MUMBAI, March 30 -- The Bombay High Court has set aside the Union Bank of India's decision to declare businessman Puneet Agarwal, a former director and personal guarantor of Promart Retail India, as a "wilful defaulter". The court said the bank did not follow the proper procedure required under Reserve Bank of India (RBI) guidelines. According to the bank's petition, it had given Promart a loan of Rs.40 crore. At the time, Agarwal had signed a personal guarantee for the loan. However, in January 2014, he resigned as director of the company and sold his shares to new promoters. In October 2014, the bank pointed out irregularities in Promart's cash credit (CC) account and by December, classified it as a Non-Performing Asset (NPA). In 2015, the bank sent a notice to the company, its promoters, and Agarwal, proposing to declare them "wilful defaulters." It alleged failure to repay dues and misuse of funds, citing RBI guidelines. The following year, Union Bank issued a show-cause notice to the company, its promoters, and Agarwal, classifying them as 'wilful defaulters' for failing to regularize the company's CC account. The term wilful defaulter refers to a borrower who intentionally refuses to repay a loan despite having the financial capacity to do so. Citing RBI guidelines, the bank alleged that the defaulters had failed to repay the dues and had misused the funds While Agarwal denied the allegations, clarifying that he had already resigned from his post before the account turned into an NPA, the bank still made the declaration against him. Agarwal learnt about the classification only in 2019, and challenged it before the Bombay high court in 2021. On March 18, a division bench of justices Bharati Dangre and Manjusha Deshpande noted that the RBI rules require banks to follow a clear process before declaring someone a 'wilful defaulter'. The process includes giving reasons for the decision, backing it with evidence, and allowing a review committee to consider the person's response. The bench observed that in Agarwal's case, these procedures were not followed, as the decision was taken on the same day as his representation before the committee. However, the court allowed the bank to start fresh proceedings against Agarwal to declare him a willful defaulter, if legally permitted, by following the correct procedure....