("CDR Master Circular") issued by the RBI. To ascertain the sustainability of CDR, the lenders required MBSL to submit a Flash Report, which would present the reasons for its decline, its viability and plan for revival. The said Flash Report would then be forwarded by the lenders to an independent agency for obtaining a Techno Economic Viability ("TEV") Report. The TEV Report would....
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.... Viability Assessment from PNB Investments Services Ltd. and Stock Audit Report dated 29.08.2012 from M/s Mehrotra and Mehrotra, Chartered Accountants of MBSL. The representative of Feedback Infra, which conducted the Technical Viability Study of MBSL stated that the demand for solar panels was increasing substantially, both nationally as well as internationally. With the anticipated anti-dumping duties on Chinese companies, the viability of MBSL would improve. It was suggested that the core strategy and operating plans of MBSL are technically feasible. 22. The lender banks, thereafter, issued a Final Restructuring Scheme ("FRS") of MBSL. On 21.01.2013, the lender banks further issued a modified FRS in respect of MBSL. 23. On 18.03.2013, the CDR-Cell issued a letter stating that on 21.01.2013, the CDR-EG had approved the proposed restructuring package of MBSL. The Respondent Bank was appointed as the Monitoring Institution, leading the CDR process along with other consortium banks. The details of approved package was outlined in Annexure-1. MBSL was classified as Class-B borrower under the CDR Scheme, which has Classes from A to D. In the Class-B category, MBIL was classified....
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.... proposed to classify him as a Wilful Defaulter under the Master Circular as MBSL defaulted to meet its loan repayment obligations. It was alleged that MBSL had diverted the funds for other purposes. 33. On 01.05.2019, the Petitioner submitted a reply stating that he was neither the Director nor the shareholder of MBSL. It was stated that earlier also, the Respondent Bank attempted to declare the Petitioner as Wilful Defaulter, for which, W.P. (C) No. 7797 of 2017 was filed before this Court. However, the Respondent Bank stated before this Court that it was not taking any action against the Petitioner. Hence, the Writ Petition was disposed of vide order dated 14.11.2017. It was contended that after the Petitioner exited from MBSL, the lender banks admitted MBSL for CDR as per the CDR Master Circular. It is stated that if any act of Wilful Default was noted at that stage, then MBSL would not have been admitted to CDR. The Petitioner contended that during the CDR process, the lender banks were informed that the personal guarantee of the Petitioner was not available, which was accepted by them. Hence, the Show Cause Notice deserved to be withdrawn. 34. On 07.02.2020, the Wilful ....
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....der. 44. I have heard Mr. Dayan Krishnan, learned Senior Counsel appearing for the Petitioner alongwith Mr. Vaibhav Mishra, Mr. Karan Batura, Mr. Ekansh Mishra and Mr. Jayant Chawla, Advocates and Mr. Sanjay Bajaj, learned counsel appearing for the Respondent Bank alongwith Mr. Shivam Takkar and Mr. Sarthak Sehgal, Advocates, at length, and perused the record. Relevant discussion in W.P. (C) No. 4181/2023 45. This Court in W.P. (C) No. 4181/2023 titled as Ratul Puri v. Bank of Baroda, has extensively dealt with the scheme of RBI's Master Circular for declaring a person as "Wilful Defaulter", "standard of proof" to decide the validity of event of Wilful Default under the Master Circular, scope of judicial review in administrative action and scheme of CDR issued by RBI. 46. The scheme of the RBI's Master Circular for declaring a person as "Wilful Defaulter", as discussed in terms of paragraph nos. 48 to 59 is reproduced as under:- 48. Before going into the facts of the case, it is essential to examine the scheme of the Master Circular. In order to put in place a system to disseminate credit information pertaining to wilful defaulters for cautioning banks and fina....
