Ministry of Finance
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Why is personal bank guarantee of big defaulters not invoked by public sector Banks: Supreme Court asks FinMin to reply on representation

The Supreme Court noted that the issue concerning failure of Public Sector Banks to invoke personal guarantee of big defaulters was pertinent and allowed the petitioner to approach the FM with representation.

Shruti Mahajan

The Supreme Court on Monday asked the Ministry of Finance to furnish a response on the question of why personal guarantees of big corporate loan debtors is not invoked. (Saurabh Jain vs Union of India)

On a plea filed in the Supreme Court which claimed that a whopping sum of about Rs 1,900 crores is lost on a daily basis merely because the Public Sector Banks are failing to invoke personal bank guarantees furnished by big corporates, the Supreme Court noted that it is an important issue.

However, the Bench of Justices Rohinton Nariman and Navin Sinha said that the petitioner should approach the Ministry of finance with this contention first and allowed the petitioner to file a representation before the Ministry as such.

The Court observed that the Ministry's circular itself makes it clear that the personal bank guarantee of such defaulters has to be invoked by public sector banks and yet, the same has not been done, the petition had pointed out. This failure led to loss not just to the public exchequer but also to the common man, the Court observed.

"...it has been made clear that the Ministry of Finance itself has, by a Circular, directed personal guarantees issued by promoters/managerial personnel to be invoked. According to the petitioners, despite this Circular, Public Sector Undertakings continue not to invoke such guarantees resulting in huge loss not only to the public exchequer but also to the common man."

Therefore, keeping in view the importance of this subject, the Court allowed the petitioner to withdraw the plea and instead make a representation on the subject before the Ministry of Finance within a period of two weeks.

The Ministry has been directed by the Supreme Court to respond to this representation within four weeks from receiving it.

The petitioner was represented by Senior Counsel Manan Kumar Mishra and Advocate Durga Dutt.

Read Order:

Saurabh Jain vs UOI.pdf
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