Loans / Borrowings — Default, Willful Defaulter, End-use

Reporting requirement

Report whether (a) the company has defaulted in repayment of loans / interest to banks, FIs, government, or dues to debenture holders; (b) the company is declared as a willful defaulter; (c) term loans were applied for the purpose for which they were raised; (d) funds raised on short-term basis have been used for long-term purposes; (e) funds taken from any entity have been on-lent to a subsidiary / associate / JV; (f) funds raised pledging securities of subsidiaries / JVs / associates.

What to verify before signing

• Statement of default — period, amount, lender, days past due
• RBI database of willful defaulters; bank confirmations of status
• Loan sanction letter vs ledger usage — term-loan end-use audit trail
• Working-capital limit vs long-term assets created during the year
• Group on-lending pattern; pledged security registers

Sample observation — applicable

(a) The Company has not defaulted in repayment of loans or other borrowings or in the payment of interest thereon to any lender. (b) The Company has not been declared a willful defaulter by any bank or financial institution or other lender. (c) The term loans availed during the year were applied for the purposes for which the loans were obtained. (d) On an overall examination of the financial statements of the Company, no funds raised on short-term basis have been utilised for long-term purposes by the Company. (e) The Company has not taken any funds from any entity or person on account of or to meet the obligations of its subsidiaries, associates or joint ventures. (f) The Company has not raised loans during the year on the pledge of securities held in its subsidiaries, joint ventures or associate companies.

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