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....r the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets. (d) The unit has defaulted in meeting its payment / repayment obligations to the lender and has also disposed off or removed the movable fixed assets or immovable property given for the purpose of securing a term loan without the knowledge of the bank /lender. The identification of the wilful default should be made keeping in view the track record of the borrowers and should not be decided on the basis of isolated transactions/incidents. The default to be categorised as wilful must be intentional, deliberate and calculated." 52. A bare reading of Clauses 2.1.3(b) and (c) clearly reveals that an event of wilful default can only take place when the "loan amount" lent by the bank is diverted or siphoned off by the borrower, for any use, other than for which the loan was granted. 53. Clause 2.2 of the Master Circular defines "diversion of funds" and "siphoning of funds" as under: "2.2 Diversion and siphoning of funds: The terms "diversion of funds" and "siphoning of funds" should construe to mean the following: - ....
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....on of the person in the Board of the company etc. The last part of Clause 2.5 places a specific obligation on the banks to put in place a transparent mechanism so that the penal provisions of the said clause are not misused and the scope of such discretionary exercise of power is kept to a bare minimum. Solitary or isolated incidents are not to be used for the use of penal action under the said clause. Clause 2.5 reads as under: "2.5 Penal measures In order to prevent the access to the capital markets by the wilful defaulters, a copy of the list of wilful defaulters (non-suit filed accounts) and list of wilful defaulters (suit filed accounts) are forwarded to SEBI by RBI and Credit Information Bureau (India) Ltd. (CIBIL) respectively. The following measures should be initiated by the banks and FIs against the wilful defaulters identified as per the definition indicated at paragraph 2.1 above: a) No additional facilities should be granted by any bank / FI to the listed wilful defaulters. In addition, the entrepreneurs / promoters of companies where banks / FIs have identified siphoning / diversion of funds, misrepresentation, falsification of acco....
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....rmation Companies (Regulation) Act, 2005 and of which it is a member. Reserve Bank of India has, in exercise of the powers conferred by the Act and the Rules and Regulations framed thereunder, granted Certificate of Registration to (i) Experian Credit Information Company of India Private Limited, (ii) Equifax Credit Information Services Private Limited, (iii) CRIF High Mark Credit Information Services Private Limited and (iv) Credit Information Bureau (India) Limited (CIBIL) to commence/carry on the business of credit information. Credit Information Companies (CICs) have also been advised to disseminate the information pertaining to suit filed accounts of Wilful Defaulters on their respective websites. (b) Banks / FIs should, however, submit the quarterly list of wilful defaulters where suits have not been filed only to RBI in the format given in Annex 1. (c) In order to make the current system of banks/FIs reporting names of suit filed accounts and non-suit filed accounts of Wilful Defaulters and its availability to the banks by CICs / RBI as current as possible, banks / FIs are advised to forward data on wilful defaulter....
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....nt/non-Executive Directors of the bank. The order declaring a person as wilful defaulter shall become final only after it is confirmed by this Review Committee. The said clause also provides that under Section 2(60) of the Companies Act, 2013, an officer who is in "default" to mean only "whole time director" unless the case falls in the category of exceptions enumerated in the said clause. Clause 3 reads as under: - "3. Mechanism for identification of Wilful Defaulters The transparent mechanism referred to in paragraph 2.5(d) above should generally include the following: (a) The evidence of wilful default on the part of the borrowing company and its promoter/whole-time director at the relevant time should be examined by a Committee headed by an Executive Director and consisting of two other senior officers of the rank of GM/DGM. (b) If the Committee concludes that an event of wilful default has occurred, it shall issue a Show Cause Notice to the concerned borrower and the promoter/whole-time director and call for their submissions and after considering their submissions issue an order recording the fact of wilful default and the reasons for the s....
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....le 21 of the Constitution of India. The concluding paragraph of the said discussion reads as under:- "64. As held by the Hon'ble Supreme Court, the declaration of a person as wilful defaulter and barring him from credit facility in the future have civil and penal consequences, which also have the effect of adversely affecting his reputation. Thus, the declaration of a person as wilful defaulter, apart from adversely affecting the fundamental rights guaranteed under Article 19(1)(g) of the Constitution, also affects the right to reputation of a person, which is also a fundamental right guaranteed under Article 21 of the Constitution. The decisions of the Hon'ble Supreme Court in the cases of Sukhwant Singh v. State of Punjab, Subramanian Swamy v. Union of India and Om Prakash Chautala v. Kanwar Bhan are noteworthy in this regard." 48. While dealing with the standard of proof to decide the validity of an event of Wilful Default under Master Circular in paragraph nos.65 to 69, it was concluded that in the test of validity of civil action on preponderance of probability, the graver the consequences of such civil action, the higher is the degree of proof required. The conclu....
