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Loan Moratorium: SC Rejects Plea for Moratorium Relief on Bank NPAs

Supreme Court on the extension of loan moratorium today, July 9.

Supreme Court on the extension of loan moratorium today, July 9.

SC rejected the plea saying it was an unfit case. In previous judgements, it was the courts' view that these financial decisions should be left to policymakers.

The Supreme Court on Friday rejected the plea seeking the moratorium on the declaration of accounts as Non-Performing Asset (NPA) till June 23, it announced. The court said that it is a matter of policy and that it does not see it as a ‘fit case’ for intervention. In June, the SC rejected a plea that sought a fresh loan moratorium relief, which was set in place due to the onset of the second COVID-19 pandemic wave. The court claimed that such decisions with financial ramifications are best left to the policymakers i.e. the government and the Reserve Bank of India.

The Supreme Court on Friday rejected the plea seeking the moratorium on the declaration of accounts as Non-Performing Asset (NPA) till June 23, it announced. The court said that it is a matter of policy and that it does not see it as a ‘fit case’ for intervention. In June, the SC rejected a plea that sought a fresh loan moratorium relief, which was set in place due to the onset of the second COVID-19 pandemic wave. The court claimed that such decisions with financial ramifications are best left to the policymakers i.e. the government and the Reserve Bank of India.

A bench consisting of Justice DY Chandrahud and Justice Mukeshkumar Rasikbhai Shah refused to entertain the petition filed by an advocate, Vishal Tiwari, who was seeking direction to modify the court’s March 23, 2021, judgment. The verdict stood that the period of declaring any account as non-performing assets (NPA) shall be reckoned from the date of the judgement pronounced. “These are all policy matters, we cannot interfere in the petition, sorry,” said Justice Chandrachud, adding that such a case is not fit. The bench said that the judgement given in the moratorium case and the plea filed by Tiwari were two different things entirely. The court then questioned Tiwari’s need to file the modification application.

Tiwari argued that the reason behind the application was that the RBI issued a circular, wherein, a gap of seven days stood from the day of judgement to consider the account as a non-performing loan.

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Prior to these events, a bench consisting of Justices Ashok Bhushan and Mukeshkumar Rasikbhai Shah denied a PIL that was filed by advocate Vishal Tiwari last Friday, July 2. Tiwari sought the direction to allow his plea following the March 23, 2021 judgement by the SC, which was denied in June.

The apex court clarified that it had other pressing issues to attend to as well, such as vaccinations, issues relating to migrant workers and so on. The court also added that these matters come under the ambit of the government and RBI as they are the policymakers meant to assess the situations and take the appropriate measures.

On March 23, the apex court has put a restraint on banks from charging interest on interest during the six-month loan moratorium period that was set from March 1 to August 1, 2020. With that done, however, the court refused to put an extension on the loan moratorium period beyond the March to August timeframe. This was done as the court believed these kinds of changes are best left in the policymakers’ hands.

The bench then vacated a September 3, 2020, stay order that prevented lenders from declaring as NPAs loan accounts that were not classified as such before August 31, 2020. Having said that, the bench and the court had repeatedly expressed their concern over the struggle of borrowers from different sectors who have been dealt hard blows by the pandemic. Industries like real estate and power were some of the worst affected.

It was the court’s view that if it were to alter the broader outline of the moratorium package and give all the borrowers a complete interest relief, that would ‘break the bank’, so to speak. This course of action would most likely jeopardise the banking system and drain all the funds according to the RBI.

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first published:July 09, 2021, 11:44 IST