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THERE is a fresh trouble brewing between Subhiksha and its lender Kotak Mahindra Bank. The cash-strapped retailer has filed a writ petition questioning Kotak Mahindra Bank's decision to declare it a wilful defaulter. In its petition, Subhiksha wanted the court to invalidate the bank's resolution and stop the RBI and Credit Information Bureau (Cibil) from acting on it, as the status of a wilful defaulter may make it ineligible for corporate debt restructuring.
The judge hearing the case asked Subhiksha to issue notice to all the respondents on the petition within a week. The respondents are Kotak Mahindra Bank, RBI and Cibil. The petition filed by Subhiksha comes on the back of a resolution passed by Kotak's Grievance Redressal Committee, where it termed the retailer a "wilful defaulter." The bank also wanted Subhiksha to be reported to RBI and Cibil as a wilful defaulter.

As per RBI guidelines, a wilful default is one where "a unit has defaulted in meeting its payment/repayment obligations to the lender even when it has the capacity, where funds have been used for purposes other than what it has been paid for or when a company has sold off collateral (moveable or immoveable assets) against which a loan was taken without the knowledge of the banker."

Subhiksha, in its petition, giving an account of its credit history with Kotak, said that payments have so far always been honoured on time. In this case, it said that the default in interest payment was not intentional.

"Non-payment of interest from operational cash could be wilful default but no company can be held obliged to pay interest by obtaining shareholder loans and for inability to do that be classified as a wilful defaulter," the retailer mentions in the petition, referring to some shareholder loans taken around end-December 08 and early-January 09. It also goes on to add that the closure of some shops was only an indication of cash crunch and not of wilful default. It further said Kotak was not sure whether Subhiksha was unable to pay as claimed in the winding up notice served to it or if it had wilfully defaulted.

When contacted by e-mail, Mr Subramanian said, "We have no comment on any legal proceedings as such matters are sub judice. We cannot comment on any such writ as claimed. The attempt by Kotak Mahindra Bank to declare us as a wilful defaulter is merely one more step in the blackmail and strong arm tactics being attempted by the Bank and we do not see it as having any legal validity."

This development is the latest in a series of salvos exchanged between Subhiksha and Kotak Mahindra Bank, to which the retailer owes Rs 40 crore.

Earlier, Kotak filed a winding up petition against the retailer, as a result of which a provisional liquidator was asked to take charge of Subhiksha's books of accounts.

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