This was legal and within the various circulars issued by the Reserve Bank of India in dealing with derivative transactions, the apex court said.
The judgment paves the way for banks to resume recovery proceedings, which were stalled as the matter was sub judice.
Companies such as Hindustan National Glass & Industries, Emcure Pharmaceuticals and Finolex Industries had argued derivative transactions did not involve lending or borrowing and, therefore, RBI circulars did not cover those.
The Bench, of judges A K Patnaik and Swatanter Kumar, thus settled the issue in view of contradictory judgments of the Bombay High Court and the Calcutta High Court, in a large batch of appeals.
The Bombay HC, in the petitions moved by ICICI Bank and Deutsche Bank, had held borrowers in derivative transactions were wilful defaulters, while the Calcutta HC's view was they were not.
In view of diverging views, the parties had appealed to the Supreme Court. Writing the judgment, Patnaik said the terms lender and borrower should be given a wider interpretation.
A senior official with a Mumbai-based bank said: "It is a landmark judgment.
"Many defaulters had been hiding behind the judicial system so far.
"This will help banks recover their lost money."
"Now, borrowers will be concerned about the consequences.
"If they are listed as wilful defaulters, no bank would offer them credit.
"We
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