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....power has been exercised in disregard of relevant consideration, the Court would hold the action bad in law. If the relevant, germane and valid considerations are ignored or overlooked by an executive authority while taking a decision, the same would fail to withstand judicial scrutiny. The relevant observations are as under: - ***" 50. The scheme of CDR, as discussed in paragraph nos. 71 to 89, is reproduced as under:- "71. The RBI has framed the CDR Master Circular enabling the lender banks to prepare a CDR scheme in respect of a business entity, which is struggling in meeting its existing loan repayment obligations. The CDR Master Circular requires the borrower to submit a Flash Report to the lender banks making the restructuring proposal. Wherever necessary, the lender banks would obtain a TEV Report to ascertain the viability of the company. The CDR Master Circular also requires the lender banks to change the management of the company where there has been "diversion of funds". In case of "diversion of funds", wherever necessary, the banks may also carry out forensic audit of the company. Clause 3 of the CDR Master Circular reads as under: - "3. SCRUTINY....
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.... makes reference to RBI's guidelines issued on 2.7.2012, which define "wilful default" as: "(i) The unit has defaulted in meeting its payment/ repayment obligations to the lender even when it has the capacity to honour the said obligations. (ii) The unit has defaulted in meeting its payment/ repayment obligations to the lender and has not utilized the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes. (iii) The unit has defaulted in meeting its payment/ repayment obligations to the lender and has siphoned off the funds so that the funds have not been utilized for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets. (iv) The unit has defaulted in meeting its payment/ repayment obligations to the lender and has also disposed off or removed the movable fixed assets or immovable property given by him or it for the purpose of securing a term loan without the knowledge of the bank/ lender." 75. The aforesaid definition of wilful default in RBI's guidelines issued on 2.7.2012 is identical ....
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....g weak resources, inadequate vision, and not having support of professional management. Borrower Class 'C': Over-ambitious promoters; and borrower-corporate which diverted funds to related/unrelated fields with/without lenders' permission. Borrower Class 'D': Financially undisciplined borrower-corporate." 81. Clause 7.2 provides that: "The classification of each borrower-corporate shall be decided at the meeting of the CDR Empowered Group (EG) whereat the Financial Restructuring Proposal is approved. The standard terms and conditions applicable to different classes of borrowers are set out in Annexure-IV." 82. As per Clause 7.3, "Referring Institution should incorporate all applicable standard terms and conditions in the restructuring package, besides special conditions deemed necessary in specific cases..." Annexure IV in paragraph A (1) to (28), provides standard conditions for all four category of borrowers. 83. Paragraph B imposes "Additional Conditions for Borrower Class - 'B' (In addition to Standard Conditions Stipulated Under A)". Paragraph C imposes "Additional conditions for Borrow....
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....02.12.2023, the Respondent Bank filed Minutes of Meeting dated 08.11.2019, wherein, the decision to issue Show Cause Notice to the Petitioner was taken. At Serial No. 2 in the said minutes of the meeting, the decision to issue Show Cause Notice to Petitioner for alleged acts of Wilful Default is taken by the Respondent Bank. In the reasons column, the Respondent Bank has referred to observations made in the Forensic Audit Report, based on which it has concluded that there is diversion of funds. It is thus evident that the Respondent Bank has issued Show Cause Notice to the Petitioner only by referring to the observations made in the Forensic Audit Report. This Court is of the view that this approach of the Respondent Bank is not in conformity with the scheme of the Master Circular. 53. Under the Master Circular, to declare a person as a Wilful Defaulter, lender banks have to independently find that the "Wilful Default" is "intentional, deliberate and calculated" and the said conclusion is based on "objective facts and circumstances of the case". The Forensic Audit Report can act as a piece of corroboration for the said exercise, but not the sole basis. The lender banks must reco....
