Wilful default dismissal upheld as no intentional fund diversion or mens rea found under Master Circular rules

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....The HC upheld the dismissal of wilful default proceedings against the respondent, holding that no mens rea or intentional diversion of borrowed funds was established. The court affirmed that at the time of approving corporate debt restructuring, the lenders, including BOB, had a duty to verify genuine financial distress and absence of fund siphoning, which they satisfied. The mere investment of company funds in subsidiaries did not constitute diversion of borrowed funds under the Master Circular. The court found the forensic audit report and related committees' conclusions to be flawed and unsupported by evidence, especially given multiple prior forensic audits clearing the respondent of fraud. The court emphasized that wilful default requi.........