SMALL SCALE INDUSTRIAL MANUFACTURES ASSOCIATION (REGD.) versus UNION OF INDIA AND OTHERS on 23 March 2021

SMALL SCALE INDUSTRIAL MANUFACTURESASSOCIATION (REGD.)

v.

UNION OF INDIA AND OTHERS

(Writ Petition (C) No. 476 of 2020)

MARCH 23, 2021

[ASHOK BHUSHAN, R. SUBHASH REDDY ANDM.R. SHAH, JJ.]

Judicial review – Economic policy matters – Covid-19pandemic – Financial strain faced by industrial sector – Policydecisions by RBI and/or Government w.r.t relief/regulatory packages– Judicial review of – Limited scope – Held: Economic and fiscalregulatory measures are a field where Judges should encroach uponvery warily as Judges are not experts in these matters – Wisdomand advisability of economic policy are ordinarily not amenable tojudicial review – Function of the court is not to advise in mattersrelating to financial and economic policies for which bodies likeRBI are fully competent – Court can only strike down some or entiredirections issued by the RBI in case it is satisfied that the directionswere wholly unreasonable or in violative of any provisions of theConstitution/any statute – Matters of economic policy ought to beleft to the government – No writ of mandamus can be issued directingthe Government/RBI to announce/declare particular relief packages/policy or to grant some more reliefs/packages – Merely becausesome class/sector may not be agreeable/satisfied with such packages/policy decisions, the courts should not ordinarily interfere with thepolicy decisions, unless it could be faulted on the ground of malafide, arbitrariness, unfairness etc. – Present petitions seeking reliefsw.r.t total waiver of interest during the moratorium period; sector--wise relief packages; extension of moratorium period beyond31.08.20 or extension of the last date for invocation of the resolutionmechanism provided in the 6.8.2020 circular, are all in the realm ofthe policy decisions – If such reliefs are granted, it would seriouslyaffect the banking sectors and have far reaching financialimplications on the economy of the country – However, there shallbe no charge of interest on interest/compound interest/penal interestfor the period during the moratorium and any amount already

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Arecovered under thereunder be refunded to the concerned borrowersand be given credit/adjusted in the next instalment of the loan account– Constitution of India – Articles 14, 32, 226, 227 – DisasterManagement Act, 2005.

Disaster Management Act, 2005 – ss.3,6-14, 23, 35-37 –BNatural disasters; Pandemic – Plea that there is no National Planat all therefore, the National Disaster Management Authority failedto perform its duty – Held: Cannot be accepted – There is already aNational Disaster Management Plan prepared even prior to theCovid-19 pandemic – Under the National Plan, there is a NationalDisaster Management Institutional Mechanism – The said plan alsoCenvisages nodal ministries for management of different disasters –Disaster due to Covid-19 pandemic would fall under disaster dueto “biological emergencies” – Considering the very nature of thepandemic which would have PAN--India impact, empowered groupswere constituted by the NDMA – Therefore, when there is already inDexistence a National Plan, which might have been prepared evenprior to the Covid-19 pandemic, it cannot be said that there is noNational Plan by the NDMA at all – For every disaster, there shallnot be a new National Plan.

Conclusion

Words & Phrases – “may” – Disaster Management Act, 2005E– s.13 –Held: Word used in s.13 is “may” and not “shall” – Whileinterpreting a particular provision, the language used is to be readas it is – The legislature has deliberately used the word “may” -–“may” is used after considering the object and purpose of the Actas a whole and the role to be played by the Central Governmentthrough different ministries, by the State Government, by the DistrictFAuthority at the district level – In the present case, the Ministry ofFinance and the RBI have already come out with different packages/reliefs in repayment of loans or grant of fresh loans to the personsaffected by disaster – Interpretation of Statutes.

Partly allowing the writ petitions, the CourtG

HELD: 1.1 In catena of decisions and time and again thisCourt has considered the limited scope of judicial review ineconomic policy matters. From various decisions of this Court,this Court has consistently observed and held-The Court willnot debate academic matters or concern itself with intricacies ofHtrade and commerce; It is neither within the domain of the courts nor the scope of judicial review to embark upon an enquiry as towhether a particular public policy is wise or whether better publicpolicy can be evolved. Nor are the courts inclined to strike downa policy at the behest of a petitioner merely because it has beenurged that a different policy would have been fairer or wiser ormore scientific or more logical. Wisdom and advisability ofeconomic policy are ordinarily not amenable to judicial review;Economic and fiscal regulatory measures are a field where Judgesshould encroach upon very warily as Judges are not experts inthese matters. [Para 14][75-D-F]

1.2 Laws relating to economic activities should be viewedwith greater latitude than laws touching civil rights such asfreedom of speech, religion etc. The function of the Court is tosee that lawful authority is not abused but not to appropriate toitself the task entrusted to that authority. The function of the courtis not to advise in matters relating to financial and economicpolicies for which bodies like RBI are fully competent. The courtcan only strike down some or entire directions issued by theRBI in case the court is satisfied that the directions were whollyunreasonable or in violative of any provisions of the Constitutionor any statute. It would be hazardous and risky for the courts totread an unknown path and should leave such task to the expertbodies. Matters of economic policy ought to be left to thegovernment. What is best in the national economy and in whatmanner and to what extent the financial reliefs/packages beformulated, offered and implemented is ultimately to be decidedby the Government and RBI on the aid and advise of the experts.The same is a matter for decision exclusively within the provinceof the Central Government. Such matters do not ordinarily attractthe power of judicial review. Merely because some class/sectormay not be agreeable and/or satisfied with such packages/policydecisions, the courts, in exercise of the power of judicial review,do not ordinarily interfere with the policy decisions, unless suchpolicy could be faulted on the ground of mala fide, arbitrariness,unfairness etc. The correctness of the reasons which promptedthe government in decision taking one course of action insteadof another is not a matter of concern in judicial review and thecourt is not the appropriate forum for such investigation. Thepolicy decision must be left to the government as it alone can AB

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Aadopt which policy should be adopted after considering of thepoints from different angles. In assessing the propriety of thedecision of the Government the court cannot interfere even if asecond view is possible from that of the government. [Paras 14.1,14.5, 15, 17][76-G-H; 77-C-D; 78-F-H; 79-B-C]

BR.K. Garg v. Union of India (1981) 4 SCC 675 : [1982]1 SCR 947; Arun Kumar Agrawal v. Union of India(2013) 7 SCC 1 : [2013] 3 SCR 508; Peerless GeneralFinance and Investment Co. Ltd. v. RBI, (1992) 2 SCC343 : [1992] 1 SCR 406; State of M.P. v. Nandlal Jaiswal,(1986) 4 SCC 566 : [1987] 1 SCR 1; BALCOCEmployees’ Union (Regd.) v. Union of India, (2002) 2SCC 333 : [2001] 5 Suppl. SCR 511; Narmada BachaoAndolan v. Union of India, (2000) 10 SCC 664 : [2000]4 Suppl. SCR 94; Prag Ice & Oil Mills v. Union ofIndia AIR 1978 SC 1296 : [1978] 3 SCR 293; P.T.R.DExports (Madras) P. Ltd. v. Union of India (1996) 5SCC 268 : [1996] 2 Suppl. SCR 662 – relied on.Metropolis Theatre Co. v. Chicago, 57 L Ed 730 : 228US 61 (1913) – referred to.

1.3 Legality of the policy, and not the wisdom or soundnessEof the policy, is the subject of judicial review. The scope of judicialreview of the governmental policy is now well defined. The courtsdo not and cannot act as an appellate authority examining thecorrectness, stability and appropriateness of a policy, nor are thecourts advisers to the executives on matters of policy which theexecutives are entitled to formulate. Government has to decideFits own priorities and relief to the different sectors. It cannot bedisputed that pandemic affected the entire country and barringfew of the sectors. However, at the same time, the Governmentis required to take various measures in different fields/sectorslike public health, employment, providing food and shelter to theGcommon people/migrants, transportation of migrants etc. andtherefore, as such, the government has announced variousfinancial packages/reliefs. Even the government also suffered dueto lockdown, due to unprecedented covid-19 pandemic and alsoeven lost the revenue in the form of GST. Still, the GovernmentHseems to have come out with various reliefs/packages.

Government has its own financial constraints. Therefore, as such,no writ of mandamus can be issued directing the Government/RBI to announce/declare particular relief packages and/or todeclare a particular policy, more particularly when many complexissues will arise in the field of economy and what will be the overalleffect on the economy of the country for which the courts do nothave any expertise and which shall be left to the Governmentand the RBI to announce the relief packages/economic policy inthe form of reliefs on the basis of the advice of the experts.Therefore, no writ of mandamus can be issued. [Paras 18, 19][79-D-H; 80-A]

1.4 No State or country can have unlimited resources tospend on any of its projects. That is why it only announces thefinancial reliefs/packages to the extent it is feasible. The courtwould not interfere with any opinion formed by the Governmentif it is based on the relevant facts and circumstances or based onexpert advice. When Government forms its policy, it is based ona number of circumstances on facts, law including constraintsbased on its resources. It is also based on expert opinion. Itwould be dangerous if court is asked to test the utility, beneficialeffect of the policy or its appraisal based on facts set out onaffidavits. No right could be absolute in a welfare State. Man is asocial animal. He cannot live without the cooperation of a largenumber of persons. Every article one uses is the contribution ofmany. Hence every individual right has to give way to the right ofthe public at large. Not every fundamental right under Part III ofthe Constitution is absolute and it is to be within permissiblereasonable restriction. This principal equally applies when thereis any constraint on the health budget on account of financialstringencies. It is the cardinal principle that it is not within thelegitimate domain of the court to determine whether a particularpolicy decision can be served better by adopting any policydifferent from what has been laid down and to strike down asunreasonable merely on the ground that the policy enunciateddoes not meet with the approval of the court in regard to itsefficaciousness for implementation of the object and purpose ofsuch policy decision. Whether there shall be a waiver of interestduring the moratorium period or whether there shall be sector-wise relief packages and/or RBI should have issued directions AB

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Awhich are sector specific and addressing such sector specificissues and/or whether the moratorium period should be extendedbeyond 31.08.2020 or the last date for invocation of the resolutionmechanism, namely, 31.12.2020 provided in the 6.8.2020 circularshould be extended are all in the realm of the policy decisions.Not only that, if such reliefs are granted, it would seriously affectBthe banking sectors and it would have far-reaching financialimplications on the economy of the country. [Paras 20-22][80-B-D-G, H; 81-A-B]

1.5 Now so far as the relief sought of waiver of interestduring the moratorium period is concerned, it is required to beCnoted that the bankers/lenders have to pay the interest to thedepositors and their liability to pay the interest on the depositscontinue even during the moratorium period. There shall beadministrative expenses also required to be borne by the bankers/lenders. Continue payment of interest to depositors is not only Done of the most essential banking activities but it shall be a hugeresponsibility owed by the banks to crores and crores of smalldepositors, pensioners etc. surviving on the interest from theirdeposits. There may be several welfare funds schemes, categoryspecific and sector specific which might be surviving and areimplemented on the strength of the interest generated from theirEdeposits. All such welfare funds would depend on the incomegenerated from their deposits for the survival of their members.Therefore, to grant such a relief of total waiver of interest duringthe moratorium period would have a far-reaching financialimplication in the economy of the country as well as the lenders/

Fbanks. Therefore, when a conscious decision has been taken notto waive the interest during the moratorium period and a policydecision has been taken to give relief to the borrowers bydeferring the payment of installments and so many other reliefsare offered by the RBI and thereafter by the bankersindependently considering the Report submitted by KamathGCommittee consisting of experts, the interference of the court isnot called for. [Para 23][81-C-F]

1.6 Now so far as the submission on behalf of the petitionersthat the RBI should have issued directions which are sectorspecific and addressing such sector specific issues is concerned,H

at the outset, it is required to be noted that as such the Committeeheaded by Shri K.V. Kamath had gone into such sector specificissues and gave its recommendations. The recommendations ofthe Kamath Committee have been substantially accepted by theRBI in its circular dated 7.9.2020 which provides for separatethreshold for 26 sectors including power, real estate andconstruction. Even otherwise, it is required to be noted that everysector might have suffered differently and therefore it will not bepossible to provide sector specific/sector-wise reliefs. Thepetitioners cannot pray for sector specific relief by either waiverof interest or restructuring by way of present proceedings underArticle 32 of the Constitution of India and the question of suchfinancial stress management measures requires examination andconsideration of several financial parameters and its impact. Nowso far as the submission on behalf of the petitioners that as perthe notifications/circulars/reliefs offered by the RBI and/or FinanceDepartment of the Union of India ultimately it is left to the bankersand it should not have been left to the bankers and theGovernment/RBI must intervene and provide further reliefs isconcerned, at the outset, it is required to be noted that as suchthe bankers are commercial entities and since the customerprofile, organizational structure and spread of each lendinginstitution is widely different from others, each lending institutionis best placed to assess the requirements of its customers andtherefore, the discretion was left to the lending institutionsconcerned. Any borrowing arrangement is a commercial contractbetween the lender and the borrower. RBI and/or the Union ofIndia can provide for broad guidelines while recommending togive the reliefs. [Paras 24, 25][81-G-H; 82-A-E]

1.7 Now so far as the submission on behalf of the petitionersthat the relief packages which are offered by the UOI/RBI/Bankers/Lenders are not sufficient and some better and/or morereliefs should be offered is concerned, it is not within the judicialscope of the courts to issue such directions. No mandamus canbe issued to grant some more reliefs/packages. The court cannotinterfere with the economic policy decisions on the ground thateither they are not sufficient or efficacious and/or some more ABC

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Areliefs should have been granted. The Government might havetheir own priorities and the Government has to spend in variousfields and in the present case like health, medicine, providingfood etc. Even as per the case of the Union of India and so statedin the counter filed on behalf of the Union of India and the RBI,so many policies have been announced to mitigate the impact ofBCovid-19 pandemic. While offering the financial relief packages,the financial constraint and/or financial burden on the governmentis also required to be considered and borne in mind, which canbe considered by the experts and the government and the courtshave not expertise to assess the financial burden. From theCvarious steps/measures/policy decisions/packages declared bythe Union of India/RBI and the bankers, it cannot be said thatthe UOI and/or the RBI have not at all addressed the issuesrelated to the impact of Covid-19 on the borrowers. As such,none of the petitioners have specifically challenged the variouscirculars/policy decisions taken by the UOI/RBI. The borrowersDwant something more than the reliefs announced. Merely, sincethe reliefs announced by the UOI/RBI ither may not be suitingthe desires of the borrowers, the reliefs/policy decisions relatedto Covid-19 cannot be said to be arbitrary and/or violative ofArticle 14 of the Constitution of India. It cannot be said that anyEof the fundamental rights guaranteed under the Constitution areinfringed and/or violated. Economic decisions are required to betaken keeping the larger economic scenario in mind. [Para 26][82-F-H; 83-E-H]

1.8 Similarly, the relief sought that the moratorium periodFshould be extended and/or the last date for invocation of theresolution mechanism namely 31.12.2020 provided under the06.08.2020 circular should be extended are all in the realm ofpolicy decisions. Even otherwise, almost five months wereavailable to eligible borrowers when circular dated 6.8.2020 was notified providing for a separate resolution mechanism for Covid-G19 related stressed assets. Therefore, sufficient time was givento invoke the resolution mechanism. Therefore, the petitionersshall not be entitled to any reliefs, namely, (i) total waiver ofinterest during the moratorium period; (ii) to extend the periodof moratorium; (iii) to extend the period for invocation of theHresolution mechanism, namely 31.12.2020 provided under the 6.8.2020 circular; (iv) that there shall be sector-wise reliefsprovided by the RBI; and (v) that the Central Government/RBImust provide for some further reliefs over and above the reliefpackages already offered which can be said to be in the realm ofthe economic policy decisions and for the reasons statedhereinabove and as observed hereinabove granting of any suchreliefs would have a far reaching financial implication on theeconomy of the country. It appears, whatever best can be offeredhas been offered for the different fields and to the common peopleas well as those persons who are affected due to Covid-19pandemic. [Para 27][84-A-F]

2.1 On conjoint reading of the relevant provisions of theDMA 2005, it cannot be said that the functions of all the Ministriesare to be discharged by the NDMA which should take decisionqua the area in each Ministry. It also cannot be said that thefunctions of the Ministries will stand transferred to the NDMAand will have to be discharged by the NDMA either directly orindirectly for the purpose of disaster management. VariousMinistries under the Central Government have to take variousrelief measures within their respective spheres for remedyingthe effects of the disaster. From the pleadings, it is borne outthat in fact there is already a National Disaster Management Planprepared even prior to the Covid-19 pandemic. Under the NationalPlan, there is a National Disaster Management InstitutionalMechanism, which is reproduced hereinabove. The said plan alsoenvisages nodal ministries for management of different disasters.For example, if the disaster is due to drought, Ministry ofAgriculture and Farmers Welfare would be the nodal agency; ifthe disaster is due to floods, Ministry of Housing and UrbanAffairs would be the nodal agency and if the disaster is due to“biological emergencies”, the Ministry of Health and Welfarewould be the nodal agency. The disaster due to Covid-19 pandemicwould fall under disaster due to “biological emergencies”.However, it appears that Covid-19 pandemic disaster is of such anature that it could not be confined to one nodal ministry andwhatever measures/reliefs are required to be taken/given areprovided by every Ministry in each and every day needed.Therefore, various reliefs/packages are provided by differentMinistries, such as, Ministry of Railways, Ministry of Finance, AB

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AMinistry of Health and Family Welfare etc. It also appears thateven considering the very nature of the pandemic which wouldhave PAN-India impact, empowered groups were constituted bythe National Disaster Management Authority. Therefore, whenthere is already in existence a National Plan, which might havebeen prepared even prior to the Covid-19 pandemic, it cannotBbe said that there is no National Plan by the NDMA at all. NationalPlan would be for a long term and even with respect to disasterto happen in future. For every disaster, there shall not be a newNational Plan. National Plan would be comprehensive in naturewhich is already there in existence. Therefore, the submissionCthat there is no National Plan at all and therefore the NDMA hasfailed to perform its duty cannot be accepted. [Para 29][90-D-H;91-A-D]

2.2 Now so far as the submission on behalf of the petitionersthat the NDMA has failed to perform its duty cast under SectionD13 is concerned, at the outset, it is required to be noted that theword used in Section 13 is “may” and not “shall”. As per thesettled proposition of law, while interpreting a particular provision,the language used is to be read as it is. On a fair reading of Section13, it appears that the legislature has deliberately used the word“may”. This “may” is used after considering the object andEpurpose of the Act as a whole as well as the role to be placed bythe Central Government through different ministries, role to beplaced by the State Government, role to be played by the DistrictAuthority at the district level. In the present case, the Ministryof Finance and the RBI have already come out with different Fpackages/reliefs in repayment of loans or grant of fresh loans tothe persons affected by disaster. Even the Central Governmentthrough Ministry of Finance and the RBI has taken various stepsfor granting reliefs to the disaster affected borrowers. The CentralGovernment has also come out with a new definition of MSMEs

for improving turnover caps for better access of schemes/benefits.GThere are other reliefs also announced by the CentralGovernment. The Central Government has also declared themoratorium from March to August, 2020. The proceedings underthe IBC are also suspended during the moratorium period. Asper the provisions of the DMA 2005, the responsibilities andHfunctions of the discharge of functions by the NDMA would be confined to Section 6 of the Act. However, on-ground disastermanagement and relief measures shall have to be undertaken bythe Central Ministries and the State Government Ministriesdepending upon the need of the disaster and only in a case wherethe NDMA is satisfied that the reliefs which are already announcedare not sufficient and/or no steps are taken at all with respect tothe reliefs mentioned in Section 13, the National Authority mayrecommend the reliefs in repayment of loans etc. Therefore, itcannot be said that the National Authority has failed to performits duty as cast under Section 13 of the Act. It is required to benoted and so stated in the affidavit dated 31.08.2020 filed on behalfof the Union of India that NDMA also took cognizance of theissues being dealt with by the RBI and sent its “views andrecommendations” given by O.M. dated 28.08.2020 and theNDMA also opined that RBI may consider granting further reliefs,as deemed appropriate, after considering and taking into accountthe financial relief packages issued by the Ministry of Finance,as well as, other relief measures that have already been issued/declared by the RBI itself. The “views and recommendations”of the NDMA were communicated to the RBI vide letter dated31.08.2020. Therefore, it cannot be said that the NDMA has notstepped into at all. It is to be noted that even as per Section 13 ofthe Act, the National Authority “may” and “recommend” reliefin repayment of loans or grant of fresh loans to the personsaffected by disaster on such concessional terms as may beappropriate. Thereafter, as per the “views and recommendations”of the NDMA, RBI has come out with Resolution framework andon the basis of the same the lenders/bankers after getting theapproval of their Board of Directors have come out with thepolicies. Thus, from the above, it cannot be said that NDMA hasfailed to perform its duty cast under Section 13 of the Act. Fromthe above, it also cannot be said that there is no National Plan inexistence at all. [Paras 30, 301.1-30.3][91-D-H; 92-A-E; 93-B]

