Non Whole Time Director will not be considered as Defaulter in case of default in repayment is made by Company: RBI

RBI/2014–15/565 DBR.No.CID.BC.89/20.16.001/2014–15

April 23, 2015

Please refer to our Cir­cu­lar DBOD.No.DL.BC.54/20.16.001/2001–02 dat­ed Decem­ber 22, 2001 on the above subject.

2. As you are aware, Sec­tion 2(60) of the Com­pa­nies Act, 2013 defines an offi­cer who is in default to mean only the fol­low­ing cat­e­gories of directors: 

1. whole-time direc­tor;
2. where there is no key man­age­r­i­al per­son­nel, such direc­tor or direc­tors as spec­i­fied by the Board in this behalf and who has or have giv­en his or their con­sent in writ­ing to the Board to such spec­i­fi­ca­tion, or all the direc­tors, if no direc­tor is so specified;
3. every direc­tor, in respect of a con­tra­ven­tion of any of the pro­vi­sions of this Act, who is aware of such con­tra­ven­tion by virtue of the receipt by him of any pro­ceed­ings of the Board or par­tic­i­pa­tion in such pro­ceed­ings and who has not object­ed to the same, or where such con­tra­ven­tion had tak­en place with his con­sent or connivance.

3. In view of the above statu­to­ry pro­vi­sions, a non-whole time direc­tor should not be con­sid­ered as a default­er unless it is con­clu­sive­ly estab­lished that

1. he was aware of the fact of default by the bor­row­er by virtue of any pro­ceed­ings record­ed in the Min­utes of the Board or a Com­mit­tee of the Board and has not record­ed his objec­tion to the same in the Min­utes, or,
2. the default had tak­en place with his con­sent or connivance.

How­ev­er, the above excep­tion will not apply to a pro­mot­er direc­tor, even if not a whole time director.

4. There­fore, in par­tial mod­i­fi­ca­tion of our afore­men­tioned Cir­cu­lar dat­ed Decem­ber 22, 2001, we advise that while dis­sem­i­nat­ing infor­ma­tion to Cred­it Infor­ma­tion Com­pa­nies on bor­row­ers with out­stand­ing amount aggre­gat­ing Rs. 1 crore and above clas­si­fied as doubt­ful or loss assets (non-suit filed as well as suit filed accounts), banks/FIs should exclude the names of non-whole time direc­tors (Nom­i­nee and Inde­pen­dent Direc­tors) oth­er than the pro­mot­er direc­tors from the list, except in the rarest cir­cum­stances spec­i­fied in para­graph 3 above.

Yours faith­ful­ly

(Rajin­der Kumar)
Chief Gen­er­al Manager