No additional facilities should be granted by any bank / FI to the wilful defaulters

2) . In addition, the entrepreneurs /promoters of companies where banks/FIs have identified siphoning / diversion of funds, misrepresentation, falsification of accounts and fraudulent transactions would be debarred from institutional finance from the scheduled commercial banks, etc and floating new ventures for a period of five years from the date the name of the wilful defaulter is published in the list of wilful defaulters by the RBI;

3) The lenders may initiate criminal proceedings against wilful defaulters, wherever necessary Banks and FIs should adopt a proactive approach for a change of management of the wilfully defaulting borrower unit, wherever possible 

First of all Bank will initiate proceedings before Debts recover Tribunal after giving due notice to you or bank can also initiate proceedings under SARFAESI Act, 2002 for taking physical possession of the mortgage property and will try to auction off the property to recover their loan.

Bank can also file money suit/summary suit before the Courts to recover money from you.

Every defaulter is not the wilful defaulter. 
A ‘wilful default’ would be deemed to have occurred if any of the following events is noted:

1. The unit has defaulted in meeting its payment / repayment obligations to the lender even when it has the capacity to honour the said obligations.

2. 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.

3. 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 utilised for the specific purpose for which finance was availed of, nor are the funds available with the unit in the form of other assets.

4. The unit has defaulted in meeting its payment / repayment obligations to the lender and has also disposed off or removed the movable fixed assets or immovable property given for the purpose of securing a term loan without the knowledge of the bank / lender.

Mechanism for identification of Wilful Defaulters

The mechanism referred to in paragraph 2.5 above should generally include the following:

(a) The evidence of wilful default on the part of the borrowing company and its promoter / whole-time director at the relevant time should be examined by a Committee headed by an Executive Director or equivalent and consisting of two other senior officers of the rank of GM / DGM.

(b) If the Committee concludes that an event of wilful default has occurred, it shall issue a Show Cause Notice to the concerned borrower and the promoter / whole-time director and call for their submissions and after considering their submissions issue an order recording the fact of wilful default and the reasons for the same. An opportunity should be given to the borrower and the promoter / whole-time director for a personal hearing if the Committee feels such an opportunity is necessary.

(c) The Order of the Committee should be reviewed by another Committee headed by the Chairman / Chairman & Managing Director or the Managing Director & Chief Executive Officer / CEOs and consisting, in addition, to two independent directors / non-executive directors of the bank and the Order shall become final only after it is confirmed by the said Review Committee. However, if the Identification Committee does not pass an Order declaring a borrower as a wilful defaulter, then the Review Committee need not be set up to review such decisions.

(d) As regard a non-promoter / non-whole time director, it should be kept in mind that Section 2(60) of the Companies Act, 2013 defines an officer who is in default to mean only the following categories of directors:

(i) whole-time director

(ii) 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;

(iii) every director, in respect of a contravention of any of the provisions of Companies 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.

Therefore, except in very rare cases, a non-whole time director should not be considered as a wilful defaulter unless it is conclusively established that:

I. he was aware of the fact of wilful default by the borrower by virtue of any proceedings recorded in the minutes of meeting of the Board or a Committee of the Board and has not recorded his objection to the same in the Minutes; or,

II. the wilful default had taken place with his consent or connivance.

The above exception will however not apply to a promoter director even if not a whole time director.

(iv) As a one-time measure, Banks / FIs, while reporting details of wilful defaulters to the Credit Information Companies may thus remove the names of non-whole time directors (nominee directors / independent directors) in respect of whom they already do not have information about their complicity in the default / wilful default of the borrowing company. However, the names of promoter directors, even if not whole time directors, on the board of the wilful defaulting companies cannot be removed from the existing list of wilful defaulters.

(e) A similar process as detailed in sub-paragraphs (a) to (c) above should be followed when identifying a non-promoter / non-whole time director as a wilful defaulter.

That before classifying you wilful defaulter bank has to provide you opportunity of hearing where you have to give explanation and clarification that you or your wife has not acted in manner to be classified as wilful defaulter.

It is not mandatory to provide any details as mentioned in your query.

Since you are trying for OTS and also paid some amount, so your bonafide is proved. At least you will not declare fugitive economic offender.

