Sec 29A:  A person shall not be eligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person—

(a) is an undischarged insolvent;

(b) is a wilful defaulter in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949;

 (c) has an account, or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949 and at least a period of one year has lapsed from the date of such classification till the date of commencement of the corporate insolvency resolution process of the corporate debtor:

Provided that the person shall be eligible to submit a resolution plan if such person makes payment of all overdue amounts with interest thereon and charges relating to non-performing asset accounts before submission of resolution plan;


  1. Meaning:
  • Wilful Defaulter as per Master Circular of RBI dated July, 1, 2015:
  • A “wilful default” would be deemed to have occurred if any of the following events is noted :-
  • (a) The unit has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honour the said obligations.
  • (b) The unit has defaulted in meeting its payment / repayment obligations to the lender and has not utilised the finance from the lender for the specific purposes for which finance was availed of but has diverted the funds for other purposes.
  • (c) 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.
  • 2.2  Diversion and siphoning of funds
  • The terms “diversion of funds” and “siphoning of funds” should construe to mean the following:-
  • 2.2.1 Diversion of funds, referred to at para 2.1(b) above, would be construed to include any one of the undernoted occurrences:
  • (a)  utilization of short-term working capital funds for long-term purposes not in conformity with the terms of sanction;
  • (b)  deploying borrowed funds for purposes / activities  or creation of assets other than those for which the loan was sanctioned;
  • (c)  transferring funds to the subsidiaries / Group companies or other corporates by whatever modalities;
  • (d)  routing of funds through any bank other than the lender bank or members of consortium without prior permission of the lender;
  • (e)  investment in other companies by way of acquiring equities / debt instruments without approval of lenders;
  • (f) Shortfall in deployment of funds vis-à-vis the amounts disbursed / drawn and the difference not being accounted for.
  • 2.2.2 Siphoning of funds, referred to at para 2.1(c) above, should be construed to occur if any funds borrowed from banks / FIs are utilised for purposes un-related to the operations of the borrower, to the detriment of the financial health of the entity or of the lender. The decision as to whether a particular instance amounts to siphoning of funds would have to be a judgement of the lenders based on objective facts and circumstances of the case.
  • 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.

  • NPA as per RBI master Circular dated August, 3, 2001

 Accordingly, with effect from March 31, 2004, a non-performing asset (NPA) shall be a loan or an advance where;

  1. interest and/ or instalment of principal remain overdue for a period of more than 90 days in respect of a term loan,
  2. the account remains ‘out of order’ for a period of more than 90 days, in respect of an Overdraft/Cash Credit (OD/CC),

iii.            the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

  1. interest and/or instalment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purposes, and
  2. Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts.

  1. Scope
  • NPA i.e. Non-performing assets are a genus where all those loans are calculated which are not paid back to banks whether intentionally or unintentionally.
  • Wilful defaulters are a species of NPA, wherein the defaulter (individual/company) is not willing to repay the loan in-spite of ability to pay back the same.
  • Eg: if a company has not paid its term-loan for more than 90 days, its account will be classified as NPA. Now after calculation of all the assets of company (process as specified by RBI) if results show that company has assets but has diverted them in order to not pay to bank, then company will be termed as wilful defaulter. On other place, if the reason for non-payment of loan is lack of or zero funds with company due to economic slowdown, dis-functioning of company etc, then that loan will be termed as bad loan wherein bank cannot recover its amount.
  1. Threshold:
  • The scheme of RBI requires banks and institutions to report all cases of wilful defaults of 25 lakhs and above.
  • There is no such limit for declaring NPA.
  1. Section 29A
  • There is no time limit provided in case of wilful defaulters, but in case of NPA it is provided that if an account is declared as NPA for 1 year or more.
  • A remedy is provided to company whose account has been declared NPA to be a resolution applicant, if he pays of overdue before submission of plan for resolution.
  • Wilful defaulters can be a company or individual under clause (b) of section 29A but in clause (c) promoters, management of company and other company having control of company whose account has been declared as NPA is also debarred.
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