2.3 There is no justification shown to restrict the relief ofnot charging interest on interest with respect to the loans up toRs. 2 crores only and that too restricted to the categories asenumerated. What are the basis to restrict it to Rs. 2 crores arenot forthcoming. Therefore, as such, there is no rational to restrict AB

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Asuch relief with respect to loans up to Rs. 2 crores only. Evenotherwise, it is required to be noted that the scheme dated23.10.2020 granting relief/benefit of waiver of compound interest/interest on interest contains eligibility criteria and it providesthat any borrower whose aggregate of all facilities with lendinginstitution is more than Rs. 2 crores (sanctioned limit orBoutstanding amount) will not be eligible for ex-gratia paymentunder the said scheme. Therefore, if the total exposure of theloan at the grant of the sanction is more than Rs. 2 crores, theborrower will be ineligible irrespective of the actual outstanding.For Example, if the borrower has been sanctioned a loan of Rs. 5Ccrores and has availed of the same, even though he might haverepaid substantially bringing down the principal amount of lessthan Rs. 2 crores as on 29.02.2020, but because of the sanctionof the loan amount of more than Rs. 2 crores, he will be ineligible.It also further provides that the outstanding amount should notbe exceeded to Rs. 2 crores and for this purpose aggregate of allDfacilities with the lending institution will be reckoned. Therefore,if a borrower, for example, MSME Category has availed and hasoutstanding of business loan of Rs. 1.99 crores and also has duesof its credit card of Rs. 1.10 lakhs, thereby making the aggregateto Rs. 2.10 crores, it stands ineligible. Therefore, the aforesaidEconditions would be arbitrary and discriminatory. Even otherwise,it is required to be noted that compound interest/interest oninterest shall be chargeable on deliberate/willful default by theborrower to pay the installments due and payable. Therefore, itis in the nature of a penal interest. By notification dated27.03.2020, the Government has provided the deferment of theFinstallments due and payable during the moratorium period. Oncethe payment of installment is deferred as per circular dated27.03.2020, non-payment of the installment during the moratoriumperiod cannot be said to be willful and therefore there is nojustification to charge the interest on interest/compound interest/Gpenal interest for the period during the moratorium. The presentpetitions seeking reliefs, namely, (i) total waiver of interest duringthe moratorium period; (ii)to extend the period of moratorium;(iii) to extend the period for invocation of the resolutionmechanism, namely 31.12.2020 provided under the 6.8.2020circular; (iv)that there shall be sector-wise reliefs provided byH

the RBI; and (v) that the Central Government/RBI must providefor some further reliefs over and above the relief packages alreadyoffered stand dismissed. However, it is directed that there shallnot be any charge of interest on interest/compound interest/penalinterest for the period during the moratorium and any amountalready recovered under the same head, namely, interest oninterest/penal interest/compound interest shall be refunded tothe concerned borrowers and to be given credit/adjusted in thenext instalment of the loan account. All these petitions are partlyallowed to the aforesaid extent only and as observed for thereliefs, the petitions are dismissed. Interim relief granted earliernot to declare the accounts of respective borrowers as NPAvacated. [Paras 31, 31.1, 32][93-F-H; 94-A-E, G-H; 95-A-C]

Charan Lal Sahu v. Union of India, (1990) 1 SCC 613: [1989] 2 Suppl. SCR 597; Union Carbide CorporationLimited v. Union of India, (1991) 4 SCC 584 : [1991] 1Suppl. SCR 251; Kailash Chand Sharma v. State ofRajasthan, (2002) 6 SCC 562 : [2002] 1 Suppl. SCR317; M. Nagaraj v. Union of India, (2006) 8 SCC 212: [2006] 7 Suppl. SCR 336; Rattan Arya v. State of T.N.(1986) 3 SCC 385 : [1986] 2 SCR 596; State of W.B. v.Anwar Ali Sarkar [1952] SCR 284 : AIR 1952 SC 75;D.S. Nakara v. Union of India, (1983) 1 SCC 305 :[1983] 2 SCR 165; Roop Chandra Adlakha v. DelhiDevelopment Authority, 1989 Supp. (1) SCC 116 :[1988] 3 Suppl. SCR 253; T.N. GodavarmanThirumulkpad v. Union of India (1997) 2 SCC 267 :[1996] 9 Suppl. SCR 982; Pradip Kumar Maity v.Chinmoy Kumar Bhunia (2013) 11 SCC 122 : [2013] 7SCR 117; Chinnamarkathian v. Ayyavoo (1982) 1 SCC159 : [1982] 2 SCR 146; Official Liquidator v. DhartiDhan (P) Ltd. (1977) 2 SCC 166 : [1977] 2 SCR 964;Bachahan Devi v. Nagar Nigam, Gorakhpur (2008) 12SCC 372 : [2008] 2 SCR 424; Delhi Administration v.Umrao Singh (2012) 1 SCC 194 : [2011] 11 SCR 838;Union of India v. Kumho Petrochemicals Co. Ltd. (2017)8 SCC 307 : [2017] 4 SCR 324; Federation of RailwayOfficers Association v. Union of India (2003) 4 SCC

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14SUPREME COURT REPORTS

A289 : [2003] 2 SCR 1085; Dhampur Sugar (Kashipur)Ltd. v. State of Uttaranchal, (2007) 8 SCC 418 : [2007]10 SCR 199; Dalmia Cement (Bharat) Ltd. v. Union ofIndia (1996) 10 SCC 104 : [1996] 1 Suppl. SCR 825;Villianur Iyarkkai Padukappu Maiyam v., Union of India(2009) 7 SCC 561 : [2009] 9 SCR 225; Shri SitaramBSugar Co. Ltd. v. Union of India (1990) 3 SCC 223 :[1990] 1 SCR 909 – referred to.

Case Law Reference

[1989] 2 Suppl. SCR 597C[1991] 1 Suppl. SCR 251[2002] 1 Suppl. SCR 317[2006] 7 Suppl. SCR 336[1986] 2 SCR 596D[1952] SCR 284[1983] 2 SCR 165[1988] 3 Suppl. SCR 253[1996] 9 Suppl. SCR 982E[2013] 7 SCR 117[1982] 2 SCR 146[1977] 2 SCR 964[2008] 2 SCR 424F[2011] 11 SCR 838[2017] 4 SCR 324[2013] 3 SCR 508G[1992] 1 SCR 406[2003] 2 SCR 1085[2007] 10 SCR 199[1987] 1 SCR 1H[2001] 5 Suppl. SCR 511

SMALL SCALE INDUSTRIAL MANUFACTURES ASSOCIATION(REGD.) v. UNION OF INDIA

CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No.476 of 2020

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[Under Article 32 of the Constitution of India]

With

W.P. (C) No. 542/2020, 945/2020, 937/2020, 1024/2020, 1025/2020, 1006/2020, 959/2020, 955/2020, 506/2020, 568/2020, 606/2020, 608/2020, 711/2020, 785/2020, 802/2020, 829/2020, 826/2020, 964/2020, 1029/2020, 1157/2020, 1132/2020, 1178/2020, 1190/2020 and W.P. (C) DiaryNo. 12389 of 2020.

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Ravindra Shrivastava, Siddharth Bhatnagar, Huzefa Ahmadi,Mukul Rohatgi, Harish Salve, Sr. Advs., Kunal Vajani, Kunal Mimani,Shubhang Tandon, Abhimanyu Bhandari, Ms. Rooh-e-hina Dua,Cheitanya Madan, Pranjal Kishore, Atul Shankar Vinod, VijayRAghunathan, Dinesh Balachandran, M.P. Vinod, Ashish AGarwal, Ms.Shashi Kiran, Ms. Sangeeta Bhalla, Ms. Kirti Sinha, Arjun Chaudhary,Ashish Virmani, Himanshu Dhuper, Ms. Nishi Chaudhary, Manjeet Kirpal,Yashartha Gupta, Chandra Prakash, B V Balaram Das, B. RAmanaMurthy, Kumar Dushyant Singh, Devesh Chauvia, Mukul Lather, Ms.Pooja Singh, Ms. Swati Setia, Shashank Kunwar, Ms. Sonia Dube,Shatadru Chakraborty, Ms. Kanchan Yadav, Anurag Singh, Ms. SurbhiAnand, M/s. Legal Options, Anil Soni, Harish Pandey, Utsav Trivedi,Chirag Sh??? Abhinay, Ms. Pragya Wal, Himanshu Sachdeva, Ms. SrishtiKumar, Ms. Astha Prasad, A. Karthik, Syed Jafar Alam, ShankhSengupta, Ms. Tina Abraham, Ms. Chhavi Jain, Mahesh Agarwal,Vijayesh Atri, Ankur Saigal, Rohan Sharma E. C. Agarwala, SanjayKapur, V M Kannan, Sambit Panja, Ms. Megha Karnwal, GauravSharma, Dhawal Mohan, Prateek Bhatia, Ms. Alankrita Sinha, Keshav EF

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AMohan, R.K. Awasthi, Prashant Kumar, Piyush Vatas, Ms. Ritu Arora,Santosh Kumar – I, M/s. Lambat And Associates, M/S. D.S.K. Legal,M.s. Manju Jetley, Manoj V. George, Ms. Shilpa Liza George, Ms.Bhavika, Ashish Virmani, M. P. Vinod, Mrs. Anil Katiyar, Jinendra Jain,Ms. Shashi Kiran, Ms. Manjeet Kirpal, Ramesh Babu M. R., AbhikalpPratap Singh, Abhigya Kushwah, Ms. Sunita Yadav, Pradeep KumarBDubey, Siddharth Rajkumar Murarka, Ms. Anamika Kushwaha, Ms.Nandita Rao, Ms. Mahija Reddy, K. N. Agnihotri, Virendra Arora, ADvs.For the appearing parties.

The Judgment of the Court was delivered by

M. R. SHAH, J.C

1. Writ Petition (Civil) No. 476 of 2020 has been preferred underArticle 32 of the Constitution of India by the Small Scale IndustrialManufactures Association, Haryana for an appropriate writ, direction ororder directing the Union of India and others to take effective and remedialmeasures to redress the financial strain faced by the industrial sector,Dparticularly MSMEs due to the Corona Virus Pandemic. It appears thatthe writ petitioner is not satisfied with the steps taken by the RBI videnotification dated 27.03.2020. According to the petitioner, the Covid-19Regulatory Package notified by the RBI vide notification dated 27.03.2020insofar as the terms loans, working capital facilities and restructuring ofStressed Account is inadequate, ineffective and does not offer anyEsubstantial relief, aid or assistance to the industries particularly MSMEs.According to the petitioner, the above-mentioned Regulatory Packagewill not in any manner salvage the MSMEs and help them recover fromfinancial losses that have been caused due to the unforeseencircumstances. With the above broad grievances, it is prayed as under:F(a) issue writ/writs including a writ of mandamus or any otherwrit or direction in the nature thereof, directing the respondents topermit the lending institutions not to recover interest componentfrom the industries particularly MSMEs on Term Loans andWorking Capital Facilities availed by them for three months fromG01.03.2020 to 31.05.2020; (b) issue writ/writs including a writ of mandamus or any otherwrit or direction in the nature thereof, directing the respondents topermit the lending institutions to grant interest free moratoriumperiod for Term Loan and not recovery of interest on WorkingCapital Facilities for three months from 01.03.2020 to 31.05.2020;H

(c) issue writ/writs including a writ of mandamus or any otherwrit or direction in the nature thereof, directing the respondents toallow restructuring of Stressed Accounts; (d) issue writ/writs including a writ of mandamus or any otherwrit or direction in the nature thereof, directing the respondents toextend the date for depositing GST from 20[th] of every month to30[th] of every month for a period of six months; (e) issue writ/writs including a writ of mandamus or any otherwrit or direction in the nature thereof, directing the respondents torefund the pending GST amounts and utilise pending GST amountsfor payment of Government expenses for the MSMEs industries.

1a. Writ Petition (Civil) No.542 of 2020 under Article 32 of theConstitution of India has been preferred by the petitioners – CREDAI –Maharashtra Chambers of Housing Industry and another which has beenfiled for and on behalf of the real estate sector challenging notificationdated 27.03.2020 issued by the RBI with a prayer that the same may bedeclared as ultra vires to the extent it charges interest on the loan amountduring the moratorium period (which has been declared between March1, 2020 till August 31, 2020). Therefore, the main grievance in this writpetition is to continue not to charge the interest on the outstanding portionof the term loans during the moratorium period.

1b. By way of Writ Petition (Civil) No. 945 of 2020 preferredunder Article 32 of the Constitution of India, the petitioner, a practisingAdvocate, has prayed for an appropriate writ, direction or order directingthe Union of India – Ministry of Finance, Ministry of Home Affairs andthe RBI to extend the moratorium period till 31[st] December, 2020, whichwas lastly extended vide notification dated 23.05.2020.

1c. Writ Petition (Civil) No. 937 of 2020 has been preferred underArticle 32 of the Constitution of India by the Contract Carriage OperatorsAssociation to quash notification dated 27.03.2020 issued by the RBI tothe extent charging interest during the moratorium period. It is also prayedto direct the RBI to extend the period of moratorium by another sixmonths, without any interest being levied on the loans availed by themembers of the petitioner organisation.

1d. Writ Petition (Civil) No. 1024 of 2020 has been preferredunder Article 32 of the Constitution of India by the petitioner –Confederation of Real Estate Developers Association of India (CREDAI), ABC

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Afor and on behalf of the private real estate developers in Chhattisgarh,also challenging notification dated 27.03.2020 issued by the RBI to theextent charging interest on the loan amount during the moratorium period.It is also prayed for an appropriate writ, direction or order directing therespondents – Union of India to take adequate measures of reliefs to thedisaster affected persons in accordance with letter and spirit of DisasterBManagement Act, 2005, more particularly Sections 12 and 13 of the saidAct, more particularly to the reliefs with respect to waiver of loan and/or interest on all kind of loans availed by the borrowers/disaster affectedpersons through a well informed and formulated policy.

1e. Writ Petition (Civil) No. 1025 of 2020 under Article 32 of theCConstitution of India has been preferred by the Chhattisgarh SpongeIron Manufacturers Association, also challenging notification dated27.03.2020 issued by the RBI, which has been further extended videnotification dated 23.05.2020 to the extent it charges interest on the loanamount during the moratorium period. It is also prayed to direct theDUnion of India and others to take steps/grant reliefs to the disaster affectedpersons in accordance with letter and spirit of Disaster ManagementAct, 2005, more particularly in terms of Sections 12 and 13 of the saidAct.

1f. Writ Petition (Civil) No. 1006 of 2020 has been preferred underEArticle 32 of the Constitution of India by an individual M/s SupertechLimited for an appropriate writ, direction or order directing the RBI andthe National Housing Bank to instruct all the banks/financial institutions/non-banking financial companies to restructure all loan accounts availedby the petitioner on its projects and to calculate the repayment @ 8%simple interest from the date of disbursement till its final repayment inFthe light of paragraphs 28 to 30 of the decision of this Court dated10.06.2020 passed in Writ Petition (Civil) No. 940 of 2017 (Amrapaligroup matter) and to protect the interest of the home buyers.

1g. Writ Petition (Civil) No. 959 of 2020 under Article 32 of theConstitution of India has been preferred by Federation of Self-FinancingGTechnical Institutions and others for an appropriate writ, direction ororder directing the Union of India – Ministry of Finance, RBI and othersto provide such financial relief to its members freezing all financialliabilities of financial institutions of the petitioners – banks and financialinstitutions. It is also prayed for waiver of the penal interest charged forHa period of one year or until such time as it takes for the pandemic to

abate. It is also further prayed to direct the Union of India – Ministry ofFinance and the RBI to direct the financial institutions to grant additionalcredit facility of Rs. 2 crores to each member institutions of the petitionerswithout interest to meet salary cost and other overheads during the Covid-19 pandemic. It is also further prayed to direct to the financial institutionsto reschedule the loan instalments for one academic year without anycharge of interest over the interest for the unpaid period.

1h. Writ Petition (Civil) No. 955 of 2020 under Article 32 of theConstitution of India has been preferred by the CREDAI – HR for andon behalf of the real estate sector for an appropriate writ directing therespondents – Union of India, RBI and others to provide such financialrelief to its members, freezing all financial liabilities of such memberstowards banks and financial institutions. It is also further prayed to directthe RBI to apply Circular dated 27.03.2020 to all banks, non-bankingfinancial companies, housing finance companies and other financialinstitutions compulsorily and mandatorily to all loan accounts withoutany discrimination or classification.

1i. Writ Petition (Civil) No. 506 of 2020 under Article 32 of theConstitution of India has been preferred by one private limited companychallenging notification dated 27.03.2020 issued by the RBI to the extentcharging interest on the loan amount during the moratorium period.

1j. Writ Petition (Civil) Diary No. 12389 of 2020 under Article 32of the Constitution of India has been preferred by the Shopping CentresAssociation of India (SCAI) for and on behalf of its members who areengaging in Malls and Shopping Centres challenging notification dated27.03.2020 issued by the RBI to the extent charging interest on the loanamount during the moratorium period. It is also prayed to extend themoratorium period beyond August, 2020. An application has also beenfiled for exemption from paying court fee and notarized affidavits. Thesaid prayer is allowed in terms of clause 3 of the application.

1k. Writ Petition (Civil) No. 568 of 2020 under Article 32 of theConstitution of India has been preferred by CREDAI – MCHI, Mumbaifor and on behalf of its members – real estate developers for anappropriate writ, direction or order for waiver of interest in respect of itsinstalments due as on March, 2020 until end of fourth quarter of financialyear 2020-2021. It is also further prayed to direct the RBI and financialinstitutions to make available additional source of finance in the nature A

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Aof grant of additional loans, working capital facilities, guaranteedemergency credit line and construction finance etc.

1l. Writ Petition (Civil) No. 606 of 2020 under Article 32 of theConstitution of India has been preferred by an individual also challengingnotification dated 27.03.2020 issued by the RBI as ultra vires to theBextent it charges interest on the loan amount during the moratorium period.It is prayed to direct the respondents to provide relief in repayment ofloan by not charging interest during the moratorium period declared bynotification dated 27.03.2020, further extended by notification dated23.05.2020.

C1m. Writ Petition (Civil) No. 608 of 2020 under Article 32 of theConstitution of India has been preferred by the Association of PowerProducers and others for and on behalf of the private power developersin India, owning power plants in the country for an appropriate writ,direction or order directing the RBI to issue directions to lendinginstitutions not to charge interest on interest accrued during theDmoratorium period in terms of notification dated 27.03.2020. It is alsoprayed to direct the RBI to extend moratorium on interest and principalfor an additional period of six months ending on 31.03.2021 withouttreating any member of the petitioner no.1 as defaulter. It is also furtherprayed to direct the RBI to de-link interest rates issued by lendingEinstitutions from credit rating till such time that the stress on the powersector caused due to the Covid-19 pandemic is eased. It is also furtherprayed to direct the RBI to provide a special dispensation to the lendersto allow extension of the Scheduled Commercial Operation Date ofprojects under construction, due to delays in completion of under-construction projects on account of Covid-19 and the lockdown, byFanother one year while maintaining the “standard” asset categorisation.It is also further prayed to direct the respondents to include Non-Convertible Debentures as part of the relief granted by the RBI in itsnotification dated 27.03.2020, as well as, any other Covid-19 relatedrelief which may be granted.G

1n. Writ Petition (Civil) No. 711 of 2020 under Article 32 of theConstitution of India has been preferred by Coimbatore JewelleryManufacturers Association for and on behalf of its members to declarethat part of notification dated 27.03.2020 issued by the RBI, as extendedby notification dated 23.05.2020, as ultra vires to the extent it chargesHinterest on the loan amount during the moratorium period. It is also prayed to direct the Union of India and the RBI to provide relief in repayment ofloan by not charging interest during the moratorium period declared bynotification dated 27.03.2020, further extended by notification dated23.05.2020. It is also further prayed to extend the moratorium period onpayment of instalments/interest by a further period of 18 months, inexercise of powers under Section 21 read with Section 35A of the BankingRegulation Act, 1949.