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....ns to explain that the deposits made by MBSL in favour of its parent company MBIL under lease agreements can never be regarded as diversion of funds, which were refundable security deposits. The observation that the deposits are 58.82 times of the yearly rentals is factually incorrect. The total security deposit under the lease agreements was only 3.05 times of the rental. The Forensic Audit Report and the Respondent Bank considered 58.82 times from one of the lease agreements. Whereas, with respect to all the lease agreements executed between MBSL and MBIL, the average security deposits come to 3.05%, which is evident from the following chart:- Exhibit 1.3- "Summary of excess security deposits over and above yearly lease rentals" Amt in INR Sr.No. Agreement Description Party with whom agreement has been entered into Amount of Security Deposit Amount of rent (P.A) Ratio of Lease rent per annum to Security deposit (Times) 1. Deed for Sub lease of Building - Thin Film 1 Moser Baer India Limited 43,50,00,000 14,400,000 30.21 2. MOU for sub-lease of land - Thin Film 2 Moser Baer India Limited 2,00,00,000 3,900,000 5.13 3. D....
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.... Date of Leasing Cost of assets out (In Crore) Security Deposit (In Crore) Annual Lease Rental Tenure of Lease Total Lease Rent (in Crore) Ratio of Deposit vs. Lease Rent (Times) IRR As per us As per Forensic Auditor Building Thin Film- I 23.06.2008 53.37 14,400,000 20 yrs. 28.80 1.91 30.21 16.66% Thin Film- II 31.03.2010 62.08 7,680,000 20 yrs. 15.36 2.83 40.20 12.05% Total 114.45 22,080,000 44.16 Land Sub Lease I 23.06.2008 10,20,000 82 yrs. 8.364 0.72 58.82 Operating Lease Sub Lease II 31.03.2010 39,00,000 80 yrs. 31.20 Not Paid 5.13 Operating Lease Total 49,20,000 39,564 Utilities....
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....also charged the Petitioner for Wilful Default on this allegation. However, considering the explanation given by the Petitioner, the said allegation was dropped by the Review Committee of Bank of Baroda in its order dated 23.03.2023. It appears that lender banks, which were all common part of the CDR package, are picking and choosing from the Forensic Audit Report and issuing Show Cause Notice, without there being any consistency on the alleged acts of Wilful Default. 68. At this stage, it is essential to deal with the argument raised by the Respondent Bank that 7 out of the 9 lease agreements are unstamped. In this regard, reference may be made to the proviso to Section 3 of the Indian Stamp Act, 1899, which provides that no duty is chargeable in respect of any instrument executed in favour of a developer or unit in connection with the carrying out of purposes of the SEZ. In any case, it is evident that the lender banks were aware of the lease agreements and execution of unstamped lease agreements per se cannot amount to diversion of funds. 69. This brings us to the second ground relied upon by the Identification Committee that MBSL had executed financial lease agreements wi....
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....appears that merely because the Forensic Auditor observed the execution of operating lease by MBSL in favour of MBIL to be unusual, perhaps since the Financial Auditor did not have access to documents of this period, the Respondent Bank could not have drawn an inference of diversion of funds. This is more particularly when the Forensic Auditor in its Report itself has not drawn any conclusion of diversion of funds. 77. There is another aspect of the matter. The Respondent Bank sanctioned the loan facilities to MBSL vide sanction letters dated 04.04.2008, 03.06.2010, 20.08.2010, 25.03.2011 and 02.09.2011. The loan sanction letters enabled the Respondent Bank to access the financial statements of MBSL and its balance sheets at all times. The lease agreements were reflected in the financial statements. The Respondent Bank was aware of the lease agreements and the nature of transactions. Even after being aware of the lease agreements, the Respondent Bank continued to sanction further credit facilities. The Respondent Bank, therefore, did not perceive anything out of the ordinary from these lease agreements. 78. After MBSL faced financial constraints and was unable to meet its loa....