So in  your case bank will proceed under sarfaesi act i.e. auction of mortgage properties and remaining recovery from guarantor.

And also under INSOLVENCY AND BANKRUPTCY act to declare you insolvent.

For declaring you as 'wilful' defaulters the bank has to establish that even though you have the means to repay you wantonly have no intention to do so, on the basis of documentary evidence and in accordance with the RBI norms. You have already shown your intent to repay by selling one of your assets for Rs.3 crore. If the bank issues you any notice to declare you as 'wilful' defaulters, which is mandatory, you may challenge the bank's move on these grounds. However, it makes sense to stop loss by selling your other property at the best possible price prevailing in the market now, instead of waiting for better prospects, and settle with the bank.

Bank will proceed for auction sale of property. if you do not have any other property or asset to disclose, bank cannot do anything against you. it is no possible to recover anything from a person who does not have anything. Even if bank wants to send you to civil prison, they will have to pay for your lodging and boarding in civil prison.  

It is often observed that the Indian management system adopts the method of defining responsibilities and punishments rather than analyzing and solving the problem.
It also continues in our banking system because it is often found that bankers do not take their responsibilities seriously and rather choose to do the official work conveniently.
This is where the concept of wilful default takes place.

Non-cooperative borrowers are individuals who escape their duties of constructively engaging with their lenders by making defaults in the repayment of dues.
Such borrowers do not clear the dues while being capable to pay.

The circular DBR.No.CID.BC.57/20.16.003/2014-15 which was issued on July 1, 2014, defines willful default as follows;

If any following events are satisfied, then in accordance with the circular, willful default would be considered to have happened-

• There is default by the borrower in discharging its obligations of payment and repayment to the lender and it is proved that such a unit capable to clear the dues and obligations,
• When the borrower does not utilize the funds for the purposes for which they were borrowed but rather use the funds for some purposes,
• If the borrower siphons off the finances and funds and uses them neither for the particular purpose for which they were availed nor to let the funds be available with the themselves in form of assets, etc.,
• When the borrower disposes of the immovable property or any fixed movable assets provided by them for securing a loan without any knowledge of the lender or the bank. 

The Supreme Court issued a verdict on the RBI's 2016 circular allowing banks to declare willful defaulters as "fraud". The Supreme Court held on Monday that a hearing must be allowed to borrowers before the classification of an account as fraud.

Companies Act, 2013 – Section 447 and 448 would be applicable to wilful defaulters. S. 447 says someone found guilty of fraud shall be punishable with imprisonment of six months which can extend up to ten years, or with a fine three times more than the amount involved in the fraud or with both. 

1. The OTS process has failed for which the Bank will further initiate SARFAESI proceedings and issue possession notice u/s13(4) of the Act and finally take over physical possession of the mortgaged property with police help as per DM's order to be obtained by filing an application u/s14 of the Act.

2. It appears that the collective sale values of the mortgaged properties are miserably  inadequate to realise your outstanding for which you may stand financially benefited even if your properties are sold by the lending bank to realise the outstanding.

3.For declaring you as wilful defaulter, the Committee of the Bank formed for such declaration will give you chance to prove that you are not a willful defaulter.

Dear client,  

When a bank declares a borrower as a wilful defaulter, it means that the borrower has deliberately refused to repay the loan despite having the capacity to do so. The process for declaring a borrower as a wilful defaulter usually involves an investigation by the bank to establish that the default was willful and deliberate.

If the bank declares you as a wilful defaulter, it may take various legal actions to recover the outstanding debt. The bank may initiate legal proceedings against you and your wife as directors of the ex-company. The bank may also take steps to seize any collateral or security that was pledged against the loan, such as the mortgaged properties. In addition, the bank may also take steps to freeze your bank accounts or other assets.

If you are unable to pay the remaining 5 crores to the bank, it is important to communicate with the bank and try to negotiate a mutually acceptable solution. You may explore options such as debt restructuring, settlement or a one-time settlement (OTS) to repay the outstanding debt. However, if the bank considers you as a wilful defaulter, it may be more difficult to negotiate a settlement or restructuring.

It is recommended that you consult with a legal professional and explore all possible options for repaying the outstanding debt or negotiating a settlement with the bank.

After 3 months of non payment the bank declares the loan in to NPA and you are termed as wilful defaulter