1o. Writ Petition (Civil) No. 785 of 2020 under Article 32 of theConstitution of India has been preferred by CREDAI Tamil Nadu prayingfor waiver of interest/penal interest for a period of one year or until suchtime as it takes for the pandemic to abate. It is also prayed to direct therespondents to provide such financial relief to the members of theassociation including freezing all financial liabilities of such memberstowards banks and financial institutions from whom the members of thepetitioner’s association have taken loans, for a further period of sixmonths. It is also further prayed to direct the respondents to providesuch financial relief including one-time restructuring for all accounts ofreal estate projects which were standard as on 31.12.2019.

1p. Writ Petition (Civil) No. 802 of 2020 under Article 32 of theConstitution of India has been preferred by the Textile and KnitwearAssociation challenging notifications dated 27.3.2020 and 23.05.2020issued by the RBI as ultra vires to the extent charging interest on theloan amount during the moratorium period. It is also prayed to directbanks and financial institutions not to charge the interest on the duepayments towards principal/interest for a period of three years.

1q. Writ Petition (Civil) No. 829 of 2020 under Article 32 of theConstitution of India has been preferred by the Northern India TextileMills Association also challenging notifications dated 27.03.2020 and23.05.2020 to the extent charging interest during the moratorium period.

1r. Writ Petition (Civil) No. 826 of 2020 under Article 32 of theConstitution of India has been preferred by the Federation of Industrialand Commercial Organization (FICO) also challenging notification dated27.03.2020 to the extent charging interest on the loan amount during themoratorium period. It is also prayed to direct the respondent – RBI todirect banks and financial institutions to make all due payments towardsprincipal/interest in a three-year period after expiry of the forbearanceperiod, without charging any interest on the same.

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A1s. Writ Petition (Civil) No. 964 of 2020 under Article 32 of theConstitution of India has been preferred by Chattisgarh Laghu andSahayak Udyog Sangh for and on behalf of its members declaring theportion of notification dated 27.03.2020 issued by the RBI, as extendedby notification dated 23.05.2020, charging the interest and also intereston interest (penal interest) during the moratorium period as ultra vires.B

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1t. Writ Petition (Civil) No. 1029 of 2020 under Article 32 of theConstitution of India has been preferred by an individual challengingnotifications dated 27.03.2020 and 23.05.2020 to the extent charginginterest on the loan amount during the moratorium period.

C1u. Writ Petition (Civil) No. 1157 of 2020 under Article 32 of theConstitution of India has been preferred by the Chhattisgarh UdyogMahasangh also challenging notifications dated 27.03.2020 and23.05.2020 to the extent charging interest/interest on interest (penalinterest) on the loan amount during the moratorium period. It is alsoprayed to direct the Union of India to take adequate and effectiveDmeasures of reliefs to the disaster affected persons in accordance withletter and spirit of Disaster Management Act, 2005, more particularly interms of Sections 12 and 13 of the said Act, and such reliefs includinginter alia suitable waiver of loan and/or interest on all kind of loans availedby the borrowers/disaster affected persons through a well informed andEformulated policy.

1v. Writ Petition (Civil) Nos. 1132 of 2020 and 1178 of 2020 underArticle 32 of the Constitution of India have been preferred by ChhattisgarhHotel and Restaurant Association and Raipur Automobile DealersAssociation (RADA) respectively for the same reliefs as have beenFprayed in Writ Petition (C) No. 1157 of 2020.

1w. Writ Petition (Civil) No. 1190 of 2020 under Article 32 of theConstitution of India has been preferred by a private limited company –Fabworth Promoters Private Limited for an appropriate writ, directionor order directing the Union of India – Ministry of Finance and RBI andGothers challenging the RBI Circular dated August 06, 2020 to the extentmentioned in 10A and 10B. It is also prayed to direct not to charge anyadditional interest or additional charges of any nature by the lendinginstitutions, including but not limited to, towards grant of additional financewhile approving a resolution plan under the RBI Covid-19 ResolutionFramework dated August 06, 2020. It is also further prayed for anH

appropriate writ, order directing the respondents to formulate a reliefpackage/policy to make effective provisions for the hospitality sectorincluding but not limited to make available additional source of finance inthe nature of grant of additional loans, working capital facilities, guaranteedemergency credit line etc., without payment of any additional interest onthe existing contractual rates of interest or additional charges of anynature. It is also further prayed to direct the respondents to formulate arelief package/policy making it mandatory for all lending institutions topass on the benefit of reduction of repo rates by RBI to all loans andfacilities granted by all lending institutions.

2. Considering the reliefs sought in the respective writ petitions,referred to hereinabove, the reliefs sought by the respective petitionersin their respective petitions can be broadly bifurcated into four parts,namely, (1) waiver of compound interest/interest on interest during themoratorium period; (2) waiver of total interest during the moratoriumperiod; (3) extension of moratorium period; and (4) there shall be sector-wise economic packages/reliefs.

Submissions on behalf of the respective Petitioners

3. Shri Ravindra Shrivastava, learned Senior Advocate appearingon behalf of the respective petitioners in Writ Petition (C) Nos. 964/2020, 1024/2020, 1025/2020, 1132/2020, 1157/2020 and 1178/2020 hasmade the following submissions:

i) that this Court ought not to limit the scope for relief and directionsonly qua waiver of compound interest which is limited to a highly restrictedsegment of the class of borrowers. It is submitted that shorn oftechnicalities of pleadings and specific prayers, this Court must takecognizance in public interest of the severity and the magnitude of thedisaster and mould the relief accordingly to extend an effective measureof relief to an utterly distressed class of people affected by the pandemicof Covid-19;

ii) that Covid-19 pandemic is a disaster in itself of an unprecedentedhistory. It undoubtedly requires disaster management;

iii) that the “disaster management” must be and can only beaddressed under the statutory regime of law enacted by the Parliament.The question of executive response will come into play only after thespecial law on the aspect of “disaster management” has run its full course.

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AThere is no way that the issues arising out of the disaster of Covid-19can be addressed without travelling the course of path under the DisasterManagement Act, 2005 (hereinafter referred to as the “DMA 2005”); iv) that the Statement of Objects and Reasons of DMA 2005specifically states that the DMA 2005 has been enacted to provide forBrequisite institutional mechanisms for drawing up and monitoring theimplementation of the disaster management plans, ensuring measuresby various wings of Government for prevention and mitigating effects ofdisasters and for undertaking a holistic, coordinated and prompt responseto any disaster situation. It is submitted that the preamble of the Actstates that it is an Act to provide for the effective management of disastersCand for matters connected therewith or incidental thereto;

v) that by reason of the very provision of Section 72 of the Actwhich accords to it overriding effect, DMA 2005 is a special law and isa complete code in itself;

Dvi) that the aspects of “disaster management” which inter aliaincludes grant of relief and concessions to the distressed community ofborrowers affected by the disaster, has not at all been considered,addressed and much less sought to be remedied under the statutoryframework. Whatever little has been seen is only executive response.The conspectus of the provisions of DMA 2005 simply imposes legalEand statutory duty on statutory authorities who have to perform the legalobligation in the interest of the distressed community of people sufferingthe disaster and its impact. It is submitted that in the matter of grant ofreliefs and concessions and adopting measures for minimising the painsand agony of the disaster, the statutory authorities have not risen at all toFtheir task and legal duty;

vii) it is submitted that Covid-19 pandemic is a “disaster” withinthe meaning of Section 2(d) of the Act. It is submitted that not onlydisaster but it is a “disaster of severe magnitude” within the contemplationof Section 13 of the Act. Any disaster inflicted on mankind within theGterritory of India, requires “disaster management” to be carried out byseveral tier of authorities as are established under the Act; the NationalDisaster Management Authority being the foremost, seemingly omnipotentand omnipresent. It is submitted that the “disaster management” is definedin Section 2(e) of the Act; H

viii) that the “disaster management” is a continuous and integratedprocess of planning, organising, coordinating implementing measureswhich are necessary and expedient for “…Mitigation or reduction ofrisk of any disaster or its severity or consequences…”. That the issueswhich arises squarely fall within the meaning and amplitude of “disastermanagement” which is statutorily mandated under Section 2(e) of theAct;

ix) that the word “mitigation” has been defined in Section 2(i) andthe word “resources” has been defined in Section 2(p) of the DMA2005;

x) that in the present case the steps for disaster managementhave not been undertaken by the statutory authorities under the Act,which makes out a plain and simple case of issue of mandamus to putthe statutory authorities in action for performing their duties under thelaw;

xi) that while Section 11 mandates duty to draw up a plan fordisaster management for the whole country, at least this Court has notbeen informed of any such national plan;

xii) that Section 12 of the Act imposes a mandatory duty on theNational Authority to recommend guidelines for the minimum standardsof relief to be provided to ‘persons affected by disaster’ which includesinter alia the reliefs mentioned in three sub-clauses in Section 12 of theAct. The width and scope of the Section is widest and admits of nolimitations. The expression minimum standards of relief to ‘personsaffected by disaster’ are all such reliefs which are necessary and requiredfor sustenance and survival of meaningful living existence of the ‘peopleaffected by disaster’. This will include within its fold monetary reliefand concessions, apart from other measures;

xiii) that the Union of India has filed various affidavits but none ofthem places on record any recommendation of National Authority forguidelines for providing minimum standards of relief for ‘persons affectedby disaster’ in discharge of legal duty under the Act;

xiv) that Section 13 of the Act is more specific and directly pertinentto the issues which have been raised in these petitions. The Parliamentis cognizant of the fact that an occurrence of disaster of severe magnitudecan inevitably seriously impair the ability and capacity of the borrowersfor repayment of loans and further the ‘persons affected by disaster’

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Amay require for living existence grant of fresh loans. Being aware ofsuch a contingency which is most likely to occur in cases of disaster ofsevere magnitude, the National Authority has been enjoined upon withlegal duty to “recommend relief” – in repayment of loans or grant offresh loans to persons affected. It is submitted that what would be formof relief in the payment of loan or grant of fresh loans on concessionalBterms, is the exclusive domain and authority of the National Authority. Itis submitted that the relief envisaged under Section 13 of the Act has tobe meaningful and substantive; it has to be based on rational considerationand not a pittance. A legal and faithful discharge of duty cast upon theNational Authority would require the Authority in minimum to undertakeCan empirical study of the severity of the magnitude and in proportion therequirement of the number and class of people and the exact nature ofrelief to be extended which is possible only after collection of relevantdata and undertaking a study by experts; xv) that Section 13 which casts duty upon the National AuthorityDto recommend relief in the matter of repayment of loans and/or grant offresh loans on concessional terms does not make any differentiationamong the class of ‘persons affected by disaster’. The class of personsaffected by disaster is one integrated class as the Covid-19 pandemichas affected every single individual person, the difference may be ofdegree. Section 13 intends to provide relief in the matter of repaymentEof loans etc. to all the persons affected by the disaster and does notadmit of any classification. While this much is the minimum scheme oflaw, the National Authority has not made any recommendation with regardto relief in the repayment of loans and/or for grant of fresh loans topersons affected by disaster on such concessional terms as may beFappropriate. There has been a complete inaction on the part of theNational Authority in performing the legal duty. It is submitted that anyrecommendations of the National Authority under Section 13 of the DMA2005 have not been brought to the notice of this Court;

xvi) that some of the measures which are suggested to have beenGtaken are only executive measures and are dehors of the provisions ofSections 12 and 13 of the DMA 2005. Those measures cannot be readin substitution of the requirements of Sections 12 and 13. The only andexclusive authority to make recommendations either under Section 12or 13 of the Act is only the National Authority. It is submitted that inview of the clear provision of the Act entrusting the duty of makingH

recommendations for extending reliefs for persons affected by disasteris on the National Authority. The case on behalf of the UOI so stated inparagraph 29 of affidavit dated 31.08.2020 that as the reliefs/measuresin financial sector were being examined and supervised by the Ministryof Finance, the NDMA did not step in as, by its very nature, it may nothave expertise in dealing with the complex policy decisions effecting thefinancial stability of the nation in general and that of banking sector inparticular, is not only incorrect, unacceptable but rather uncharitable tothe highest body of NDMA.

It is submitted that therefore the NDMA has not stepped in despitethe clear mandate under Section 13 of the Act. It is submitted that theentire executive government both, at the level of Centre and the Stateare under the command of the National Authority and bound to act in aidof the National Authority in discharging its duties. It is submitted that theNational Authority is not an expert body is unacceptable. It is submittedthat the National Authority has all the powers to seek assistance fromother bodies for performing its legal duties. The task of DisasterManagement also includes capacity building and augmentation ofresources which the National Authority can work on. Lack of resourcesin terms of funds is neither an answer nor an excuse for not performingits duties and obligations under the DMA to provide relief to the personsaffected by disaster;

xvii) that the Ministry of Finance and the RBI do have an importantrole to play but their role is and can only be to aid and assist the NationalAuthority in formulation of the measures of relief. The actual decisionand based thereon the recommendations to various stakeholders includingthe lending institutions is solely the jurisdiction and authority of the NationalAuthority, which jurisdiction and power can neither be delegated norabdicated. The measures formulated by the Ministry of Finance andRBI have to have the approval and sanction of the National Authoritywhich alone has the authority to make their recommendations;

xviii) that even the government in discharge of executive functionsand providing administrative response have to act as “parens patriae”which doctrine is embedded in the preamble of the Constitution. It issubmitted that the government in democracy or any other governmenthas to act only and only for the welfare of the people. In support of hissubmission, reliance is placed on the decision of this Court in the case of AB

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ACharan Lal Sahu v. Union of India, (1990) 1 SCC 613 (paragraph35).

It is submitted that therefore when the doctrine of parens patriaegets attracted, the lack of resources or financial considerations resultingin denial of relief to the needy persons affected by disaster is no answerBand cannot be pressed into service. It is submitted that the governmentis simply bound to arrange its coffers in such a manner that the reliefcannot be denied. Reliance is placed upon the decision of this Court inthe case of Union Carbide Corporation Limited v. Union of India,(1991) 4 SCC 584;

Cxix) that the bogey of financial burden and stress on the banks todrive them unviable is raised without any basis on record much lessbased on empirical study and collection of relevant data which is thebasic requirement particularly of rule of law. On the duty of undertakingempirical study based on collection of relevant and quantifiable data,reliance is placed on the decision of this Court in the case of KailashDChand Sharma v. State of Rajasthan, (2002) 6 SCC 562; and thedecision of the Constitution Bench judgment in the case of M. Nagarajv. Union of India, (2006) 8 SCC 212 (paragraphs 44 to 46);

xx) that while it is the case of the petitioners that there are norecommendations issued by the NDMA in terms of Section 13 of theEDMA 2005, the cryptic correspondence annexed with the affidavit ofthe Union of India dated 31.08.2020 shows that certain views andrecommendations have been expressed by the NDMA vide O.M. dated28.08.2020. While referring to para 5 of the said affidavit, it is submittedthat thus, on the showing of the Union of India itself, whatever is theFnature of views and recommendations of the NDMA, it is clear andcategorical of one thing that the measures adopted by the RBI and theGovernment of India, the Ministry of Finance before the NDMA havenot found to be adequate and satisfactory. It is clearly stated by theNDMA that the borrowers may require further relief from the bankingsector and that the RBI may consider granting further relief to theGborrowers;

xxi) that while the Ministry of Finance vide its letter dated31.08.2020 seems to have communicated to the RBI the aforesaid viewsand recommendations of NDMA regarding relief and repayment of loansby borrowers affected by Covid-19 pandemic, there is nothing on recordH

to show any further consideration much less any grant of further reliefby the RBI, pursuant to the views and recommendations of the NDMA; AB

xxii) Now so far as the waiver of compound interest by way ofEx- Gratia Scheme vide memo dated 23.10.2020 is concerned, it isvehemently submitted that the very use of the word “ex-gratia” isinappropriate and indicates complete lack of empathy and a misdirectedapproach of the Union of India. What the persons affected by the disasterare entitled to at the hands of the statutory authority and also the welfareGovernment towards disaster management and within its contemplationextension reliefs and concessions, is misconceived as matters of bountyand/or charity described as ex-gratia. The distressed class of personsaffected by the disaster are entitled to reliefs and concessions as a matterof right because that flows from the legal and statutory duty imposed bythe statutory law of Parliament – DMA 2005 and the supreme law ofthe land, i.e., the Constitution of India. It is submitted that it is becauseof this approach of a gratis underlying the scheme that both the statutoryauthorities and Union of India have miserably failed to address the issuein right perspective and grant relief and concessions to the personsaffected by the disaster in an effective, meaningful and substantialmanner; C

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xxiii) that even the Scheme dated 23.10.2020 contains the eligibilitycriteria as under:

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“4. Eligibility criteria under the scheme

(1) Borrowers in the following segments/classes of loans, whohave loan accounts having sanctioned limits and outstandingamount of not exceeding Rs.2 crore [aggregate of all facilitieswith lending institutions] as on 29.02.2020, shall be eligibleFunder the Scheme:

(i) MSME loans

(ii) Education loans

(iii) Housing loans

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(iv) Consumer durable loans

(v) Credit card dues

(vi) Automobile loans

(vii) Personal loans to professionals

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A(viii) Consumption loans

Any borrower whose aggregate of all facilities with lendinginstitutions is more than Rs.2 Crore (sanctioned limits oroutstanding amount) will not be eligible for ex-gratia paymentunder this scheme.

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(2) The aforesaid eligibility shall be subject to the followingfurther conditions and stipulations:

(i) Account should be standard as on 29[th] February2020, i.e., loan should not be a Non-performing Asset(NPA) as on 29[th] February, 2020.

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(ii) Lending institution must be either a banking company,or a Public Sector Bank, or a Co-operative Bank[i.e., an Urban Co-operative Bank or a State Co-operative Bank or a State Co-operative Bank or aDistrict Central Co-operative Bank], or a RegionalDRural Bank, or an All-India Financial Institution, or aNon-Banking Financial Company or a HousingFinance Company registered with RBI or NationalHousing Bank as the case may be. A Non-BankingFinancial Company as the case may be. A Non-Banking Financial Company-Micro FinanceEInstitution should be a member of a Self-RegulatoryOrganization (SRO) recognized by RBI.

(iii) The ex-gratia payment under this scheme shall beadmissible irrespective of whether the borrower insub-clause (1) has fully availed or partially availed orFnot availed of the moratorium on repaymentannounced by RBI vide its circular DOR. No.BP.BC.47/21.04.048/2019-20, dated 27[th] March,2020 and extended on 23[rd] May, 2020.”

It is submitted that a perusal of the aforesaid will show that theGrelief and concession which was announced in the affidavit of the Unionof India dated 02.10.2020 has been further restricted making it whollyarbitrary and eyewash. It is submitted that the following restrictions areobvious from paragraph 4:

i.That it is applicable to the borrowers in the 7 class/segments;H

ii.It is applicable to the borrowers who have loan accountsAhaving sanction limits and outstanding amount of notexceeding 2 crores;

iii.The aggregate of all facilities with lending institutions shouldnot exceed 2 crores as on 29.02.2020; B

iv.That the account should be standard as on 29.02.2020 i.e.the loan should not be a non performing asset as on thatdate.

