The Delhi High Court has provided interim relief to an account from being declared a Non Performing Asset by the Punjab & Sind Bank, in light of the moratorium allowed by the RBI by its circular issued on March 27.
The Single Bench of Justice Rekha Palli noted that:
'Classification of the Petitioner's accounts as NPA would certainly amount to altering the position as existing on 01.03.2020 and, therefore, grave and irreparable loss will be caused to the petitioner, in case, its accounts are declared as NPA, only on account of its failure to pay the instalments, which were admittedly payable on or before 31.03.2020.'
While passing the interim order, the bench expressed agreement with the view expressed by another bench in the case Ananth Raj Ltd vs Yes Bank Ltd.
"I also find myself in agreement with the observation of the Coordinate Bench in Anant Raj Limited (supra) that the intention of the RBI while issuing the regulatory package was to maintain status quo with regard to the classification of accounts of the borrowers as they existed on 01.03.2020", observed Justice Rekha Palli in the interim order.
The case will be next considered along with Ananth Raj case on May 4. Meanwhile, the petitioner has been directed to implead the RBI as a party in the case.
Recently, the Bombay High Court had passed an interim order that the lockdown period should be excluded from the 90-day period for NPA declaration.
In the present plea (Shakuntala Educational & Welfare Society vs Punjab and Sind Bank), the Petitioner had asked for directions to be given to Punjab & Sind Bank to not to declare its pending loan accounts as Non Performing Assets (NPA).
In addition to this, the Petitioner had also asked for a direction for grant of moratorium of three months to it in terms of circular issued by the Reserve Bank of India (RBI).
Petitioner had informed the court that it is a charitable society engaged in the business of technical and higher education. In order to set up the institutions, the Petitioner had availed six term loans from the Respondent/Bank out of which four term loans stand fully repaid in accordance with the restructured repayment plan as conveyed by the respondent vide its letter dated 30.12.2014.
The Petitioner further submitted that in view of this March 27 circular issued by the RBI, whereunder a 90 days moratorium with regards to the instalments, which became payable after 01.03.2020 has been granted, the Respondent cannot declare the Petitioner's accounts as NPA only on account of its failure to pay the instalments, which were payable on or before 31.03.2020.
It was also argued by the Petitioner that since the various institutes run by the Petitioner are educational institutes situated in the State of Uttar Pradesh, where the State Government has issued a specific directive prohibiting the Petitioner from coercing the students to pay the due fees, the Petitioner is not in a position to repay the instalments as payable in March, 2020 for the term loan V & VI.
After making the submissions, the Petitioner pledged that it will make the payments within one week of lifting the said prohibitory order by the State Government.
Challenging the interim relief, Ms Suruchi Aggarwal, who was appearing for the Respondent Bank argued that the moratorium as envisaged by the RBI is applicable only for instalments which became payable on or after 01.03.2020 and not for those which had become due prior to 01.03.2020. She further submitted that the Statement of Development Regulatory Policy dated 27.03.2020 does not envisage any such moratorium in cases of installments which had already become due prior to 01.03.2020.
Highlighting that the Petitioner's account as NOA had already fallen due on 31/12/19, she argued that the RBI's circular dated 27.03.2020 on which heavy reliance is being placed by the Petitioner, can in any event not override Regulatory Policy, which does not provide for deferment of an account being classified as NPA on account of the COVID19 pandemic.
While giving interim relief to the Petitioner, the court observed that:
'...irrespective of the question, as to whether, the moratorium as envisaged by the RBI's circular dated 27.03.2020 would be applicable to the petitioner qua the instalments, which question can be determined only after completion of pleadings and considering the stand of the RBI, the fact remains that in view of the lockdown in the country as also the undisputed position that the petitioner still had time to make the payment of the due instalments till 31.03.2020, before which date on account of the lockdown and directive issued by the State Government, it has been prevented from demanding the due fees from the students of its various institutes.'
While ordering that the Respondent Bank would not be declaring the Petitioner's account till the next date of hearing, the court clarified that if, meanwhile, the order prohibiting collection of fees is lifted by the State Government, the Petitioner roll have to make the payment forthwith within a period of one week.
The court will next hear the matter on 04/05/2020.
The Petitioner in the present case was represented by Advocates Saket Sikri, Gautam Khazanchi and Aayushi Sharma
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