Won't Pass Any Order Which Will Lead To Economy Going Haywire, Says Supreme Court On Pleas For Loan Moratorium Extension

Update: 2020-12-08 14:32 GMT

The Supreme Court continued the hearing in the pleas pertaining to extension of loan moratorium along with petitions by specific sectors.Solicitor General Tushar Mehta made submissions on behalf of the Centre bench of Justices Ashok Bhushan, R Subhash Reddy & MR Shah, the crux of which were that the the sector specific issues that emanate in the instant petitions could not be...

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The Supreme Court continued the hearing in the pleas pertaining to extension of loan moratorium along with petitions by specific sectors.

Solicitor General Tushar Mehta made submissions on behalf of the Centre bench of Justices Ashok Bhushan, R Subhash Reddy & MR Shah, the crux of which were that the the sector specific issues that emanate in the instant petitions could not be granted relief under Article 32.

"Not a case for your lordships to go further under Writ jurisdiction. Centre handheld all sectors. Their argument of NDMA not doing anything were nothing but arguments made in desperation. If sector specific issues persist, they are free to go to RBI, but to seek relief under Article 32 and pray that the relief(s) already granted be tweaked is not maintainable"

- Solicitor General Tushar Mehta to Supreme Court

The law officer stated that the Central Government realised and accepted that there was a problem and that there had to be a solution but that had to be sector specific. 

"The solutions need to be met out institutionally and within frameworks provided," he added

The Centre told Supreme Court that to roll out interest waivers would mean that a huge waiver will be attracted which in turn would affect the economy. "If the banks were to bear this burden, it would necessarily wipe out a substantial and a major part of their net worth, rendering most of the banks unviable and raising a very serious question mark over their very survival", said SG while stating that a blanket waiver of interest would mean foregoing an estimated 6 lac crore.

Justice Bhushan told him at this juncture that he courts were conscious of this and that it would not pass any orders which would shake the economy.

"Of course court will not pass an order which will lead to the economy going haywire. We are conscious of the fact"

- Supreme Court

On the aspect of Centre's non chalance regarding economic stresses faced by various sectors which was argued by petitioners, Solicitor General said that waiver of interest was never the solution in any economy but providing thrusts for boost of various sectors was the right way to proceed.

"Centre not done anything - I am answering to this argument now. Many sectors affected by Covid and RBI took decisions, Said, we can restructure but not waive everything. RBI took a wise decision of "eligibility criteria" vis-a-vis Non-NPA accounts..... all conceivable sectors affected by Covid19 have been taken into consideration," he argued

The law officer then told court that banks were fully empowered to customise relief to not so big and big borrowers (loans of up to 1500 crores and over 1500 crores respectively).

"Big Contours and parameters to be fixed by RBI, minute ones to be fixed by the Kamath Committee and they are to be implemented by the banks," SG argued.

On the issue of the implications of the Disaster Management Act, 2005, the Solicitor General informed Court that the effect of this disaster (Covid19) was of such nature that it could not be dealt with by one ministry. "All the written decisions are taken with approval and the initiation of decisions under the Act are taken by the Prime Minister  who is the Chairman of the NDMA... all ministries are required to function under sections 35 & 37 of the Act," he argued.

Senior Advocate VV Giri appeared for the Reserve Bank of India, arguing that the prudence framework was available in terms of the RBI Circulars.

He argued today that the discretion to frame a resolution plan should be with the bank and not the borrower.

The bench is expected to continue the hearing tomorrow.

Complete updates from the hearing available here.

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