It is submitted that the eligibility criteria enshrined in para 4 of thescheme has stark contrast with affidavit dated 02.10.2020. It is submittedthat the Ministry of Finance has added more and drastic conditionsreducing it to an illusion of reliefs and concessions. The arbitrary andirrational criteria is so striking that the scheme is virtually nugatory. Inthe first place, para 18 of the affidavit dated 02.10.2020 as well as para4 of the scheme, both make it evident that if the total exposure of theloan at the grant of sanction is more than Rs. 2 crores, the borrower willbe ineligible irrespective of the actual outstanding. For example, if theborrower has been sanctioned a loan of Rs. 5 crores and has availed ofthe same, even though he might have repaid substantially bringing downthe principal amount to less than Rs. 2 crores as on 29.02.2020 butbecause of the sanction of the loan amount of more than Rs. 2 crores,he stands ineligible. It is submitted that more remarkable is the conditionthat the outstanding amount should not exceed Rs. 2 crores and forwhich purpose the aggregate of all facilities with the lending institutionswill be reckoned. It means that hypothetically a borrower, for exampleMSME category, has availed and has outstanding of business loan ofRs. 1.99 crores and also has a due on his credit card of Rs.1.10 lakhthereby making the aggregate to Rs.2.10 crores, he stands ineligible.This cannot be justified by any logic; D

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xxiv) that even the categorisation of borrowers limited to 8categories only is not based on collection of any data and any empiricalstudy in an objective manner, much less a study of the severity of themagnitude and effect of the pandemic disaster on the borrowers, theclassification on the borrowers limited to 8 categories has no nexus withthe object sought to be achieved. It is submitted that it cannot be suggestednor can it be accepted logically that the borrowers outside 8 categoriesare not or would not be affected by the severity of the disaster, i.e, the G

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Apandemic and make them the class of persons affected by the disasterentitling to a similar treatment on parity. On what basis the categorisationlimited to 8 categories has been made is not discernible nor can becomprehended;

xxv) that affidavit dated 02.10.2020 shows that there is aBclassification between ‘small borrowers’ and ‘big borrowers’. It issubmitted that this classification is wholly arbitrary. It is submitted thatin the process of this classification a sizable and much bigger class of‘middle class borrowers’ has been completely excluded and no treatmenthas been accorded to the class of borrowers situated between the smalland big classes. It is submitted that this classification therefore is clearlyCunrealistic and unscientific. It is submitted that neither any study hasbeen done nor the classification has been made on any rational basiswhich has nexus with the ground reality;

xxvi) that the classification of borrowers is both discriminatoryand arbitrary and thereby in violation of Article 14 of the Constitution. ItDis submitted that the classification is solely irrational, unreal, unscientificand highly subjective, thereby suffering from the vice of arbitrarinessviolating Article 14 of the Constitution;

xxvii) that the classification has no nexus at all with the objectsought to be achieved whereas the object is clear, statutory, constitutionalEand singular, i.e., extending reliefs to ameliorate the distress and miseriesof the distress class of persons which are severely hit by the disaster ofpandemic and do constitute a sizable and significant class of personsaffected by the disaster requiring disaster management; xxviii) that the impugned classification is based on whims andFcaprice of the executive rather than an objective and real consideration.No material is available on record to show the basis of the classification.The Union of India cannot seek to clothe a decision which is so evidentlydiscriminatory and arbitrary under the protective shield of policy decisioninasmuch as any policy can neither be arbitrary nor discriminatory. InGsupport of his submissions, Shri Ravindra Shrivastava has heavily reliedupon the decisions of this Court in the cases of Rattan Arya v. State ofT.N. (1986) 3 SCC 385; State of W.B. v. Anwar Ali Sarkar 1952SCR 284: AIR 1952 SC 75 (paras 83 & 84); and D.S. Nakara v.Union of India, (1983) 1 SCC 305 (paras 13 & 14); H

xxix) that even within the class of classified eligible borrowers,the arbitrariness is writ large because categories and the borrowers ofeach categories are inherently dissimilar but are sought to be paintedwith one brush. They are made to wear the shoes of one size to fit in all.The borrowers in 8 categories compared with each other unequal. Forexample, a business loan to MSME category is considered at par withhome loan and educational loan. The conditions of the loans and interestsare bound to be different so much so the credit card holders and consumerdurable loans and automobile loans are inherently dissimilar, also thepersonal loans to professional and the MSME loans are different in content.It is submitted that thus unequals are being treated as equals which itselfis a case of classic discrimination. Reliance is placed on the decision ofthis Court in the case of Roop Chandra Adlakha v. Delhi DevelopmentAuthority, 1989 Supp. (1) SCC 116 (paras 19 & 20);

xxx) that even charging interest on interest/compound interestcan be said to be in the form of penal interest. It is submitted that thepenal interest can be charged only in case of wilful default. It is submittedthat in view of the effect of pandemic due to Covid-19 and even otherwisedefer the payment of loan during the moratorium period as per circulardated 27.3.2020, it cannot be said that there is any wilful default whichwarrants interest on interest/penal interest/compound interest. It issubmitted that there shall not be any interest on interest/penal interest/compound interest charged for and during the moratorium period;

xxxi) that even otherwise limiting relief and concessions to thevictims of disaster to waiver of compound interest alone is arbitrary,insufficient, irrational and discriminatory. It is submitted that the so-calledwaiver of compound interest can only be one of the measures but oughtnot to be allowed to be the end of the road by closure of the case as hasbeen sought by the Union of India. Only a proper and objective studywill reveal whether relief more than the waiver of compound interest isthe dire need of the persons affected by the disaster. Sections 12 and 13of the DMA 2005 envisage reliefs in terms of more than what is soughtto be done under the pretence of ex-gratia scheme. It is submitted thateven a judicial notice can be taken that the severity of the impact andconsequences of the disaster upon the common class of people, such asemployees, businessmen, farmers, workers, industrialists, professionalsetc. are beyond description. To a significant class of people, the impactof the disaster has threatened their very survival and meaningful existence AB

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Aof life and liberty. It is submitted that therefore it is a completemisconception of the Union of India that relief of waiver of compoundinterest is sufficient to provide redress within the meaning of Sections12 and 13 of the DMA 2005. It is submitted that the measures of reliefswere required to be laid down sector and group wise classified on thebasis of common denominating factors, which have not been done;B

xxxii) Now so far as the measures proposed by RBI vide circulardated 6.8.2020 is concerned, it is vehemently submitted that the samecannot be said to be a relief of ‘disaster management’ which otherwiseis arbitrary and discriminatory. It is submitted that the RBI Circular dated6.8.2020 is a sheet anchor of case of both the Union of India and theCRBI. This circular seeks to provide for the resolution framework forCovid-19 based on the “Prudential Framework for Resolution of StressedAssets Directions 2019” dated 7.6.2019. It is submitted that on the faceof it the resolution framework only adopts and incorporates the circulardated 2.6.2019, which is prior to onset of pandemic disaster; D

xxxiii) that the RBI is not the authority though it may havesupportive role to play to take a decision in regard to the measures ofrelief and concession to the disaster affected persons arising out of thetask of disaster management under DMA 2005. It is submitted that thecircular is not a substitute for the decision of the NDMA under SectionsE12 and 13 of the DMA 2005;

xxxiv) that though the resolution framework mentions Covid-19but is not tailor made suited to the extraordinary and unprecedentedimpact, consequences and distress caused to the persons affected bythe disaster of pandemic Covid-19. The resolution framework for theFstressed assets governed by the prudential framework cannot be ipsofacto applied for grant of reliefs and concessions to the disaster affectedpersons under the task of disaster management. The prudential normshave nothing to do with the peculiarities of impact and consequences ofthe disaster such as Covid-19 the management of which has entailedinto repeated nationwide lockdown unprecedented in history and itsGcontinuous cascading impact and consequences hitting across the lifeand liberties, business, industries and environment. Importation ofprudential norms designed for resolution framework for stressed assetsfor lessor conditions of economic distress is only whimsical and irrational.It is submitted that it is, as such, dereliction of duty; H

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xxxv) that the resolution framework as per 6.8.2020 has itselfbeen held to be inadequate by none other than the NDMA as is evidentfrom the views and recommendations of NDMA contained in the OMdated 28.08.2020. Having taken cognizance of RBI Circular dated6.8.2020 the NDMA has observed that the borrowers require furtherrelief from the banking system and exalted the RBI to grant furtherrelief. Such inadequate measure of so-called resolution framework inthe RBI circular dated 6.8.2020 ought not be accepted by this Court;

xxxvi) that the resolution framework in RBI circular is highly bankcentric and leans not only heavily but only in favour of the banks andlending institutions rather than walking extra mile for the distress classof persons and borrowers. The resolution framework by virtue of theconditions of eligibility in paragraph 2 thereof is per se discriminatoryand arbitrary. MSME borrowers whose aggregate exposure to lendinginstitutions collectively is Rs. 25 crores or less on 1.3.2020 are not eligiblefor resolution framework. This classification is solely arbitrary and isbased on no intelligible differentia having nexus with the object. It issubmitted that the resolution framework is applicable only to thoseborrowers who are having distress on account of Covid-19 but in whatmanner such factor would be determined is not provided for, leavingtherefore, the benefit of the resolution framework to subjectivesatisfactory and arbitrariness of the banks, it has been left to the unguided,ultimate and final discretion of the banks to lay down their individualpolicies and framework creating gross inequality and introducing totalsubjectivity; xxxvii) It is further submitted by Shri Ravindra Shrivastava, learnedSenior Advocate appearing on behalf of some of the petitioners that thetrigger for filing these petitions and the Court taking the cognizance thereofare conditions of exceeding distress, financial and otherwise whichseriously impinge upon the fundamental rights of Article 14, 19 and 21 ofthe Constitution in their full ramifications. It is submitted that the occasionfor this Court is an extraordinary human tragedy of unparallel origin andprecedence and therefore requiring extraordinary statutory legal andconstitutional response by the statutory authorities and the Governmentof India. It is submitted that the issues are far more important to beasked to be closed on the basis of few affidavits and circulars which fallfar short from the requirements of constitutional and statutory duties. Itis submitted that the statutory authorities must act without any more AB

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Adelay, the Government of India being the parens patriae has to act in ameaningful manner and meaning of the doctrine as the father of thecitizens of the republic and therefore the ultimate custodian and guardianof their welfare. It is submitted that the role of the parens patriae bythe Government of India has not been discharged as per the doctrinewhich has been explained by the Constitution Bench in Charan LalBSahu (supra);

xxxviii) that the very nature of the issues involved in this case andof which cognizance is required to be taken are such that there is aneminent need in public interest of continuous monitoring of the statutoryand executive action by this Court and further issuance of continuousCdirections and mandamus to all the authorities concerned. It is submittedthat neither the magnitude and severity of the disaster which hascontinuous and cascading effect and considering the very concept of“disaster management” under the Act as an integrated and continuousprocess, the relief and measures adopted or required to be adopted cannotDbe a sort of one-time grant or package. It is submitted that with theevolution of situation there is a strong public interest and need for thisCourt to keep exercising its constitutional jurisdiction under Article 32 ofthe Constitution so that the authorities do not fail, they remain active andvigilant and enormous class of victims of the disaster do not remaincrying for the redressal of the grievances. In support of his submission,Eheavy reliance is placed on the decision of this Court in the case of T.N.Godavarman Thirumulkpad v. Union of India (1997) 2 SCC 267.

4. Dr. Abhishek Manu Singhvi, learned Senior Advocate appearingon behalf of the power sector has further submitted in addition to what issubmitted by Shri Ravindra Shrivastava, learned Senior Advocate thatFduring the lock down due to Covid-19 pandemic, power sector is badlyaffected. It is submitted that therefore there shall be a special packageof relief for the power sector. It is submitted that therefore not enabling/considering the impact of lockdown due to pandemic, vis-à-vis powersector and not providing special package for the power sector, unequalsGare treated equally. It is submitted that therefore the NDMA/UOI/RBImust devise suitable and appropriate sector specific measures essentiallyfor the continued operation of the power generation sector.

4.1 It is submitted that the RBI Circular relating to Covid-19 reliefpackages viz. impugned RBI notifications, RBI Circulars dated 6.8.2020,H7.9.2020 have left the option of providing relief to the discretion of lenders instead of making it mandatory. It is submitted that as per the aforesaidnotifications, the lenders are permitted to grant a moratorium of threemonths on payment of all instalments for repayment of term loans andworking capital facilities falling due during the moratorium period. It issubmitted that as per paragraphs 14 and 15 of Part B of circular dated6.8.2020, the decision to provide relief has been left to the discretion ofthe lenders; as per paragraph 18 of circular dated 06.08.2020, theresolution process has to be invoked by not less than 75% of lenders byvalue and not less than 60% of lenders by number. It is further submittedthat paragraph 7 of circular dated 7.9.2020 provides a window to thelenders to vary from the provisions of the circular dated 6.8.2020.

4.2 It is further submitted that in order to ensure that relief isgranted to borrowers impacted by the spread of Covid-19 pandemic andthe subsequent national lockdown, the above-mentioned circulars oughtto be binding on all lenders who would otherwise qualify as “financialcreditors” under the Insolvency and Bankruptcy Code, 2016.

4.3 It is further submitted that by leaving the application of thesaid RBI circulars to the discretion of the individual lenders, borrowers,who are under severe financial stress on account of Covid-19, are deniedappropriate relief as lenders tend to focus on their own statutory andinternal compliances and interests. It is submitted that the purpose ofproviding a relief framework for the borrowers affected by the Covid-19 pandemic stands defeated since lenders are incentivised to recovertheir costs. It is submitted that in such a scenario, the RBI ought to havemade it mandatory for all lenders to provide relief under the impugnedRBI notifications, Circulars dated 6.8.2020 and 7.9.2020 available at theoption of the borrowers and not at the discretion of the lenders in orderto provide relief to borrowers impacted by the outbreak of Covid-19.

5. Shri Kapil Sibbal, learned Senior Advocate appearing on behalfof CREDAI – Real Estate Sector has vehemently submitted that RealEstate Sector is also badly and severely affected due to nationwide lockdown. It is submitted that the measures undertaken by the UOI/RBI arearbitrary, discriminatory, illusory and inadequate and does not offer anyreliefs to the Real Estate Sector, when Real Estate Sector because of itsimportance and contribution towards country’s economy requires specialconsideration.

5.1 It is further submitted that the Union of India/NDMA havefailed to perform their statutory duty cast under Sections 12 and 13 of AB

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Athe DMA 2005. It is submitted that while providing reliefs, no data iscollected with respect to impact on individual sectors. It is submittedthat even as required under the DMA 2005, there is no national planprepared while considering the disaster – Covid-19 pandemic.

5.2 It is further submitted that even the terms of reference ofBKamath Committee are ex-facie contrary to the aim and object of policiesframed by the RBI/UOI, which was primarily to mitigate and alleviatethe debt burden of the borrowers. It is submitted that the KamathCommittee Report,

(i) proceeds on the basis that businesses which were shut downCdue to Government action [i.e. National Lockdown] anddefaulters.

(ii) The Terms of Reference of Kamath Committee are onlyaligned for interest of the lending institutions and not forcontinuous viability of businesses as seen from the chartannexed.D

(iii) The stringent conditions so imposed are difficult to complyand will turn all businesses into NPA.

(iv) Restructuring plan is required to be approved by December2020 although the Real Estate sector has barely commencedEfunctioning due to COVID – 19 restrictions i.e. the “forcemajeure’ even continues and no proposal is possible.

(v) The ratios of borrowing limits / net asset value which werenever there in the original loan agreements are imposedunder the Restructuring Policy.

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(vi) Moratorium Policy expired on 31.08.2020 and due to theinability of the businesses in the real estate sector to makepayments during the months of September, October andNovember 2020, their credit rating has already beendowngraded to Grade “D” and as NPAs. Therefore, theyGdo not qualify for restructuring.

(vii) Being a restructured loan, banks will have to makeadditional 10% integral provisioning for such lending and asa result of credit rating downgrading, the banks will have tocharge few percentage basis points for all such loans.

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5.3 It is further submitted that the banks are the beneficiaries ofthe policies framed by the RBI, who have profiteered at the peril ofborrowers who are unable to withstand the effects of the disaster. It issubmitted that the real estate sector is seeing a continuous decline insales, investments, leasing and pricing in 2021 owing to the effect ofCovid-19 pandemic. Shri Sibbal, learned Senior Advocate has furthersubmitted that if the moratorium period is not extended till 31[st] March,2021 and if the reliefs as sought for in the writ petition are not granted,then majority of all accounts will be qualified as NPA as per RBIPrudential norms on Income Recognition; asset classification andprovisioning pertaining to advances; virtually no accounts would qualifyfor restructuring under the Restructuring Policy, since it is made applicableonly to those accounts which are not in default for more than 30 days ason 01.03.2020 and credit rating of members of the CREDAI will bedowngraded and permanently impaired, resulting in the witnesses of themembers of the association becoming commercially unviable. It issubmitted that real estate sector is one of the most affected sectors onaccount of the lockdown and the ongoing pandemic. The precarioussituation has adversely affected not only over 1400 members of CREDAI– MCHI but also the 270 ancillary industries dependent on the real estateindustry. If the sector suffers such irreparable loss, all the allied industrieswould also be severely affected. Therefore, it is prayed in para 8 togrant the following reliefs:

8.1 The Moratorium Policy be made mandatory and extended bythe Respondent No.2 from 01.09.2020 until 31[st] March, 2021 orcomplete normalcy is achieved, whichever is earlier.

8.2 All borrowers in the real estate sector must be granted thebenefit of interest waiver (including interest on interest), as thecase may be, till complete normalcy is achieved or till the ResolutionPlan under Restructuring Policy is approved [if invoked],whichever is earlier.

8.3 Restructuring Policy dated 07.08.2020 and 07.09.2020 to besimplified, broad based and implemented across board withoutany classification so that the true object of bailing out the borrowersunder stress [precipitated by the national disaster / pandemic /force majeure event] and supporting the revival of the Indianeconomy / its GDP through its focal sector i.e. real estate can beseamlessly achieved.

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A8.4 All accounts which have not been declared as NPA as on01.03.2020 are to be made eligible for restructuring without anyfurther provisioning of 10% by banks.

6. The other learned Advocates appearing for the other respectivepetitioners, such as, Textile Association, Healthcare Sector, HotelierBAssociation, Shopping Centres and Malls, Travellers and other industrieshave by and large made the submissions which are narrated hereinaboveand therefore they are not repeated again here.

Reply on behalf of the Union of India

7. All these petitions are opposed by Shri Tushar Mehta, learnedCSolicitor General of India, appearing for the Union of India, Shri HarishSalve, learned Senior Advocate appearing on behalf of the Indian BankAssociation, Shri V. Giri, learned Senior Advocate appearing on behalfof the RBI and Shri Mukul Rohatgi, learned Senior Advocate appearingon behalf of the SBI.

7.1 Shri Tushar Mehta, learned Solicitor General has taken us toDvarious affidavits/additional affidavits filed on behalf of the Union ofIndia. He has also taken us to the various provisions of the DMA 2005,which shall be referred to and dealt with hereinbelow:

Shri Tushar Mehta, learned Solicitor General has submitted that itis a fact and nobody can dispute that the pandemic has caused stress toElarge and small business and to individual borrowers who have lost theirjobs and livelihoods. That they need relief which will help them to getback on their feet. It is submitted that however different segments/sectorshave suffered differently. It is submitted that to mitigate the burden ofdebt servicing brought about the disruptions in the market conditions onaccount of Covid-19 pandemic, RBI came out with a circular datedF27.03.2020 which permitted lending institutions to grant a moratorium onpayment of all instalments of term loams falling due between 1.3.2020and 31.5.2020, which came to be extended till 31.08.2020. It is submittedthat one of the grievances pertains to grant of waiver from paying interestwhich has accrued during the moratorium period while making theGrepayment of loan after the moratorium is over. It is submitted that oneother grievance is waiver from paying interest on interest/compoundinterest accrued during the moratorium period. It is submitted that theCentral Government is fully conscious of the difficulties faced by thevarious sectors and the stakeholders of various sectors within the purviewof the Ministry of Finance and other Ministries.H

7.2 It is submitted that the Finance Ministry, after the outbreak ofthe COVID-19 pandemic globally, has taken several measures of reliefdealing with the potential problems faced by several sectors and in severalspheres of all financial worlds. All these measures were taken as aresponsible and measured response to mitigate the problems faced bythe sudden outbreak of the pandemic and keeping in mind-

(i) The financial stability of the economy;

(ii) The additional unforeseen and unexpected financial burdenimposed on the exchequer to provide relief packages to citizensat large, adversely affected due to the pandemic;

(iii) The very nature of the pandemic whose duration remainsuncertain;

(iv) The difference in implications of the reliefs granted for varioussectors; and

(iv) The fact that the resources of any country would not beunlimited.

It is further submitted that the Central Government has also takena number of measures to mitigate financial suffering, which include,inter alia, the following: -

(i) Agriculture loans: 3% subvention on interest rate payable onprompt repayment has been made admissible despite availingmoratorium.

(ii) Housing loans: Subvention on interest rate under PradhanMantri Awas Yojna has been extended by one more year up to31.03.2021.