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....d any concern regarding the same until the Show Cause Notice was issued by the Respondent Bank alleging the lease agreements to be an act of diversion of funds. The act of invoking the Master Circular against the Petitioner by the Respondent Bank, based on observations made in the Forensic Audit Report, several years after the execution of lease agreements, appears to be an afterthought. 83. The Review Committee in the impugned order has recorded that the Forensic Auditor concluded that the lease agreements between MBIL and MBSL were created for diverting banks funds. The learned Senior Counsel for the Petitioner has taken this Court through the Forensic Audit Report to show that no such observation is made in the Forensic Audit Report. The Review Committee has attempted to add words to the Forensic Auditor, which is non- existent in the Report. 84. When the Petitioner made the aforesaid submissions before the Review Committee, the Review Committee, instead of dealing with each of them on merits, again rejected them by relying on the observations made in the Forensic Audit Report. Thus, there appears to be no independent application of mind by the Respondent Bank. From ....
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....ty Assessment, addressed the lender banks and explained that long term funds were utilized for investment on subsidiaries. 90. In the letter dated 18.03.2013, which approved the restructuring package, the details of package were earmarked in Annexure-1. In Clause 1.1(iii), the lender banks noted that the investments were made by MBSL in its 100% subsidiary. These investments are to be retained and disposal of these investments is not proposed. Relevant portion is reproduced as under: "(iii) Sale of surplus assets/ investments There are no significant surplus assets/ investments proposed for sale. The investments are towards equity and preference share capital in its 100% fully owned subsidiary MBPV. These investments are required to be retained in terms of non-disposal undertaking executed with secured lenders of MBPV. Hence, no disposal of these investments is proposed." 91. The lender banks had issued the FRS before the finalization of the CDR package. In the FRS, which is the lender banks' internal document, the lender banks noted that MBSL had made investment in its 100% subsidiary. The lender banks also noted that investment in the subsidiary w....
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....at the Petitioner resigned as Executive Director of MBSL on 16.04.2012 and as full time Director on 16.11.2012. For 2011-12 or onwards, whether Helios Photovoltaic Ltd. was incurring losses or not; or MBSL made further investment or not, is not known to the Petitioner. The Petitioner cannot be held liable for any act that has transpired after he ceased to have any position in MBSL. He further submits that the Forensic Audit Report nowhere has regarded these investments as diversion of funds. The conclusion drawn by the Forensic Audit Report states - "Owing to inadequacy of documents explaining arrival, basis & justification of investments made in HPVL raises question on the need of such investment. Further, considering the current financial status of HPVL, recovery of these investments seems to be doubtful." The Report has not drawn any conclusion owing to the inadequacy of documents. It has not made any conclusion or finding of diversion of funds. 97. The lender banks must follow the mandate of Clause 2.1.3 read with Clause 2.5 of the Master Circular and independently find acts of "Wilful Default" which are "intentional, deliberate and calculated" and the said conclusion should....
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....s to the Forensic Auditor. Hence, the Forensic Auditor could not ascertain the basis as well as terms and conditions on which the loans and advances were made. 101. This Court is of the view that the aforesaid observation can hardly be categorized as diversion of funds. The Forensic Auditor has noted the factum of loans and advances. However, it is not in a position to comment on their nature of such transactions, as necessary documents were not available. Thus, the Forensic Audit Report has not drawn any conclusion about diversion of funds. 102. Learned Senior Counsel for the Petitioner contends that even otherwise, the Petitioner ceased to have any position in MBSL from 16.11.2012 onwards. If during the Forensic Audit carried out several years later, certain documents are not available to the Forensic Auditor, no fault can be attributed to the Petitioner. 103. Learned Senior Counsel has also explained that M/s Value Solar Energy Ltd. was a group company of MBSL and was engaged in the business of solar products including wafers used as raw material in production of modules. Under a MoU dated 13.3.2011, M/s Value Solar Energy Ltd. was supplying wafers to MBSL. Accordingly,....
