A petition has been filed before the Delhi High Court by road construction companies, seeking for a one-time restructuring of loan accounts in wake of the debilitating financial landscape due to the COVID-19 pandemic.
Filed by Advocates Kotla Harshavardhan, Japneet Kaur and Mansi Sood on behalf of Bharat Road Network Limited and other road construction companies, the plea states that there has been a "violation of rights conferred under Articles 14 and 19 of the Constitution, with regard to the restructuring of loan accounts of the Petitioners, due to deterioration of the financial landscape of the economy, during the lockdown of the country, keeping in view the spread of COVID-19 in the country, which is declared as a 'pandemic' by the World Health Organisation, a 'notified disaster' by the Ministry of Home Affairs and a 'natural calamity' by the Ministry of Finance'.
Referring to the guidelines issued by the Ministry of Home Affairs which suspended certain commercial activities and movement, the plea seeks for a writ of mandamus to be issued to the Respondents to allow a one-time restructuring of loans as a relief measure to the industries/companies/retail consumers, so that they are not classified as Non-Performing Assets when the lockdown is lifted.
The plea avers that MSMEs were allowed a one-time restructuring of loans as their cash flows had been severely affected because of the formalization of business through registration under GST. As an extension, this facility should be extended to all industries.
"…because of the economic activity coming to a standstill during the period of the lockdown, with consequential lingering effects which have undoubtedly affected the cash flows of businesses."
On 27th March 2020, a 3-month moratorium had been announced on payment of all instalments falling due between March 1 and May 31. This had been extended to 31st August. The plea contends that the regulatory measures adopted by the RBI are inadequate in light of the extension of the lockdown and the bleak scenario with respect to the revival of the economy.
The Petitioners being road construction companies have borne a heavy brunt due to the lockdown.
"That even after the lockdown is lifted, it will take a long time for the industry to be able to come back to normalcy, primarily because on account of the ongoing pandemic travel will continue to be far less than the travel during the days of normalcy. Consequently, toll collection will also be far less compared to earlier."
Apart from a severe impact on toll collection, some stretches of the highway have also not been completed on account of lack of labour force and milestone-based billing.
The petition further invokes Section 35A of the Banking Regulation Act, 1949 which stipulates that the RBI is required to issue directions in public interest in order to prevent the affairs of a Banking Company being conducted in a manner which is detrimental to the interest of the depositors or prejudicial to the interest of the Banking Company. The plea also refers to Section 45JA of the Reserve Bank of India Act, 1934, which requires for the RBI to ensure that the affairs of an NBFC is not conducted in a manner prejudicial to the interest of the depositors or the NBFC.
As a consequence, and as per the tenets of Satya Pal Anand v. State of MP & Ors (2015), the Court retains the authority to issue a mandamus when a public authority has failed to exercise or wrongly exercised the discretion conferred upon it by a statute or policy.
"In a proper case, in order to prevent injustice resulting to the concerned parties, the court may itself pass an order or give directions which the government or the public authority should have passed or given had it properly and lawfully exercised its discretion".
In light of the above, and as the Petitioners have never been declared as NPAs, the plea prays for the allowance of a one-time restructuring of loans, bonds etc. in view of the ongoing pandemic as envisaged under the relevant statutory provisions and circulars.