(iii) Small business borrowers: 2% subvention on interest ratehas been introduced for small business loans under Pradhan MantriMudra Yojana.

(iv) Micro Food Processing Units: Credit-linked subsidy ofRs.10,000 crore has been introduced for 2 lakh food-processingmicro-enterprises.

(v) Micro, Small and Medium Enterprises (MSMEs):Emergency credit line of up to Rs.3 lakh crore, backed by 100%guarantee from the Government, at capped rate of interest hasbeen launched.

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A(vi) Stressed MSMs: Financing for stressed MSMEs has beenenabled through launch of a subordinate debt scheme.

(viii) Non-Banking Finance Companies (NBFCs): PartialCredit Guarantee Scheme of Rs.45,000 crore and Special LiquidityFacility of Rs.30,000 crore have been launched for liquidity toNBFCs.B

7.3 It is further submitted that the Ministry of Finance was fullyalive to the problems of the borrowers which obviously cannot be ahomogenous class, but by its very nature, has various categories ofborrowing, namely, corporate loans, MSME loans and personal loansetc. It is submitted that these three broad categories may have severalCsub-categories within it, having their own peculiar problems/difficultiesand, therefore, needing peculiar remedies and solutions. It is submittedthat because of the very nature of the problems faced by various kindsand categories of stakeholders and the wide-ranging difference in theproblems faced by several sub-sections of those categories, it wasDconsciously considered that it would not have been possible for theMinistry to provide for a “one size fits all” approach and it would beadvisable that steps be taken for grant of relief/solutions for the problemsarising during the pandemic through the regulator of the banking sector,viz., the RBI.

7.4 It is submitted that it was for this reason that the Ministry ofEFinance took the initiative and started interaction with RBI in this behalf,requesting the RBI to provide for various measures of relief to theborrowers. The Finance Ministry and RBI remained in touch andconsidering the very nature of the reliefs to be considered and provided,RBI took the decision requiring all banks to take various measures forFrelief.

It is submitted that while taking such financial policy decisionshaving implications on the stability of the economy, the decisions arerequired to be taken keeping in mind several administrative and financialconsiderations/exigencies, duly keeping in mind the following complexGissues that are required to be considered:

(i) That there are a variety of borrows as stated above, namelycorporate borrowers (including large industry and largeenterprises), Micro, Small and Medium Enterprise (MSME)borrowers, and retail/personal borrowers which include, inter alia,borrowers for housing loans, education loans, vehicle loans, etc.H

(ii) That there are several categories of banks and other lendinginstitutions that are required to be kept in view while taking financialand economic decisions that are very sensitive for financial stabilityof the country. These may include scheduled commercial banks(which include, inter alia, Regional Rural Banks, small financebanks, local area banks, nationalized banks, etc.), Urban Co-operative Banks (UCBs), State Co-operative Banks (StCBs) andDistrict Central Co-operative Banks (DCCBs) that cater to ruralcredit in the country, Non-Banking Financial Companies (NBFCs),Housing Finance Companies (HFCs), all India financial institutions,etc.

(iii) That the structuring of the loan in each category of bank/lending institution and each category of borrower would be differentnot only in terms of the rate of interest and in terms of duration ofthe lending facility but also in several other distinct aspects.

(iv) In any banking sector when financial assistance is renderedby way of loans, a balance has to be maintained with the interestof crores of depositors, most of whom are merely depositors andsurviving on the interest they receive on their deposits. On anapproximate basis, there are over 197 crore deposit accounts inthe country in commercial banks alone, in which depositors havedeposited their money and are earning interest.

7.5 It is further submitted that to mitigate the burden of debtservicing brought about by disruptions on account of Covid-19 pandemic,the circulars issued by RBI permitted lending institutions to …. (a) togrant a moratorium on payment of all instalments, including interest, ofterms loans falling due between 1.3.2020 and 31.8.2020; and (b) deferrecovery of interest on working capital loans for the period from 1.3.2020to 31.8.2020. It is submitted that under the aforesaid circulars amoratorium on payment of both, principal and interest was by its verynature a temporary standstill arrangement which gives relief to theborrowers in the two ways, namely, (i) the account does not becomeNPA despite non-payment of dues; and (ii) Credit Information Companiesshall ensure that the moratorium does not adversely impact the credithistory of the borrowers.

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Amoratorium, the bank continues to incur cost on bank’s deposits andborrowings. It is submitted that since a moratorium offers certainadvantages to borrowers, there are costs associated with obtaining thebenefit of a moratorium.

7.6 It is submitted that immediately upon the serious effects ofBCovid-19 being felt in the country, the Ministry of Finance addressed aletter to the RBI dated 1.4.2020 which was after moratorium declaredby the RBI. Vide the said letter, the Ministry of Finance requested theRBI to do something more than the moratorium.

7.7 It is submitted that any moratorium is transient by its veryCnature and has to end one day. It is submitted that thus, the best interestof the economic health of the country, as well as that of the respectiveborrowers would be best served by paving the way for a more durablelong-term solution of debt restructuring.

It is submitted that the revival of the stressed borrowers isDcontingent upon debt restructuring of their loans/dues rather than hingeon extending the moratorium. It is submitted that the RBI has come outwith two circulars dated 6.8.2020, facilitating revival of real sectoractivities and mitigating the impact on the ultimate borrowers by enablinglenders to grant concessions to borrowers for Covid-19 related stress inpersonal, MSME and corporate loans. It is submitted that this wouldEenable lenders to implement individual resolution plans in respect of theloans having stress on account of Covid-19 pandemic. It is submittedthat the said approach would also enable continuance of classification ofsuch loans as standard, i.e., without treating them as NPA.

7.8. It is submitted that the RBI Circulars dated 6.8.2020 takeFcare of all categories of lending institutions and all categories ofborrowings as aforesaid, while leaving the nature and the kind of therelief to be given to the lending institution since each category of lendinginstitution would have its own bank/institution – specific financial scenarioin terms of the nature of advance, the nature of borrowers, rate of interestetc.G

That Circular dated 6.8.2020 takes care of the MSME Sector,personal loans and corporate loans, keeping in mind the overall financialstability of the economy, economic stability of banking sector and interestof the depositors in mind. It is submitted that considering the fact thatthe time limit for continuance of the present economic issues is uncertain,H

as a policy it is undesirable to either give any “one size fit all” solutions,nor would it be desirable to provide for a static relief formula. Suchreliefs are given depending upon the availability of resources and withoutcompromising the financial stability of the banking sector, and are alwayssubject to changes keeping in mind the evolving dynamic situation atvarious stages.

7.9 It is submitted that with the framework under the RBI Circularsdated 6.8.2020, banks are fully empowered to resolve Covid-19 relatedstress and customise relief to individual borrowers through grant of variousconcessions in terms of:-

i) alteration in the rate of interest and haircut on amount payableas interest;

(ii) extension of the residual tenor of the loan, with or withoutmoratorium, by up to two years;

(iii) waiving penal interest and charges;

(iv) rescheduling repayment;

(v) converting accumulated interest into a fresh loan with a deferredpayment schedule; and

(vi) sanction of additional loan.

7.10 It is submitted that so far as the question of waiver ofcompound interest/interest on interest is concerned, the said issues arerequired to be examined in the context of the larger financial constraintsfaced by the country in particular and the world in general. It is submittedthat as a part of effective fiscal planning, which is being done at a stagewhere nobody is aware as to the time till when the present situation maycontinue, with either more or less gravity, a delicate balancing act isrequired by Government in dealing with the financial impacts of thepandemic. It has to conserve financial resources for a long and uncertainbattle on the public health front, which has its own huge financialimplications. Businesses need to survive. Lending institutions too mustsurvive and promises made to depositors have to be honoured. Jobs andlivelihoods need to be safeguarded and every attempt is to be made tobring back the economic growth. Therefore, use of public resources forany category of stakeholders must be carefully calibrated. Unintendedconsequences can arise and financial stability itself could be imperilled,if due consideration is not given to all relevant aspects.

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A7.11 It is submitted that right from the initial entry of the pandemicin our country, which started facing its effects [including the financialimpact], the Central Government has proactively taken steps either itselfor through RBI, which already had their financial impact, which was/isrequired to be kept into consideration while taking further decisions eitherwhile granting moratorium which, in fact, is deferment [and not waiver]Bas well as while taking the present decision regarding relief incompounding of interest. The following steps taken by the CentralGovernment have their own financial impacts which would require theCentral Government to rationalise any kind of waiver at this stage asgoing any further than what is stipulated hereunder may be detrimentalCto the overall economic scenario, and the economy and the nation or thebanking sector may not be able to take the financial constraints resultingtherefrom.

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7.12 It is submitted that as such the Central Government hasalready given various reliefs and by providing various reliefs there alreadyDexists substantial financial burden. It is submitted that having realisedthat the pandemic has caused stress to large and small businesses and toindividual borrowers who have lost jobs and livelihoods and they needrelief which will help them get back on their feet, it has necessitatedmulti-pronged relief. It is submitted that the Central Government hasannounced the following reliefs, (1) Garib Kalyan Package; and (2) AatmaENirbhar Package.

It is submitted that the Garib Kalyan Package was for Rs.1.70lakh crore involving free food grains, pulses and gas cylinders and cashpayment to women, poor senior citizens and farmers. More than 42crore poor people received financial assistance of Rs. 65,454 croresFunder the package. It is submitted that the Aatma Nirbhar Package wasfor Rs. 20 lakh crores, involving support to MSMEs, Non-Banking FinanceCompanies, agriculture, sectors allied to agriculture, contractors, streetvendors, State Governments, relief in provident fund contribution,extension of subsidy on home loans etc.G

7.13 It is submitted that so far as the question of interest on interestis concerned, what is “moratorium” is required to be considered. It issubmitted that the word “moratorium” is categorically defined by theRBI, while issuing various circulars. The relevant circulars of RBI showthat “moratorium” was never intended to be “waiver of interest”, butH“deferment of interest”. In other words, if a borrower takes benefit of the moratorium, his liability to make payment of contractual interest (bothnormal interest and interest on interest) gets deferred for a period ofthree months and subsequently three months thereafter. It is submittedthat this decision was taken keeping the larger economic scenario inmind, more particularly the burden which would otherwise fall upon thebanks which will have to perforce pass it on the depositors and/or uponthe Government which will have its own detrimental impact on otherwelfare measures. It is submitted that after a very careful and majorconsideration of several fiscal and financial criteria, its inevitable effectsand keeping the uncertainty of the existing situation in mind, the paymentof interest and interest on interest was merely deferred and was neverwaived.

It is submitted that even the borrowers have understood thedifference between the waiver in the interest on loan and the defermentof payment of instalments for that loan and, therefore, a majority of theborrowers have, in fact, not taken the benefit of the moratorium, whichis nothing but deferment of payment of instalments.

7.14 Now so far as the waiver of interest is concerned, it issubmitted that if the Government were to consider waiver of interest onall the loans and advances to all classes and categories of borrowerscorresponding to the six-month period for which the moratorium wasmade available under the relevant RBI circulars, the estimated amountis more than Rs. 6 lakh crores. It is submitted that if the banks were tobear this burden, it would necessarily wipe out a substantial and a majorpart of their net worth, rendering most of the banks unviable and raisinga very serious question mark over their very survival. It is submitted thatthis was one of the main reasons why waiver of interest was not evencontemplated and only payment of instalments was deferred.

7.15 It is submitted that even otherwise the lending activity of anybank is always enabled by the deposits that depositors/customers hold inthe lending banks. Such depositors are much more in number than thenumber of borrowers. It is submitted that it is estimated that in the IndianBanking system for every ‘loan account’ there are about 8.5 ‘depositaccounts’. The banks can pay interest to depositors only becauseborrowers pay interest to the bank. This transaction of depositors/banks/borrowers is inevitably a part of a chain that can never be permitted tobe broken. It is submitted that therefore the contractual interest on all A

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Aoutstanding advances will have to be charged even during the period ofdeferment and if this compounding interest is not received from theborrowers for any particular period, a commensurate denial of interestto customers holding deposits is inevitable and unimaginable and wouldobviously be unacceptable considering the categories of depositors.

B7.16 It is submitted that waiving compound interest/waiving interestwould result in very substantial and significant financial burden. Thereare several categories of banks, like Private Sector Banks, Small FinanceBanks, Regional Rural Banks, Cooperative Banks, NBFCs etc. Theclasses and categories of borrowers also varies throughout the nation,and these can be broadly classified as big borrowers and small borrowers.CIt is submitted that it is impossible for banks to bear the burden resultingfrom waiver of compound interest/interest without passing on the financialimpact to the depositors or affecting their net worth adversely, whichwould not be in the larger national economic interest.

It is submitted that the Government bearing this burden wouldDhave an impact on several other pressing commitments being faced bythe nation, including meeting direct costs associated with pandemicmanagement, addressing basic needs of the common man and mitigatingthe common man’s problems arising out of loss of livelihood.

7.17 It is submitted that in view of the aforesaid cumulativeEcircumstances, after careful consideration and weighing all possibleoptions, the Central Government has decided to continue the tradition ofhandholding the small borrowers and, therefore, now the Governmenthas granted the relief of waiver of compound interest during themoratorium period, limited to the most vulnerable categories of borrowers.FIt is submitted that this category of borrowers, in whose case, thecompounding of interest will be waived, would be MSME loans andpersonal loans up to Rs. 2 crores of the following categories:

(i) MSME loans up to Rs.2 crore

(ii) Education loans up to Rs.2 crore

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(iii) Housing loans up to Rs.2 crore

(iv) Consumer durable loans up to Rs.2 crore

(v) Credit card dues up to Rs.2 crore

(vi) Auto loans up to Rs.2 croreH

(vii) Personal loans to professionals up to Rs. 2 crore

(viii) Consumption loans up to Rs.2 crore It is submitted that the aforesaid decision has been taken, afterexamining the possible fiscal scenario in case of a complete/partial waiverand after gathering the material details for reaching the decision-makingprocess, and while keeping in mind the interest of particular class ofborrowers during the unprecedented period the country is facing.

7.18 It is further submitted that the resolution framework announcedby the RBI provides that loan accounts which slip into NPA betweeninvocation and implementation may be upgraded as standard on the dateof implementation itself. It is further submitted that so far as theapprehension that credit rating agencies may record a downgrade toNPA for defaults during the moratorium, it is submitted that Securitiesand Exchange Board of India (SEBI) has already issued a Circular on30.03.2020 providing for relaxation from recognition of default due tothe moratorium. On 31.08.2020, it has further specified that in cases ofrestructuring, the same may not be considered a default by rating agencies.

7.19 It is further submitted that to give further relief, Governmenthas already suspended the operation from 25.03.2020 of Sections 7, 9and 10 of the Insolvency and Bankruptcy Code, 2016 to protect corporateborrowers impacted by the Covid-19 crises. It is submitted that even theKamath Committee set up by the RBI has recommended financialparameters for debt restructuring of 26 sectors affected by Covid-19. Itis submitted therefore that whatever best could be done by theGovernment of India, the same has been done.

7.20 Now so far as the issues raised by a number of petitionersand interveners seeking Sector-specific Reliefs, it is submitted that thevarious measures taken by the Government and the RBI, referred tohereinabove, include not only reliefs applicable across the board but alsoreliefs for the specific sectors. The petitioners/interveners cannot prayfor sector-specific relief by either waiver or restructuring by way ofpresent proceedings under Article 32 of the Constitution of India as thequestion of such financial stress management measures requireexamination and consideration of several financial parameters and itsimpact and are not suited for being judicially decided or be subjected tojudicial review.

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AIt is submitted that even otherwise, the Aatma Nirbhar Packageoffers sector-specific reliefs for the power sector, real estate sector,MSME sector. It is submitted that more than Rs.90,800 crore liquidityinjection for power distribution companies has been sanctioned,substantially enabling power distribution companies to pay their outstandingdues to power producers and transmission companies. It is submittedBthat the Government advisory has been issued for extension of registrationand completion dates of real estate projects under RERA by treatingCovid-19 as an event of force majeure. It is submitted that Credit-linked Subsidy Scheme for Housing (Pradhan Mantri Awas Yojana) hasbeen extended by one year, providing subsidy for purchase of residentialCreal estate. It is submitted that so far as relief to MSME Sector isconcerned, an Emergency Credit line up to Rs. 3 lakh crores, backed by100% Government Guarantee, has been launched to enable MSMEs toget back to regular operations. It is submitted that Rs.1.87 lakh crorehas already been sanctioned with Credit Guarantee Scheme forSubordinate Debt has been launched to help stressed and NPA MSMEDunits. It is submitted that 2% subvention on interest rate is being givenfor small business loans.

7.21 It is further submitted that with regard to reliefs sought byvarious petitioners/applicants in terms of extension of moratorium,applicability of the resolution framework, fixation of interest rate,Etransmission of rate cuts, delinking of interest rate from credit rating ofthe borrower and moratorium on repayment of non-credit instrumentsthat the setting of interest rates and other norms for restructuring whichincludes moratorium involves evaluating projections of cash flows andviability. This, in turn, requires expertise, technical knowledge of financing,Fand experience in dealing with the subject. Therefore, eligibility ofproposals, benchmarks for viability, assessment of reasonableness ofassumptions and finally acceptance and monitoring of resolution plansare matters best dealt with between the borrowers and the lendinginstitutions concerned.G7.22 It is submitted that the Central Government and all stakeholders have discharged their responsibility in the best possible mannerunder the circumstances which, by themselves, are unprecedentedcircumstances. It is submitted that all the decisions taken by the CentralGovernment, the RBI as a regulator and the lending institutions are takenkeeping in mind the severe financial stress globally as well as nationallyH

and while ensuring that the sources are utilized so that the nationaleconomy and the economy of the banking sector can withstand the presentfinancial situation, the duration of which is unknown.

7.23 Now so far as the submission that the National Plan, asrequired to be prepared under Section 11 of the DMA 2005 has not beenprepared and that the NDMA has failed to perform its duty cast underSections 12 & 13 of the DMA 2005 is concerned, Shri Mehta, learnedSolicitor General has submitted as under:

(i) that the DMA 2005 contemplates a “National Plan” undersection 2(l) of the Act. Such plan is to be prepared under Section 11 ofthe DMA 2005. That the NDMA has, in fact, prepared an exhaustiveand comprehensive “National Disaster Management Plan” which takescare of several disaster known to humanity, like cyclone and wind, floods,urban flood, earthquake, tsunami, landslides, snow avalanche, draught,cold waves, thunderstorm, lightening etc. cloud burst and hailstorm, glacierlake outbreak flood, heat wave, chemical (industrial) disaster, nuclearand radiological emergencies, biological and public health emergencies,fire hazard and forest fire hazard;

(ii) that the present disaster can fall under “biological and publichealth emergencies” under clause 7.15 of the National DisasterManagement Plan. That there are certain disasters which are and havebeen globally known to be unknown to the humanity as a race. It issubmitted that what the entire world is facing in the Covid-19 is, onesuch unforeseen disaster termed as “global catastrophe”. It is submittedthat the National Plan which is made in November, 2019, envisagessuch rarest of the rare “global catastrophe risk events”. It is submittedthat by its very nature, such a global catastrophe cannot be eitherpredicted or prevented nor can any straightjacket procedure for itsmanagement be laid down. Each country will have to respond to suchglobal catastrophe in the best possible manner under the circumstancesin the spheres of public health, finance etc. The present situation falls inthe category of “global catastrophe risk” as stipulated in clause 2.8 ofthe National Disaster Management Plan.

