Major Setback for Loan Defaulters
Troubling times are ahead for individuals who have defaulted on large loans and have been enjoying the benefits of leniency. In a landmark ruling on Friday, the Supreme Court of India overturned previous orders issued by various High Courts, allowing fresh legal action against major loan defaulters. The decision lifts the restrictions that had previously stopped criminal proceedings and fraud declarations against big defaulters, providing a new lease of action for banks and financial institutions.
The Court’s Clarification on High Court Orders
The bench, consisting of M.M. Sundaresh and Rajesh Bindal, clarified that even if administrative actions were cancelled due to violations of the principles of natural justice, it does not stop authorities from initiating new actions. This means that the door is now open for fresh criminal and administrative measures to be taken against major loan defaulters, despite previous legal hurdles.
High Courts Overstepped Their Authority
The Supreme Court also pointed out that several High Courts across the country had exceeded their jurisdiction by cancelling FIRs and criminal proceedings involving defaulters who had been declared fraudsters. These cancellations were made without any legal challenges to the fraud declarations themselves, which was deemed beyond the authority of the High Courts.
Differentiating Between Administrative and Criminal Actions
The court emphasized the distinction between administrative actions and criminal proceedings. It stated that actions taken by the Reserve Bank of India (RBI) and banks operate on different grounds, and if a crime has been committed, an FIR can be filed independently of administrative decisions. This ruling reaffirms that criminal cases can proceed even if administrative action has been halted, as long as there is a legal basis for such action.
No Obstacle for FIR Registration
The court further stated that even if administrative action is not taken, it does not prevent FIR registration. The similarity in facts does not automatically bar criminal action. Thus, loan defaulters should not consider the halt in administrative procedures as an end to the possibility of criminal proceedings.
Administrative and Criminal Proceedings Serve Different Purposes
Finally, the Supreme Court made it clear that the objectives of administrative and criminal proceedings are distinct, especially when they are handled by different authorities. While administrative actions aim at regulatory measures, criminal actions serve a legal and punitive purpose.
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