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....r banks about the resignation of the Petitioner from MBSL. When MBSL was about to default in its loan repayment obligations, MBSL informed the lender banks to consider the CDR package on the assumption that the Petitioner was no longer associated with MBSL and his personal guarantee was not available. On 20.09.2013, the CDR-EG noted that the lender banks have agreed to the substitution of personal guarantee of the Petitioner with collateral security of Rs.33 Crores. In the meeting held on 27.05.2014, the lender banks agreed to reduce the collateral security of Rs. 33 Crores to Rs. 25.53 Crores in lieu of the Petitioner's personal guarantee. The Petitioner did not furnish his personal guarantee for the CDR package nor did he participate in any of the deliberations for the approval of the CDR package. The lender banks still approved the CDR package and acted upon it without the presence and personal guarantee of the Petitioner. The lender banks, therefore, tacitly acquiesced to the Petitioner's exit from MBSL and approved the CDR package of MBSL without his presence in any capacity or personal guarantee. 107. Further, the undertaking relied upon by the Respondent Bank was not give....
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....hings, the Master Circular casts a specific obligation on the Respondent Bank to act independently and objectively under Clause 2.1.3 read with Clause 2.5 as discussed above. It would, therefore, be unsafe if lender banks start to declare borrowers as Wilful Defaulter merely on the basis of observations made in the Forensic Audit Report without there being an independent application of mind. The lender banks must follow the mandate of Clause 2.1.3 read with Clause 2.5 of the Master Circular and independently find acts of Wilful Default which are "intentional, deliberate and calculated" and the said conclusion should be based on "objective facts and circumstances of the case". Any other view would lead to consequences where mere cases of default would be categorised as acts of Wilful Default under the Master Circular. The Master Circular is not to be invoked in every case of default but only when the default is Wilful Default as construed under the scheme of the Master Circular. Identification of Wilful Default has to be made keeping in view the track record of the borrower and not on the basis of isolated transactions/incidents 112. Under Clause 2.1.3 of the Master Circular, ....
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....adversely affected due to (a) the global solar photovoltaic market was operating under stress due to huge supply addition from China; (b) China offering USD 43 billion subsidy to its domestic companies, which led to abnormal fall in the prices of solar cell. The company, however, has been able to service its debt till 31.12.2011. The CDR-EG had admitted MBSL in Class- B as per the CDR Master Circular, which applies where MBSL was classified as a Class-B borrower under the CDR Scheme, which has Classes from A to D. In the Class-B category, MBIL was classified as "Corporate/promoters affected by external factors and also having weak resources, inadequate vision and not having support of professional management." The Class-C is assigned to those corporates who "diverted funds" to unrelated fields with or without lenders' permission. Thus, the lender banks considered MBSL to be a borrower that was affected by external factors and not by the diversion of funds. 116. Before finalization of the CDR package, the lender banks obtained a TEV Report and Stock Audit Report from external agencies. After considering the said Reports, the lender banks approved the CDR package. The net wort....
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.... financial difficulty or whether there exist events of fraud and malfeasance. If the lender banks find fraud or malfeasance, the CDR-EG must either refuse CDR completely or impose such additional onerous conditions as provided in the CDR Scheme itself. 124. In the present case, the lender banks were fully aware of all the transactions, which are now alleged to be acts of Wilful Default. This fact is part of the documents leading to the finalization of the CDR scheme. Despite noting all transactions, financial statements, balance sheets, TEV Report and Stock Audit Report, the lender banks placed MBSL in Class-B of CDR Master Circular which cannot be assigned if there is diversion of funds. They found no occasion to order a forensic audit of MBIL before finalization of CDR scheme. The lender banks, therefore, never treated the alleged acts of Wilful Default as an act of diversion or siphoning either during finalization of CDR scheme or after its failure. 125. It may so happen that that during the finalisation of CDR Scheme, the lender banks are not aware of certain acts of commission or omission, which may constitute acts of Wilful Default. The lender banks may become aware of ....