7.23.1 It is submitted that in light of the aforesaid, the responsesand the reliefs measures taken by the nodal Ministries are required to beconsidered. It is submitted that it was not possible to lay down any straight-jacket methodology of dealing with such disaster and each country in A

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7.23.2 It is submitted that in the context of the unprecedentedposition, the scheme of DMA 2005 is required to be examined. Afterreferring to the Statement of Objects and Reasons of the DMA 2005, itBis submitted by Shri Mehta, learned Solicitor General that the Statementof Objects and Reasons as well as the scheme of the Act, the Actenvisages a statutory mechanism to deal with the disaster. It is submittedthat so far as the National Disaster Management Authority (NDMA) isconcerned, it is established under Section 3 of the Act with the Hon’blePrime Minister of India as its Chairperson with other members to beCnominated by the Hon’ble Prime Minister and discharges the powersand functions enumerated under Section 6 of the Act. It is submittedthat the NDMA is an administrative body having limited function stipulatedin Section 6 of the Act. It is not envisaged to be a “Super Government”which becomes repository of all functions and powers of the MinistriesDand Departments of the Government. It is submitted that it is not thatonce a disaster as defined under Section 2(d) of the Act takes place, thefunctions of all Central Government Ministries stand vested in the NDMAand each and every measure shall be taken either only by the NDMAand not by the respective Ministries/Departments or at least vetted orratified by NDMA.E

7.23.3 After referring to Sections 2 (a), (b), (c), (d), (e), (i), (m),(n), (o) and (p) and Section 6 of the Act, it is submitted by Shri Mehtathat the disaster management under the Act by NDMA is restricted toSection 6 of the Act, while the nodal ministries under the National Plantake the steps. It is submitted that the NDMA itself would not startFtaking mitigating or relief measures unless and so long as the CentralGovernment (acting through various Ministries/Departments) fails to doso. Referring to Sections 35 and 36 of DMA 2005, it is submitted that itis for the respective ministries or departments of the Government ofIndia which take steps for giving relief measures as a part of disastermanagement.G

7.23.4 It is submitted that the NDMA is alert and is functioningmuch prior to the outbreak of pandemic in our country through AdvisoryCommittee under Section 7, National Executive Committee under Section8 and sub-Committees under Section 9 of the Act. It is submitted thatunder the National Plan which is a statutory plan prepared under theHAct, an institutional framework is provided which is as under:

1.14.1 National Level

Figure 1-3: National-level disaster management – basic institutional framework It is submitted that therefore the National Disaster ManagementPlan also envisages nodal ministries for management of differentdisasters. It is submitted that National Plan prepared by the NDMAitself envisages that each category of disaster will be dealt with by anodal ministry.

7.23.5 It is submitted that Covid-19 was a disaster of such a naturethat it could not be confined to one nodal ministry. Whatever measures/reliefs were required to be taken/given were provided by every ministryin each and every way needed. It is submitted that the Ministry ofRailways provided free rails for transport of migrants, Ministry of Healthand Family Welfare dealt with the substantial part of disaster managementnamely taking care of public health and hospital infrastructure, Ministryof Agriculture & Farmer Welfare provided for various reliefs in theagriculture sector, Ministry of Housing and Urban Affairs issued separaterelief measures for real estate sector etc.

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ASimilarly, Ministry of Finance, whose role otherwise was to financethe measures undertaken by other Ministries also undertook several reliefsin terms of financial package and either directly or through RBI reliefensures for stressed accounts.

7.23.6 It is submitted that considering the very nature of theBpandemic which was not confined to any specific geographic locationbut at PAN-India impact having adversely affecting the various fields ofhuman life, the disaster management authority consisted “EmpoweredGroups” under Section 10(2)(h) and (i) for comprehensive action andintegrated response. The same was published by the Chairperson ofNational Executive Committee constituted under Section 8 of the Act.COne of the empowered groups was “economic and welfare measure”.It is submitted that the said empowered group functions as a limb ofNDMA as the same is constituted under the Act by the Chairman of theNational Executive Committee.

7.23.7 It is submitted that the petitioners are under someDmisconception that the functions of all ministries are to be discharged bythe NDMA and the NDMA should take a decision for the area in eachministry. It is submitted that so far as the economic impact of the presentdisaster is concerned, it is essentially the function of the Ministry ofFinance and RBI to take measures under Section 36 of the Act and theEquestion of NDMA stepping into will not arise.

7.24 Now so far as the reliance placed by the petitioners uponSection 13 of the Act is concerned, it is submitted that in Section 13 theword used is “may”. It is submitted that the word “may” used in Section13 shall have to be read as an enabling discretionary provision and notFmandatory. The legislature has in its wisdom and foresight refrainedfrom using the word “shall”. It is submitted that the interpretation of theword “may” as “shall” will lead to consequences which are neverintended by the legislature. It will also lead to disastrous consequences.

7.24.1 It is submitted that the provision of Section 13 is an enablingGprovision in which in any given set of facts the NDMA can“recommend” relief in repayment of loans or grant of fresh loans. Ifthe word “may” be used as “shall”, the only consequence it may have isa mandate of law to grant relief in repayment of loan or grant of freshloan despite [and without looking into an over financial and economicimpact on the national economy] en bloc. The meaning of the wordH“shall” would mean NDMA giving financial relief only in one sector namely banking sector [as the contingencies mentioned in Section 13are relatable to Banking Sector] even at the cost of destroying theeconomy of the nation, destroying the stability of the banking sector andeven at the cost of “disaster management” in other areas [like publichealth, medical infrastructure etc.] other than banking sectors.

7.24.2 Section 13 may perhaps be used in case of localizeddisasters like Bhopal Gas tragedy or earthquake in Gujarat. However,when a national disaster takes place, the disaster is to be managed throughseveral ministries. Food Ministry will distribute food which would involveexpenditure, agricultural ministry will give boost to the agricultural sectorby various relief measures, Health Ministry will take charge of treatmentand public health issues, Home Ministry will implement measures forprevention of spread and other ministries will have to do same in theirrespective spheres.

7.24.3 Use of the word “may” and “shall” would mean the entireeconomy of the country shall have to be divested and used in and throughbanking sector leaving all other areas untouched and even at the cost ofnational economy and the stability of the banking sector. It is submittedthat this could never have been the intention of the legislature.

In support of above, Shri Mehta, learned Solicitor General hasrelied upon the decisions of this Court in the cases of Pradip KumarMaity v. Chinmoy Kumar Bhunia (2013) 11 SCC 122 (para 6);Chinnamarkathian v. Ayyavoo (1982) 1 SCC 159 (paras 24 to 26);Official Liquidator v. Dharti Dhan (P) Ltd. (1977) 2 SCC 166 (paras7 to 10); Bachahan Devi v. Nagar Nigam, Gorakhpur (2008) 12SCC 372 (para 18); Delhi Administration v. Umrao Singh (2012) 1SCC 194 (para 13); and Union of India v. Kumho PetrochemicalsCo. Ltd. (2017) 8 SCC 307 (paras 34 &35).

7.24.4 It is further submitted that the NDMA has not done anythingis otherwise also factually incorrect. It is submitted that it is uncharitableand unfair to the unprecedented effort made by the NDMA and variousministries including the Ministry of Finance. It is submitted that in viewof the hearing which took place before this Court earlier, the NDMAalso took cognizance of the issues being dealt with by the RBI and sentits “views and recommendations” vide OM dated 28.08.2020 and opinedthat in view of the same the RBI may consider granting further reliefsas deemed appropriate after considering and taking into account thefinancial relief packages issued by the Ministry of Finance, as well as, A

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Aother relief measures that have already been issued and declared byRBI itself. It is submitted that “views and recommendations” of NDMAwere communicated to RBI vide letter dated 31.08.2020.

7.24.5 It is submitted that the “views and recommendations” ofthe NDMA deal with broad financial policy decisions having economicBimplications and other implications in the banking sector. Therefore, theMinistry of Finance, vide letter dated 31.08.2020, forwarded the “viewsand recommendations” of the NDMA to RBI requesting it to considerthe “views and recommendations” of NDMA regarding relief inrepayment of loans by borrowers affected by Covid-19, so that RBImay consider the same while charting further course of action dependingCupon, inter alia, the aforesaid parameters.

7.24.6 It is submitted that therefore in light of the RBI Circularsdated 27.3.2020, 23.5.2020 and 6.8.2020, read with the “views andrecommendations” of the NDMA regarding relief in repayment of loansby borrowers affected by Covid-19 expressed vide OM dated 29.08.2020Dand also in light of the various measures taken by the Central Government,appropriate reliefs and concessions for repayment of loans by theborrowers affected by Covid-19 have already been granted. The RBIframework under the circulars dated 6.8.2020 also adequately addressesthe various concerns expressed by the respective petitioners.E

7.25 It is submitted by Shri Mehta, learned Solicitor General thatthe packages/reliefs offered by the Central Government/RBI/Lendersare in the realm of policy decisions. It is submitted that a consciousdecision has been taken after considering every pros and cons andconsidering various factors and the priorities in the larger public interestFand the economy of the country. It is submitted that as observed andheld by this Court in the case of Arun Kumar Agrawal v. Union ofIndia (2013) 7 SCC 1 that the matters relating to economic issues,have always an element of trial and error and so long as a trial and erroris bona fide and with best intentions, such decisions cannot be questionedas arbitrary, capricious or illegal. It is submitted that in the aforesaidGdecision in paragraph 43, this Court has considered the decision of theSupreme Court of the United States in the case of Metropolis TheatreCo. v. Chicago, which took the view that the problems of Governmentare practical ones and may justify, if they do not require, roughaccommodation, illogical, if may be, and unscientific. Mere errors ofHGovernment are not subject to our judicial review. It is only its palpably arbitrary exercises which can be declared void. Shri Mehta has heavilyrelied upon paragraphs 41 to 49 of the aforesaid decision, in which thisCourt considered various earlier decisions.

7.25.1 Relying upon the decision of this Court in the case ofPeerless General Finance and Investment Co. Ltd. v. RBI, (1992) 2SCC 343, it is submitted that as observed by this Court the function ofthe Court is to see that lawful authority is not abused but not to appropriateto itself the task entrusted to that authority. It is further observed thatthe Courts are not to interfere with economic policy which is the functionof experts. It is not the function of the courts to sit in judgment overmatters of economic policy and it must necessarily be left to the expertbodies. It is submitted that it is further observed that the functions of theCourt are not to advise in matters relating to financial and economicpolicies for which bodies like RBI are fully competent. It is furtherobserved that the Court can only strike down some or entire directionsissued by the RBI in case the Court is satisfied that the directions werewholly unreasonable or violative of any provisions of the Constitution orany statute. He has relied upon paragraphs 31, 37 and 38 of the aforesaiddecision.

7.25.2 It is further submitted that in the case of Federation ofRailway Officers Association v. Union of India (2003) 4 SCC 289,it is observed that on matters affecting policy and requiring technicalexpertise the court would leave the matter for decision of those who arequalified to address the issues.

7.25.3 It is further submitted that in the case of Dhampur Sugar(Kashipur) Ltd. v. State of Uttaranchal, (2007) 8 SCC 418, it isobserved by this Court that it is well established that courts are ill-equippedto deal with the policy matters. It is further observed that in complexsocial, economic and commercial matters, decisions have to be taken bygovernmental authorities keeping in view several factors and it is notpossible for courts to consider competing claims and conflicting interestsand to conclude which way the balance tilts. It is submitted that it isfurther observed that the court cannot strike down a policy decisiontaken by the Government merely because it feels that another policydecision would have been fairer or wiser or more scientific or logical.The court can interfere only if the policy decision is patently arbitrary,discriminatory or mala fide.

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A7.25.4 On exercise of judicial review, Shri Mehta, learned SolicitorGeneral has relied upon the following decisions of this Court, Arun KumarAgrawal (supra); State of M.P. v. Nandlal Jaiswal, (1986) 4 SCC566; BALCO Employees’ Union (Regd.) v. Union of India, (2002) 2SCC 333; Peerless General Finance and Investment Co. Ltd. (supra);Dalmia Cement (Bharat) Ltd. v. Union of India (1996) 10 SCC 104;BVillianur Iyarkkai Padukappu Maiyam v., Union of India (2009) 7SCC 561; Narmada Bachao Andolan v. Union of India, (2000) 10SCC 664; and R.K. Garg v. Union of India (1981) 4 SCC 675.

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Reply on behalf of the Reserve Bank of India

C8. Shri V. Giri, learned Senior Advocate appearing on behalf ofthe Reserve Bank of India has made the following submissions:

i) that the RBI has been constituted by the provisions of Section 3of the Reserve Bank of India Act, 1934 (for short, ‘RBI Act’). It hasbeen vested with the responsibility of superintendence and control of theDbanking business in the country under the provisions of the BankingRegulation Act, 1949 (for short, ‘BR Act’). That in view of the variousprovisions of the BR Act and the RBI Act, the RBI is obliged to see thatthe banking business is carried on by banks, prudently and adhering tosound principles of banking. That the BR Act has conferred upon theRBI the powers to issue directions under Section 35A to the bankingEcompanies generally or to any banking company in particular, in publicinterest or in the interest of the Banking Policy or to prevent the affairsof the banking company being conducted in a manner detrimental to theinterest of its depositors or in a manner prejudicial to the banking company.Furthermore, under Section 21 of the BR Act, the RBI is conferred withFspecific powers to determine the policy in relation to advances to befollowed by the banking companies; ii) that the Legislature has conferred various powers on RBIempowering it to determine the banking policies to be followed by thebanking companies. That the RBI being the regulator of the bankingGsector, took cognizance of the probable stress caused in the financialsituation and conditions of the citizens of this country – the consequentstress upon the economy due to outbreak of Covid-19 pandemic andissued a statement on Development and Regulatory Policies dated27.03.2020 with the following objective and purpose:

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i)Expanding liquidity in the system sizeably to ensure thatfinancial markets and institutions are able to functionnormally on the face of COVID-19 related dislocations;

ii)Reinforcing monetary transmission so that bank creditflows on easier terms are sustained to those who havebeen affected by the pandemic;

iii)Easing financial stress caused by COVID-19 disruptionsby relaxing repayment pressures and improving accessto working capital; and

iv)Improving the functioning of markets in view of the highvolatility experienced with the onset and spread of thepandemic.

iii) that with a view to ease the financial stress by relaxing“repayment pressures”, the said Statement on Development andRegulatory Policy provided for moratorium on term loans. That followingthe aforesaid Statement on Development and Regulatory Policies, acircular was issued titled ‘Covid-19 – Regulatory Package dated27.03.2020’, thereby providing detailed instructions qua the regulatorymeasures issued by way of the said Statement. That it provided forrescheduling of payments – term loans and working capital facilities.That the circular dated 27.03.2020 came to be further modified by theRBI vide Circulars dated 17.4.2020 titled ‘Covid-19 Regulatory Package– Asset Classification and Provisioning’ and 23.5.2020 titled ‘Covid-19Regulatory Package’ whereby the moratorium period came to beextended by another three months, i.e., from 1.6.2020 to 31.8.2020 onpayment of all instalments in respect of term loans; iv) that the aforesaid policies/circulars were issued with theobjective of mitigating the burden of debt servicing brought about bydisruptions on account of Covid-19 pandemic and to ensure the continuityof viable business. It is submitted that therefore, the regulatory packageis, in its essence, in the nature of a moratorium/deferment and cannot beconstrued to be a waiver. It is submitted that, however, in order toameliorate the difficulties faced by borrowers in repaying the accumulatedinterest for the moratorium/deferment period, it was further provided inthe circular dated 23.5.2020 that in respect of working capital facilities,lending institutions may, at their discretion, convert the accumulated A

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Ainterest for the deferment period up to 31.08.2020, into a funded interestterm loan which shall be repayable not later than 31.03.2021. Further, inrespect of term loans, it has been provided that the repayment schedulefor such loans, including interest as well as principal, as also the residualtenor, will be shifted across the board; B

v) that the lending institutions are required to frame Boardapproved policies for providing the reliefs pursuant to circulars issued bythe RBI from time to time to all eligible borrowers and disclosed in publicdomain. Since the customer profile, organizational structure and spreadof each lending institution is widely different from others, each lendingCinstitution is best placed to assess the requirements of its customers.Therefore, the discretion was left to the lending institutions concerned; vi) that the banks are commercial entities that intermediate betweenthe depositors and the borrowers and are expected to run on viableDcommercial considerations. That the banks being custodians of depositors’money, their actions need to be guided primarily by the protection ofdepositors’ interests. Any borrowing arrangement is a commercialcontract between the lender and the borrower and the interest ratesreflect the same. That the interest on advances forms an important sourceof income for banks and after meeting the cost of funds, the banks alsoEneed to sustain reasonable interest margins for viable operations;

vii) that otherwise the RBI being cognizant of the enormity of thechallenges faced in the wake of Covid-19 has already announced severalmeasures to mitigate the immediate impact on the real sector as well asFfinancial sector, namely, Circulars dated 27.3.2020, 17.4.2020 and23.5.2020. It is submitted that the aforesaid circulars/policies wereannounced with the primary objective of enabling all key constituents in the economy, most importantly the borrowers, to cope with the economicfallout. The overriding objective was to prevent financial markets fromfreezing up; ensure normal functioning of financial intermediaries; easeGthe stress faced by households and businesses; and keep the life bloodof finance flowing. It is submitted that many measures/policy decisionshave been announced by the RBI to mitigate the impact of Covid-19,which are as under:

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SMALL SCALE INDUSTRIAL MANUFACTURES ASSOCIATION(REGD.) v. UNION OF INDIA [M. R. SHAH, J.]

1 The purpose of this measure relating to reverse repo rate is to make it relativelyunattractive for banks to passively deposit funds with the Reserve Bank and instead,to use these funds for on-lending to productive sectors of the economy.

2 This measure was announced as financial markets worldwide were facing intenseselling pressures on extreme risk aversion due to the spread of COVID-19 infections.3 This reduction in the CRR released primary liquidity of about Rs,1,37,000 croreuniformly across the banking system in proportion to liabilities of constituents ratherthan in relation to holdings of excess SLR.

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[2021] 15 S.C.R.

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4 This comprised Rs.25,000/- crore to NABARD for refinancing regional rural banks(RRBs), cooperative banks and micro finance institutions (MFIs); Rs.15,000/- crore toSIDBI for on-lending/refinancing; and Rs.10,000/- crore to NHB for supporting housingfinance companies (HFCs). Advances under this facility were provided at the RBI’sHpolicy repo rate.

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8.1 Now so far as the prayers for waiver of interest/interest onDinterest during the moratorium period is concerned, it is submitted thatany waiver of interest on interest/compound interest will entail significanteconomic costs which cannot be absorbed by the banks without seriousdebt of their financials, which in turn will have huge implications for thedepositors and the broader financial stability. It is submitted that, in fact,Ethe government has come out with the “ex-gratia scheme” and thegovernment has to bear the cost of the ‘interest on interest’ for MSMEloans and personal loans up to Rs. 2 crores. It is submitted that thereforewaiver of interest and/or interest on interest/compound interest shall notbe in the larger country’s economy and the bankers.

F8.2 Now so far as the prayer for extension of moratorium beyond31.08.2020 is concerned, it is submitted that the moratorium was permittedas a part of immediate regulatory response, aimed at providing temporaryreprieve to borrowers affected by the pandemic, while attempting topreserve the resilience of the financial system. It entails significant coststo the lenders and a balance needs to be maintained in the overallGconsideration. A long moratorium exceeding six months can also impactcredit behaviour of borrowers and increase the risks of delinquenciespost resumption of scheduled payments. It may result in vitiating theoverall credit discipline which will have a debilitating impact on the processof credit creation in the economy. It will be the small borrowers whichmay end up bearing the brunt of the impact as their access to formalH

lending channels is critically dependent on the credit culture. It is submittedthat mere continuation of temporary moratorium would not even be inthe interest of borrowers. It may not be sufficient in addressing deepercash flow problems of the borrowers and in fact exacerbate therepayment pressures for the borrowers. Therefore, a more durablesolution was needed to rebalance the debt burden of viable borrowers,both businesses as well as individuals, relative to their cash flow generationabilities. It is submitted that with this consideration in mind the ReserveBank has announced the Resolution Framework for Covid19-relatedStress (“Resolution Framework”) on August 6, 2020, which enabled thelenders to implement a resolution plan in respect of personal loans aswell as other exposures affected due to Covid19, subject to the prescribedconditions, without asset classification downgrade. The framework, interalia, permits extension of the moratorium by a maximum of two years.

8.3 It is submitted that the Resolution Framework issued by theReserve Bank on August 6, 2020 is aimed at facilitating revival of realsector activities and mitigating the impact on the ultimate borrowers,which are under financial stress caused by economic fallout on accountof Covid-19 pandemic. It is submitted that in terms of the ResolutionFramework, only those borrower accounts shall be eligible for resolutionwhich were classified as standard, but not in default for more than 30days with any lending institution as on March 1, 2020.

8.4 It is submitted that the resolution plans implemented underframework may inter alia rescheduling of payments, conversion of anyinterest accrued, or to be accrued, into another credit facility, or, grantingof moratorium, based on an assessment of income streams of theborrower for two years. The reliefs for each borrower can be tailoredby banks to meet the specific problem being faced by each borrowerdepending on need rather than have a broad-brush approach in dealingwith the issue.

