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Module: General Practice

Q51: Regarding the consequences faced by a borrower classified as a "Wilful Defaulter," which of the following statements is INCORRECT?

A
They are debarred from availing any additional facilities from banks/FIs.
B
They are debarred from floating new ventures for a period of 5 years from the date of removal of their name from the list.
C
The lenders can initiate criminal proceedings against the borrower if diversion of funds is established.
D
They can still serve on the Board of Directors of other borrowing companies without restriction.
✅ Correct Answer: D
🎯 Quick Answer:
Statement D is INCORRECT. Wilful Defaulters are liable to be removed from the boards of other companies.
Concept Definition: The "Fit and Proper" criteria for directorships are violated by Wilful Default status.
Structural Breakdown: 1. Section 29A of IBC: They are barred from being resolution applicants (cannot buy back their own firm). 2. Board Membership: Lenders must mandate the removal of such persons from the boards of any other company seeking credit.
3. Credit Freeze: No new funds.
4. Cooling Period: The 5-year ban on new ventures (Option B) applies after they pay up/clear the default, acting as a lingering penalty.
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