This page is for general information. It is not legal, tax or investment advice. Every NPA / SARFAESI / DRT matter is fact-specific — speak to a qualified advisor before acting.
The four RBI-defined triggers
Karur Vysya Bank can initiate wilful defaulter proceedings only if one of four triggers is met: (i) capacity to pay but deliberate non-payment; (ii) diversion of loan funds; (iii) siphoning of loan funds; (iv) disposal of secured assets without lender consent. Each requires documentary evidence, not just suspicion.
Identification Committee stage
Karur Vysya Bank's Identification Committee — chaired by an Executive Director with at least two General Managers — must record a specific finding on the trigger, with evidence, and issue a written show-cause notice giving the borrower at least 21 days to respond.
Personal hearing right
Post the show-cause reply, the borrower is entitled to a personal hearing before the Identification Committee — either in person or through an authorised representative. Denial of hearing is a per-se procedural defect.
Review Committee — mandatory second look
Even after the Identification Committee tags the borrower, the classification does not become final unless confirmed by Karur Vysya Bank's Review Committee, chaired by the MD/CEO with two Independent Directors. The Review Committee must issue a reasoned order and give the borrower a fresh hearing.
CIBIL / CRILC reporting & legal effect
Only after Review Committee confirmation is the borrower reported to CIBIL and CRILC as a 'Wilful Defaulter'. From that date: no institutional credit for 5 years, director disqualification (if company borrower), promoter bar from bidding under Section 29A IBC, and possible criminal proceedings under IPC Sections 403/405/415/463.
Judicial review — writ petition at High Court
The Supreme Court in "State Bank of India v. Jah Developers" (2019) held that wilful defaulter classification is quasi-judicial and subject to writ review under Article 226. Common successful grounds: no personal hearing, non-application of mind, absence of documentary evidence for the trigger, and denial of documents relied upon by Karur Vysya Bank.
Removal after 5 years
Post the 5-year cooling-off, the borrower can apply to {bank} for removal of the tag from CIBIL / CRILC, subject to full settlement of dues and a fresh review by {bank}'s Review Committee. Removal is not automatic — a written application and clean record are required.