8.5 It is submitted that in terms of resolution framework, the RBIhad constituted an Expert Committee under Shri K.V. Kamath torecommend to the RBI the required financial parameters, along with thesector specific benchmark ranges for such parameters, to be factoredinto each resolution plan. That terms of the reference of the KamathCommittee read as under:

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A“(a)To identify suitable financial parameters that should befactored into the assumptions underlying RP finalized bythe lending institutions under the Resolution Framework.The parameters shall cover aspects related to leverage,liquidity, debt serviceability, etc.

B(b)To recommend sector-specific ranges for such financialparameters that will serve as boundary conditions for theRP [Resolution Plan].

(c) To make any other recommendations relating to financialor non-financial conditions to be considered for the RP,Cwithin the contours of the framework announced by theReserve Bank of India.

(d) To undertake the process validations of RP submitted inrespect of borrowers where the aggregate exposure of thelending institutions at the time of invocation of the resolutionprocess is Rs.1500 crore and above. The process validationDshall entail verification of the RP in terms of their adherenceto the conditions prescribed in the Resolution, withoutinterfering with the commercial judgement exercised by thelenders.”

It is submitted that the Committee has undertaken an exhaustiveEtask and has given its report dated 4.9.2020. The recommendations ofthe Kamath Committee have been broadly accepted by RBI vide circulardated 7.9.2020. It is submitted that the Kamath Committee found variableimpact of the pandemic across several sectors, with varying degrees ofseverity and varying nature of problems. It is submitted that the CommitteeFfound that it is neither possible nor desirable to arrive at any one particularformula, whether sector-specific or otherwise, to deal with the stresssituation arising from the unprecedented pandemic. It is submitted thatthe resolution of such stressed accounts shall have to be made only byand between the borrowers and the lending institutions. It is submittedthat the Kamath Committee while identifying 26 sectors, laid downGparameters that are to be guidance for the lending institutions whileundertaking the process of restructuring/resolution.

8.5.1 It is submitted that Kamath Committee based resolutionplans are applicable only to big borrowers having big and specific problemsrequiring resolution/restructuring, and such resolution can be done onlyHafter evaluating projections of cash flows and viability, which requires banking expertise and knowledge of the finance sector and which canbe done only by the lending institutions on a case-by-case basis.

8.5.2 It is submitted that so far as the borrowers which are notbig borrowers, their accounts are eligible to be restructured by therespective lending institutions as per RBI circular dated 6.8.2020. It issubmitted that the banks are fully empowered to resolve Covid-19 relatedstress and customize reliefs to individual borrowers through grant ofvarious concessions/reliefs, inter alia, in terms of

i) alteration in the rate of interest and haircut on amount payableas interest;

(ii) extension of the residual tenor of the loan, with or withoutmoratorium, by up to two years;

(iii) waiving penal interest and charges;

(iv) rescheduling repayment;

(v) converting accumulated interest into a fresh loan with a deferredpayment schedule; and

(vi) sanction of additional loan.

8.5.3 It is submitted that those accounts which are not coveredby Kamath Committee recommendations were not supposed to wait fortheir restructuring for Kamath Committee Report to come out as thesaid restructuring is not linked to the parameters to be fixed by the saidreport. It is submitted that, as such, the RBI resolution framework offerssignificant and appropriate higher relief to borrowers in the 26 sectorsidentified as Covid-19 impacted.

9. It is further submitted that the circulars issued by the RBI arepolicy decisions taken by the RBI in exercise of the statutory powersconferred on the bank under the provisions of the BR Act and RBI Act.It is submitted that the policy decisions taken by the RBI and as expressedin various circulars issued by the RBI in the wake of Covid-19 pandemic,being economic policy matters, are not amenable to judicial review exceptwhen a constitutional infraction or violation of fundamental rights aremade out.

9.1 It is submitted that the concessions that have been offeredacross the board by the RBI are offered with the objective to offset thepervasive impact that the Covid-19 pandemic has had on the country.

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AThe circulars granting moratorium for a period of six months on repaymentof instalments on all term loans and deferment of interest on workingcapital facilities; facility for resolution of Covid-19 related stressed assetsare all measures taken with the objective of enabling sustainable recoveryand facilitating credit flow to the economy, while ensuring financial stability.

B9.2 It is further submitted that as the circulars issued by the RBIare under Covid-19 package and the resolution framework issued by theRBI on 6.8.2020 are the policy decisions, the judicial interference by thisCourt is not warranted. It is submitted that every regulatory forbearancehas its trade-offs in terms of adverse incentives and unintendedconsequences. It is submitted that the RBI has exercised its expertCwisdom in issuing binding guidelines to lending institutions on how todifferentiate the risks arising from borrowers with pre-existing financialdifficulties from those which were performing well but had been impactedby the pandemic. RBI has taken a balanced view, taking into accountthe interest of the depositors, borrowers, real sector entities and banks.DFinancial stability and economic growth of the country were also kept inmind while arriving at its policy decisions by the RBI.

9.3 It is submitted that this Court in a number of decisions haveheld that the courts are not to interfere with the economic policy whichis the function of experts. It is not the function of the courts to sit inEjudgment over matters of economic policy and it must necessarily be leftto the expert bodies. It is submitted that even in such matters even expertscan seriously and doubtlessly differ. Courts cannot be expected to decidethem without even the aid of experts. In support of his submission, ShriV. Giri, learned Senior Advocate has relied upon the following decisions,Peerless General Finance and Investment Co. Ltd. (supra); ShriFSitaram Sugar Co. Ltd. V. Union of India (1990) 3 SCC 223; PragIce & Oil Mills v. Union of India AIR 1978 SC 1296; and P.T.R.Exports (Madras) P. Ltd. V. Union of India (1996) 5 SCC 268.

9.4 Making the above submissions and relying upon the abovedecisions, it is vehemently submitted by Shri V. Giri, learned SeniorGAdvocate appearing on behalf of the RBI that the reliefs sought by therespective petitioners, namely, waiver of interest on interest/compoundinterest and waiver of interest during the moratorium period; moratoriumto be permitted for all accounts instead of being at the discretion of thelenders; extension of moratorium beyond 31.08.2020; packages/reliefsshall be sector-wise’ discretion to come under the resolution frameworkH

of 6.8.2020 circulars should lie with the borrowers and not with thelenders, the respective petitioners are not entitled to the said reliefs.

9.5 Now so far as the prayer in one of the petitions sought in WritPetition (Civil) No. 955 of 2020 directing the RBI to apply circular dated27.3.2020 to all banks, non-banking financial companies, housing financecompanies and other financial institutions compulsorily and mandatorily,it is submitted that the circular dated 27.3.2020 shall be applicable to allloan accounts of all banks, non-banking financial companies, housingfinance companies and other financial institutions, subject to fulfilling theeligibility criteria.

Submissions made by Shri Harish Salve, learned SeniorAdvocate

Submissions made by Shri Harish Salve, learned SeniorAdvocate

10. Shri Harish Salve, learned Senior Advocate appearing on behalfof the Indian Banks Association, while opposing the present petitions,has vehemently submitted that the judicial review of the policy decisions,more particularly in the field of economy, would be on very narrowgrounds. It is submitted that the government packages cannot be setaside on the ground of violation of Article 14 of the Constitution of India.It is true that it is the duty of the government to bring back the economyon track. It is submitted that however therefore when a conscious decisionhas been taken by the NDMA/UOI through various ministries, RBI andthe lenders, there may be various options/reliefs which may be available,however ultimately, it is for the policy maker to take appropriate decisions/frame appropriate policies after having the expert opinion. It is submittedthat once a conscious decision of various reliefs has been taken, unlessit is arbitrary and merely because some sectors are not agreeable, itcannot be set aside. It is submitted that while announcing variouspackages/reliefs, each and every aspect has been considered from allangle.

10.1 It is submitted that the resolution regarding restructuring ofdebts is to be considered by the lenders and not by the borrowers. Hehas also relied upon catena of decisions of this Court on judicial reviewof the policy decisions, relied upon by Shri Tushar Mehta, learned SolicitorGeneral, referred to hereinabove.

10.2 It is submitted that, as such, various reliefs/measures havebeen announced by the RBI. The RBI announced a moratorium on therepayment of term loans, initially for a period of three months and further AB

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Aextended by another three months, which came to an end on 31.08.2020.The avowed object of allowing such a moratorium was to ease thefinancial stress that was being faced by borrowers “by relaxing repaymentpressures and improving access to working capital”. Such measureswould benefit those whose business was otherwise sound but becamevictims of the economic meltdown caused by the pandemic. In the caseBof individual borrowers having personal accounts, an entirely differentapproach was called for and this was finally addressed by the governmentin the package announced by it. It is submitted that on 6.8.2020 the RBIannounced “Resolution Framework for Covid-19 related stress” therebypermitting banks to restructure loans of eligible borrowers. This wasCmeticulously complied with by the banks by putting in place Boardapproved policies to grant relief to the borrowers.

10.3 It is submitted that the RBI constituted a Committee, knownas Kamath Committee and Kamath Committee made its recommendations.It is submitted that Kamath Committee recommendations were the nextDstep on addressing the economic problems being faced by businesses inIndia. It is submitted that in a number of cases the accounts had becomeirregular although not declared as NPA during this period and thereforeit has become necessary to restructure these loans. It is submitted thatthere cannot be a single formula applied to all loans and to differentsectors. The Kamath Committee therefore evolved norms which relaxedEthe existing norms on which restructuring of loans were to be affected.

It is submitted that for the purposes of restructuring alone, thefundamental premise was that the business is viable and capable ofservicing its debt obligations upon restructuring. It is for this purposethat different norms were prescribed for assessing the inherent financialFstrength of a business.

It is submitted that all the directions of the RBI have been fullycomplied with by the banks in letter and spirit and relief has been grantedto the borrowers.

10.4 It is further submitted that the Central Government hasGannounced various schemes/packages and the same have beenimplemented by the banks and have duly granted relief to all the eligibleborrowers in terms of the said schemes/packages.

10.5 Now so far as the reliance placed upon Section 13 of theDMA 2005 is concerned, it is vehemently submitted by Shri Salve, learnedH

Senior Advocate that in section 13 the word used is “may”. It is submittedthat the Government has to balance each sector and Section 13 of theAct uses the words “persons affected”. It is submitted that differentpersons/sectors have impact differently and therefore keeping in mindthe different impact on different persons/sectors, the Central Governmentthrough its various ministries, RBI and the banks have provided differentpackages/reliefs.

10.6 It is submitted that, as such, as pointed out by Shri Mehta,learned Solicitor General, a conscious decision has been taken by theNDMA. It is submitted that under the DMA, prevention and mitigationshall be within the statutory framework.

It is submitted that the architecture of the DMA 2005 is clearly astructure of enabling powers to be exercised concurrently with theexecutive powers of the Government and other statutory powers availableto the Governments at the Union, State and District levels. It is submittedthat therefore there is no question of there being a power coupled with aduty – overall duties of each of the statutory functionaries are set out inthe various provisions and enabling provisions are made to give relief asmay become necessary.

It is submitted that there may be a pandemic or a natural disasterwhich may not have that degree of economic fallout. It is submitted thatto suggest that the moment there is a disaster, there is a duty cast uponthe NDMA to afford relief from payment of interest would lead to absurdconsequences.

It is submitted that there is no power conferred under the Act bywhich the amount due by a private entity to another private entity can bewritten off or restructured. The relief under Section 13 can be grantedwhere interest is payable to the Government or by reimbursing the interestpayable to a private entity.

10.7 Now so far as the relief sought of waiver of interest, it issubmitted that IBA has 203 member banks including public sector banks,private sector banks, foreign banks and other banks including co-operativebanks and regional rural banks. It is submitted that even on the occurrenceof other calamities like cyclone, earthquake, drought or flood, banks donot waive interest but provide necessary relief packages to the borrowers.A waiver can only be granted by the Government out of the exchequer.It cannot come out of a system from banks, where credit created out of A

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Athe depositor’s funds alone. Any waiver will create a shortfall and amismatch between the Bank’s assets and liabilities.

It is submitted that the banks have to keep up with their interestpayment obligations to the depositors who are paid compound interestwith quarterly rests on FDRs. The waiver of interest obligations wouldBimpair the financial structure of the banks and unleash a greater economicdanger than what has been caused by the pandemic.

It is submitted that the resolution framework put in place by theRBI on 6.8.2020 sets out sectoral parameters and thereby recognizesthe difference between the different sectors for restructuring of loans.

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10.8 It is submitted therefore that the policy decisions taken bythe respective banks/lenders considering the recommendations made bythe Kamath Committee and as per the policies/packages offered by thegovernment may take care of the interest of the different sectors forrestructuring of loans and the same are in the larger interest of theDeconomy of the country. It is therefore prayed to dismiss all thesepetitions.

11. Shri Mukul Rohatgi, learned Senior Advocate appearing onbehalf of the State Bank of India has pointed out the resolution/policydated 1.9.2020 approved by the Board of Directors of the State Bank ofEIndia has been framed after considering the recommendations of theKamath Committee. He has also reiterated on judicial review of theeconomic policy decisions; adverse effect on the banking system if theprayer of waiver of interest/penal interest is accepted and on interpretationof various provisions of DMA 2005.

F12. Having heard learned counsel appearing on behalf of therespective petitioners and the reliefs sought in the respective petitions,the reliefs/submissions on behalf of the petitioners can be summarizedas under:

i) a complete waiver of interest or interest on interest during theGmoratorium period;

ii) there shall be sector-wise relief packages to be offered by theUnion of India and/or the RBI and/or the Lenders;

iii) moratorium to be permitted for all accounts instead of being atthe discretion of the Lenders;H

iv) extension of moratorium beyond 31.08.2020;

v) whatever the relief packages are offered by the CentralGovernment and/or the RBI and/or the Lenders are not sufficient lookingto the impact due to Covid-19 Pandemic and during the lockdown perioddue to Covid-19 Pandemic;

vi) the last date for invocation of the resolution mechanism, namely,31.12.2020 provided under the 6.8.2020 circular should be extended.

13. While considering the aforesaid submissions/reliefs sought,the scope of judicial review on the policy decisions in the field of economyand/or economic policy decisions and/or the policy decisions havingfinancial implications which affects the economy of the country arerequired to be considered.

14. In catena of decisions and time and again this Court hasconsidered the limited scope of judicial review in economic policy matters.From various decisions of this Court, this Court has consistently observedand held as under:

i) The Court will not debate academic matters or concern itselfwith intricacies of trade and commerce;

ii) It is neither within the domain of the courts nor the scope ofjudicial review to embark upon an enquiry as to whether a particularpublic policy is wise or whether better public policy can be evolved. Norare the courts inclined to strike down a policy at the behest of a petitionermerely because it has been urged that a different policy would havebeen fairer or wiser or more scientific or more logical. Wisdom andadvisability of economic policy are ordinarily not amenable to judicialreview;

iii) Economic and fiscal regulatory measures are a field whereJudges should encroach upon very warily as Judges are not experts inthese matters.

14.1 In R.K. Garg (supra), it has been observed and held thatlaws relating to economic activities should be viewed with greater latitudethan laws touching civil rights such as freedom of speech, religion etc. Itis further observed that the legislature should be allowed some play inthe joints, because it has to deal with complex problems which do notadmit of solution through any doctrinaire or strait-jacket formula and thisparticularly true in case of legislation dealing with economic matters.

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A14.2 In the case of Arun Kumar Agrawal (supra), this Courthad an occasion to consider the following observations made the SupremeCourt of the United States in the case of Metropolis Theatre Co. v.Chicago, 57 L Ed 730: 228 US 61 (1913):

“…The problems of Government are practical ones and mayBjustify, if they do not require, rough accommodation, illogical, ifmay be, and unscientific. But even such criticism should not behastily expressed. What is the best is not always discernible; thewisdom of any choice may be disputed or condemned. Mere errorsof Government are not subject to our judicial review. It is only itspalpably arbitrary exercises which can be declared void…”C

14.3 This Court in the case of Nandlal Jaiswal (supra) hasobserved that the Government, as laid down in Permian Basin AreaRate Cases, 20 L Ed (2d) 312, is entitled to make pragmatic adjustmentswhich may be called for by particular circumstances. The court cannotstrike down a policy decision taken by the State Government merelyDbecause it feels that another policy decision would have been fairer orwiser or more scientific or logical. The court can interfere only if thepolicy decision is patently arbitrary, discriminatory or mala fide.

14.4 In the case of BALCO Employees’ Union (Regd.) (supra),this Court has observed that Wisdom and advisability of economic policiesEare ordinarily not amenable to judicial review unless it can be demonstratedthat the policy is contrary to any statutory provision or the Constitution.In other words, it is not for the courts to consider relative merits ofdifferent economic policies and consider whether a wiser or better onecan be evolved.F

It is further observed that in the case of a policy decision oneconomic matters, the courts should be very circumspect in conductingan enquiry or investigation and must be more reluctant to impugn thejudgment of the experts who may have arrived at a conclusion unlessthe court is satisfied that there is illegality in the decision itself.G

14.5 In the case of Peerless General Finance and InvestmentCo. Ltd. (supra), it is observed and held by this Court that the functionof the Court is to see that lawful authority is not abused but not toappropriate to itself the task entrusted to that authority. It is furtherobserved that a public body invested with statutory powers must take H

care not to exceed or abuse its power. It must keep within the limits ofthe authority committed to it. It must act in good faith and it must actreasonably. Courts are not to interfere with economic policy which isthe function of experts. It is not the function of the courts to sit in judgmentover matters of economic policy and it must necessarily be left to theexpert bodies. In such matters even experts can seriously and doubtlesslydiffer. Courts cannot be expected to decide them without even the aid ofexperts.

It is further observed that it is not the function of the Court toamend and lay down some other directions. The function of the court isnot to advise in matters relating to financial and economic policies forwhich bodies like RBI are fully competent. The court can only strikedown some or entire directions issued by the RBI in case the court issatisfied that the directions were wholly unreasonable or in violative ofany provisions of the Constitution or any statute. It would be hazardousand risky for the courts to tread an unknown path and should leave suchtask to the expert bodies. This Court has repeatedly said that matters ofeconomic policy ought to be left to the government.

14.6 In the case of Narmada Bachao Andolan (supra), in paras229 & 233, it is observed and held as under:

“229. It is now well settled that the courts, in the exercise of theirjurisdiction, will not transgress into the field of policy decision.Whether to have an infrastructural project or not and what is thetype of project to be undertaken and how it has to be executed,are part of policy-making process and the courts are ill-equippedto adjudicate on a policy decision so undertaken. The court, nodoubt, has a duty to see that in the undertaking of a decision, nolaw is violated and people’s fundamental rights are not transgressedupon except to the extent permissible under the Constitution.

233. At the same time, in exercise of its enormous power thecourt should not be called upon to or undertake governmentalduties or functions. The courts cannot run the Government norcan the administration indulge in abuse or non-use of power andget away with it. The essence of judicial review is a constitutionalfundamental. The role of the higher judiciary under the Constitutioncasts on it a great obligation as the sentinel to defend the valuesof the Constitution and the rights of Indians. The courts must, AB

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Atherefore, act within their judicial permissible limitations to upholdthe rule of law and harness their power in public interest. It isprecisely for this reason that it has been consistently held by thisCourt that in matters of policy the court will not interfere. Whenthere is a valid law requiring the Government to act in a particularmanner the court ought not to, without striking down the law, giveBany direction which is not in accordance with law. In other words,the court itself is not above the law.”

14.7 In Prag Ice & Oil Mills (supra), this Court observed asunder:

C“We do not think that it is the function of the Court to set in judgmentover such matters of economic policy as must necessarily be leftto the government of the day to decide. Many of them are mattersof prediction of ultimate results on which even experts can seriouslyerr and doubtlessly differ. Courts can certainly not be expected todecide them without even the aid of experts.”D14.8 In P.T.R Exports (Madras) P. Ltd. (supra), this Courtobserved as under:

“In matters of economic policy, it is settled law that the Courtgives a large leeway to the executive and the legislature-EGovernment would take diverse factors for formulating the policyin the overall larger interest of the economy of the country-TheCourt therefore would prefer to allow free play to the Governmentto evolve fiscal policy in the public interest and to act upon thesame.”

