The death of a defaulter

https://www.business-standard.com/opinion/columns/the-death-of-a-defaulter-123081300429_1.html

The FIR has been filed against the resolution professional as well, appointed by the National Company Law Tribunal (NCLT) with allegations of abetment to suicide. Allegedly, Desai, a loan defaulter, was harassed for the recovery of loan and had taken this extreme step under severe stress. The police have been doing their job, based on a complaint and they have every right to investigate.

Abetment to suicide, under the Indian Penal Code (IPC) of 1860, has a chequered history.

Abet means to assist, encourage or promote someone to commit a wrong thing. It involves instigating that person to do the wrong thing, engaging with one or more people into entering a conspiracy to do that and intentionally assisting any person by way of any act or illegal omission in the doing of the wrong thing. It is also important to establish that the means followed by a person or group of persons — as in this case —have deliberate intention while instigating or supporting the wrong act.

Can using means, as outlined under law and regulations and under a competent judicial body to recover money, by an NBFC be considered as harassment and abetment to suicide? Isn’t exercising the option of insolvency proceedings a legal right to recover bad loans?

We have not yet fully stabilised the personal insolvency and bankruptcy law in India. Should we have an institutionalised conciliation mechanism, prevalent in most states in the US, to settle debts for personal insolvency before initiation of the bankruptcy proceedings? Had there been such a mechanism in India, consisting of not only lawyers but also experienced finance persons, a tragedy such a Desai’s death, could have been avoided.

Failed business and a failed businessman are two different things. Businesses fail for multiple reasons — change in customer choices, new/better substitutes, technology leaps, apart from inefficiency and lack of vision, among other things. An entrepreneur learns from such failures and reinvents business models. The ability to emerge from such financial crises and business failures is the hallmark of an entrepreneur.

A lesson from this episode is that while businesses may fail or face temporary hurdles, this is not necessarily a reflection on the entrepreneur in question. The business failures and inability to service loans can play havoc with one’s emotion. We must stop stigmatising business failures. Particularly when startups are mushrooming all around, the financial system, backed by the Reserve Bank of India (RBI) and the government, can explore ways of extending support to restart the journey of a failed entrepreneur by finance as well as counselling.

I am not aware of how much interest rate was charged on the loan and whether Desai was harassed by the lender for the loan recovery. Prima facie, it seems that the due legal process has been followed. While the court will look into the FIR, the extremely unfortunate death of the art director should not be politicised. Loan waivers have been periodically used by the central and state governments. Let’s not add one more arsenal to the armoury of the borrowers to spoil the credit culture.