F15. What is best in the national economy and in what manner andto what extent the financial reliefs/packages be formulated, offered andimplemented is ultimately to be decided by the Government and RBI onthe aid and advise of the experts. The same is a matter for decisionexclusively within the province of the Central Government. Such mattersGdo not ordinarily attract the power of judicial review. Merely becausesome class/sector may not be agreeable and/or satisfied with suchpackages/policy decisions, the courts, in exercise of the power of judicialreview, do not ordinarily interfere with the policy decisions, unless suchpolicy could be faulted on the ground of mala fide, arbitrariness, unfairnessetc.H

16. There are matters regarding which Judges and the Lawyersof the courts can hardly be expected to have much knowledge by reasonsof their training and expertise. Economic and fiscal regulatory measuresare a field where Judges should encroach upon very warily as Judgesare not experts in these matters.

17. The correctness of the reasons which prompted the governmentin decision taking one course of action instead of another is not a matterof concern in judicial review and the court is not the appropriate forumfor such investigation. The policy decision must be left to the governmentas it alone can adopt which policy should be adopted after considering ofthe points from different angles. In assessing the propriety of the decisionof the Government the court cannot interfere even if a second view ispossible from that of the government.

18. Legality of the policy, and not the wisdom or soundness of thepolicy, is the subject of judicial review. The scope of judicial review ofthe governmental policy is now well defined. The courts do not andcannot act as an appellate authority examining the correctness, stabilityand appropriateness of a policy, nor are the courts advisers to theexecutives on matters of policy which the executives are entitled toformulate.

19. Government has to decide its own priorities and relief to thedifferent sectors. It cannot be disputed that pandemic affected the entirecountry and barring few of the sectors. However, at the same time, theGovernment is required to take various measures in different fields/sectorslike public health, employment, providing food and shelter to the commonpeople/migrants, transportation of migrants etc. and therefore, as such,the government has announced various financial packages/reliefs. Eventhe government also suffered due to lockdown, due to unprecedentedcovid-19 pandemic and also even lost the revenue in the form of GST.Still, the Government seems to have come out with various reliefs/packages. Government has its own financial constraints. Therefore,as such, no writ of mandamus can be issued directing the Government/RBI to announce/declare particular relief packages and/or to declarea particular policy, more particularly when many complex issues willarise in the field of economy and what will be the overall effect on theeconomy of the country for which the courts do not have any expertiseand which shall be left to the Government and the RBI to announcethe relief packages/economic policy in the form of reliefs on the basis A

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Aof the advice of the experts. Therefore, no writ of mandamus can beissued.

20. No State or country can have unlimited resources to spend onany of its projects. That is why it only announces the financial reliefs/packages to the extent it is feasible. The court would not interfere withBany opinion formed by the Government if it is based on the relevantfacts and circumstances or based on expert advice. It is not normallywithin the domain of any court to weigh the pros and cons of the policyor to scrutinize it and test the degree of its beneficial or equitabledisposition for the purpose of varying, modifying or annulling it, based onhowsoever sound and good reasoning, only where it is arbitrary andCviolative of any Constitutional, statutory or any other provisions of law.When Government forms its policy, it is based on a number ofcircumstances on facts, law including constraints based on its resources.It is also based on expert opinion. It would be dangerous if court is askedto test the utility, beneficial effect of the policy or its appraisal based onDfacts set out on affidavits.

21. No right could be absolute in a welfare State. Man is a socialanimal. He cannot live without the cooperation of a large number ofpersons. Every article one uses is the contribution of many. Hence everyindividual right has to give way to the right of the public at large. NotEevery fundamental right under Part III of the Constitution is absoluteand it is to be within permissible reasonable restriction. This principalequally applies when there is any constraint on the health budget onaccount of financial stringencies.

It is the cardinal principle that it is not within the legitimate domainFof the court to determine whether a particular policy decision can beserved better by adopting any policy different from what has been laiddown and to strike down as unreasonable merely on the ground that thepolicy enunciated does not meet with the approval of the court in regardto its efficaciousness for implementation of the object and purpose ofsuch policy decision.G

22. With the limited scope of judicial review on the policy decisionsaffecting the economy and/or it might have financial implications on theeconomy of the country, the reliefs and submissions stated hereinaboveare required to be considered. Whether there shall be a waiver of interestduring the moratorium period or whether there shall be sector-wise reliefH

packages and/or RBI should have issued directions which are sectorspecific and addressing such sector specific issues and/or whether themoratorium period should be extended beyond 31.08.2020 or the lastdate for invocation of the resolution mechanism, namely, 31.12.2020provided in the 6.8.2020 circular should be extended are all in the realmof the policy decisions. Not only that, if such reliefs are granted, it wouldseriously affect the banking sectors and it would have far reachingfinancial implications on the economy of the country.

23. Now so far as the relief sought of waiver of interest duringthe moratorium period is concerned, it is required to be noted that thebankers/lenders have to pay the interest to the depositors and their liabilityto pay the interest on the deposits continue even during the moratoriumperiod. There shall be administrative expenses also required to be borneby the bankers/lenders. Continue payment of interest to depositors is notonly one of the most essential banking activities but it shall be a hugeresponsibility owed by the banks to crores and crores of small depositors,pensioners etc. surviving on the interest from their deposits. There maybe several welfare funds schemes, category specific and sector specificwhich might be surviving and are implemented on the strength of theinterest generated from their deposits. All such welfare funds woulddepend on the income generated from their deposits for the survival oftheir members. Therefore, to grant such a relief of total waiver of interestduring the moratorium period would have a far-reaching financialimplication in the economy of the country as well as the lenders/banks.Therefore, when a conscious decision has been taken not to waive theinterest during the moratorium period and a policy decision has beentaken to give relief to the borrowers by deferring the payment ofinstallments and so many other reliefs are offered by the RBI andthereafter by the bankers independently considering the Report submittedby Kamath Committee consisting of experts, the interference of thecourt is not called for.

24. Now so far as the submission on behalf of the petitioners thatthe RBI should have issued directions which are sector specific andaddressing such sector specific issues is concerned, at the outset, it isrequired to be noted that as such the Committee headed by Shri K.V.Kamath had gone into such sector specific issues and gave itsrecommendations. The recommendations of the Kamath Committee havebeen substantially accepted by the RBI in its circular dated 7.9.2020

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Awhich provides for separate threshold for 26 sectors including power,real estate and construction. Even otherwise, it is required to be notedthat every sector might have suffered differently and therefore it willnot be possible to provide sector specific/sector-wise reliefs. Thepetitioners cannot pray for sector specific relief by either waiver of interestor restructuring by way of present proceedings under Article 32 of theBConstitution of India and the question of such financial stress managementmeasures requires examination and consideration of several financialparameters and its impact.

25. Now so far as the submission on behalf of the petitionersthat as per the notifications/circulars/reliefs offered by the RBI and/orCFinance Department of the Union of India ultimately it is left to thebankers and it should not have been left to the bankers and theGovernment/RBI must intervene and provide further reliefs isconcerned, at the outset, it is required to be noted that as such thebankers are commercial entities and since the customer profile,Dorganizational structure and spread of each lending institution is widelydifferent from others, each lending institution is best placed to assessthe requirements of its customers and therefore, the discretion wasleft to the lending institutions concerned. Any borrowing arrangementis a commercial contract between the lender and the borrower. RBIand/or the Union of India can provide for broad guidelines whileErecommending to give the reliefs.

26. Now so far as the submission on behalf of the petitioners thatthe relief packages which are offered by the UOI/RBI/Bankers/Lendersare not sufficient and some better and/or more reliefs should be offeredis concerned, it is not within the judicial scope of the courts to issue suchFdirections. No mandamus can be issued to grant some more reliefs/packages. As observed hereinabove, the court cannot interfere with theeconomic policy decisions on the ground that either they are not sufficientor efficacious and/or some more reliefs should have been granted. TheGovernment might have their own priorities and the Government has toGspend in various fields and in the present case like health, medicine,providing food etc. Even as per the case of the Union of India and sostated in the counter filed on behalf of the Union of India and the RBI,so many policies have been announced to mitigate the impact of Covid-19 pandemic, which are referred to hereinabove.

As can be seen that as such the Central Government has alreadygiven various reliefs and by providing various reliefs, they have alreadyexpanded huge financial burden. It is required to be noted that pandemichas caused stress to large and small businesses and the individuals whohave lost jobs and livelihoods. By and large, everybody has suffered dueto lockdown due to Covid-19 pandemic. Even the Government has alsosuffered due to non-recovery of GST. From the counter filed on behalfof the Central Government, it appears that the Government hasannounced and offered ‘Garib Kalyan Package’ and ‘Aatma NirbharPackage’. The ‘Garib Kalyan Package’ was for Rs.1.70 lakh crores,involving free food grains, pulses, gas cylinders and cash payment towomen, poor senior citizens and farmers. It is reported that more than42 crore poor people received financial assistance of Rs. 65,454 croresunder the said package. The Government has also come out with ‘AatmaNirbhar Package’ which was for Rs. 20 lakh crores, involving support toMSMEs, Non-Banking Finance Companies, agriculture, sectors alliedto agriculture, contractors, street vendors, State Governments, relief inprovident fund contribution, extension of subsidy on home loans etc.Therefore, it cannot be said that the Central Government and/or theRBI have not done anything and/or have not offered any reliefswhatsoever. While offering the financial relief packages, the financialconstraint and/or financial burden on the government is also required tobe considered and borne in mind, which can be considered by the expertsand the government and the courts have not expertise to assess thefinancial burden.

From the various steps/measures/policy decisions/packagesdeclared by the Union of India/RBI and the bankers, it cannot be saidthat the UOI and/or the RBI have not at all addressed the issues relatedto the impact of Covid-19 on the borrowers. As such, none of thepetitioners have specifically challenged the various circulars/policydecisions taken by the UOI/RBI. From the submissions made by thelearned counsel appearing for the respective parties, it appears that theborrowers want something more than the reliefs announced. Merely,since the reliefs announced by the UOI/RBI ither may not be suiting thedesires of the borrowers, the reliefs/policy decisions related to Covid-19cannot be said to be arbitrary and/or violative of Article 14 of the Constitutionof India. It cannot be said that any of the fundamental rights guaranteedunder the Constitution are infringed and/or violated. Economic decisionsare required to be taken keeping the larger economic scenario in mind.

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A27. Similarly, the relief sought that the moratorium period shouldbe extended and/or the last date for invocation of the resolutionmechanism namely 31.12.2020 provided under the 06.08.2020 circularshould be extended are all in the realm of policy decisions. Even otherwise,almost five months were available to eligible borrowers when circulardated 6.8.2020 was notified providing for a separate resolution mechanismBfor Covid-19 related stressed assets. Therefore, sufficient time was givento invoke the resolution mechanism.

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Therefore, the petitioners shall not be entitled to any reliefs, namely,

(i) total waiver of interest during the moratorium period; C

(ii) to extend the period of moratorium;

(iii) to extend the period for invocation of the resolution mechanism,namely 31.12.2020 provided under the 6.8.2020 circular;

(iv) that there shall be sector-wise reliefs provided by the RBI;Dand

(v) that the Central Government/RBI must provide for some furtherreliefs over and above the relief packages already offered which, asobserved hereinabove, can be said to be in the realm of the economicpolicy decisions and for the reasons stated hereinabove and as observedEhereinabove granting of any such reliefs would have a far-reachingfinancial implication on the economy of the country. It appears, whateverbest can be offered has been offered for the different fields and to thecommon people as well as those persons who are affected due to Covid-10 pandemic. However, the relief/prayer not to charge the penal interest/Finterest on interest/compound interest during the moratorium period isconcerned, it stands on different footing which shall be dealt withhereinbelow.

28. Now so far as the submission of Shri Sibbal, learned SeniorAdvocate that there is no “National Plan” drawn up for the disasterGmanagement due to Covid-19 pandemic and that NDMA has notperformed its duty under the DMA 2005 is concerned, to appreciate theabove, the relevant provisions of DMA 2005 are required to be referredto and considered.

Section 3 of the Act provides for establishment of NationalHDisaster Management Authority which shall consist of the Prime Minister of India, who shall be the Chairperson of the National DisasterManagement Authority and other members not exceeding nine, to benominated by the Chairperson of the National Authority. Powers andfunctions of the National Authority are provided under Section 6, whichreads as under:

“6. Powers and functions of National Authority.—(1) Subject tothe provisions of this Act, the National Authority shall have theresponsibility for laying down the policies, plans and guidelines fordisaster management for ensuring timely and effective responseto disaster.

(2) Without prejudice to generality of the provisions contained insub-section (1), the National Authority may —

(a) lay down policies on disaster management; (b) approve the National Plan;

(c) approve plans prepared by the Ministries or Departments ofthe Government of India in accordance with the National Plan; (d) lay down guidelines to be followed by the State Authorities indrawing up the State Plan; (e) lay down guidelines to be followed by the different Ministriesor Departments of the Government of India for the purpose ofintegrating the measures for prevention of disaster or the mitigationof its effects in their development plans and projects; (f) coordinate the enforcement and implementation of the policyand plan for disaster management; (g) recommend provision of funds for the purpose of mitigation; (h) provide such support to other countries affected by majordisasters as may be determined by the Central Government;

(i) take such other measures for the prevention of disaster, or themitigation, or preparedness and capacity building for dealing withthe threatening disaster situation or disaster as it may considernecessary; (j) lay down broad policies and guidelines for the functioning ofthe National Institute of Disaster Management.

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A(3) The Chairperson of the National Authority shall, in the case ofemergency, have power to exercise all or any of the powers ofthe National Authority but exercise of such powers shall be subjectto ex post facto ratification by the National Authority.”

Section 7 provides for constitution of Advisory Committee byBNational Authority, which shall consist of experts in the field of disastermanagement and having practical experience of disaster managementat the national, State or district level to make recommendations ondifferent aspects of disaster management. Then comes constitution ofNational Executive Committee as per section 8 of the Act, to assist theNational Authority in the performance of its functions under the Act.CThe National Executive Committee shall consist of the Secretary to theGovernment of India, in charge of the Ministry or Department of theCentral Government having administrative control of the disastermanagement, who shall be the Chairperson, ex officio, and the Secretariesto the Government of India in the Ministries or Departments havingDadministrative control of the agriculture, atomic etc., as mentioned inSection 8(2)(b) of the Act. As per Section 9 of the Act, the NationalExecutive Committee, as and when it considers necessary, constituteone or more sub-committees for the efficient discharge of its functions.The powers and functions of the National Executive Committee are asper Section 10 of the Act, and more particularly (a) to act as theEcoordinating and monitoring body for disaster management…. (b)coordinate and monitor the implementation of the National policy; (c)monitor the implementation of the National Plan and the plans preparedby the Ministries or Departments of the Government of India; (d) monitorthe implementation of the guidelines laid down by the National AuthorityFfor integrating of measures for prevention of disasters and mitigation bythe Ministries or Departments in their development plans and projects;(e) monitor, coordinate and give directions regarding the mitigation andpreparedness measures to be taken by different Ministries orDepartments and agencies of the Government; (f) lay down guidelines for, or give directions to, the concerned Ministries or Departments of theGGovernment of India, the State Governments and the State Authoritiesregarding measures to be taken by them in response to any threateningdisaster situation or disaster; (g) advise, assist and coordinate the activitiesof the Ministries or Departments….engaged in disaster management.Section 11 of the Act provides for preparation/drawing up a Plan calledH

the “National Plan” for disaster management for the whole of the country.The National Plan shall include- (a) measures to be taken for the prevention of disasters, or themitigation of their effects; (b) measures to be taken for the integration of mitigation measuresin the development plans;

(c) measures to be taken for preparedness and capacity buildingto effectively respond to any threatening disaster situations ordisaster; (d) roles and responsibilities of different Ministries orDepartments of the Government of India in respect of measuresspecified in clauses (a), (b) and (c).

Section 12 of the Act provides for issuance of guidelines by theNational Authority for minimum standards of relief. Section 13 of theAct provides for relief in repayment of loan etc., which shall be dealtwith hereinbelow at an appropriate stage. Section 14 of the Act providesfor establishment of State Disaster Management Authority. Similarprovisions like National Disaster Management Authority are made withrespect to State Disaster Management Authority. Section 33 providesfor State Disaster Management Plan. Similar provisions are made withrespect to District Disaster Management Authority and the District Plan.Section 35 of the Act provides for measures to be taken by the CentralGovernment for disaster management. Section 35 reads as under:

“35. Central Government to take measures.—(1) Subject to theprovisions of this Act, the Central Government shall take all suchmeasures as it deems necessary or expedient for the purpose ofdisaster management.

(2) In particular and without prejudice to the generality of theprovisions of sub-section (1), the measures which the CentralGovernment may take under that sub-section include measureswith respect to all or any of the following matters, namely:—

(a) coordination of actions of the Ministries or Departments ofthe Government of India, State Governments, National Authority,State Authorities, governmental and non-governmentalorganizations in relation to disaster management; A

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A(b) ensure the integration of measures for prevention of disastersand mitigation by Ministries or Departments of the Governmentof India into their development plans and projects;

(c) ensure appropriate allocation of funds for prevention of disaster,mitigation, capacity-building and preparedness by the MinistriesBor Departments of the Government of India;(d) ensure that the Ministries or Departments of the Governmentof India take necessary measures for preparedness to promptlyand effectively respond to any threatening disaster situation ordisaster; C(e) cooperation and assistance to State Governments, as requestedby them or otherwise deemed appropriate by it; (f) deployment of naval, military and air forces, other armed forcesof the Union or any other civilian personnel as may be requiredfor the purposes of this Act; D(g) coordination with the United Nations agencies, internationalorganizations and governments of foreign countries for thepurposes of this Act; (h) establish institutions for research, training, and developmentalEprogrammes in the field of disaster management;(i) such other matters as it deems necessary or expedient for thepurpose of securing effective implementation of the provisions ofthis Act.

(3) The Central Government may extend such support to otherFcountries affected by major disaster as it may deem appropriate.”

Section 36 of the Act provides for responsibilities of the Ministriesor Departments of the Government of India, which reads as under:

“36. Responsibilities of Ministries or Departments of GovernmentGof India.—It shall be the responsibility of every Ministry orDepartment of the Government of India to—

(a) take measures necessary for prevention of disasters, mitigation,preparedness and capacity-building in accordance with theguidelines laid down by the National Authority; H

(b) integrate into its development plans and projects, the measuresfor prevention or mitigation of disasters in accordance with theguidelines laid down by the National Authority; A

(c) respond effectively and promptly to any threatening disastersituation or disaster in accordance with the guidelines of theNational Authority or the directions of the National ExecutiveCommittee in this behalf; B

(d) review the enactments administered by it, its policies, rulesand regulations, with a view to incorporate therein the provisionsnecessary for prevention of disasters, mitigation or preparedness; C

(e) allocate funds for measures for prevention of disaster,mitigation, capacity-building and preparedness; (f) provide assistance to the National Authority and StateGovernments for—

(i) drawing up mitigation, preparedness and response plans,Dcapacity-building, data collection and identification andtraining of personnel in relation to disaster management;

(ii) carrying out rescue and relief operations in the affectedarea; E

(iii) assessing the damage from any disaster;

(iv) carrying out rehabilitation and reconstruction; (g) make available its resources to the National ExecutiveCommittee or a State Executive Committee for the purposes ofresponding promptly and effectively to any threatening disastersituation or disaster, including measures for—

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(i) providing emergency communication in a vulnerable oraffected area;

(ii) transporting personnel and relief goods to and from theaffected area; G

(iii) providing evacuation, rescue, temporary shelter or otherimmediate relief;

(iv) setting up temporary bridges, jetties and landing places; H

A(v)providing, drinking water, essential provisions, healthcare,and services in an affected area; (h) take such other actions as it may consider necessary for disastermanagement.”

Section 37 of the Act provides for preparation of the DisasterBManagement Plans of Ministries or Departments of Government of India.Section 38 provides for measures to be taken by the State Government.

29. From the aforesaid, it can be said that the DMA 2005 is acomplete code in itself and different functions and responsibilities bydifferent authorities to be performed at different levels are provided. AsCper Sections 35 and 36 of the Act, it shall be the responsibility of theMinistry or the Department of the Government of India to take measuresnecessary for prevention of disaster, mitigation, preparedness andcapacity-building which shall include to allocate funds for measures forpreparation of disaster, mitigation, capacity-building and preparedness.

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Therefore, on conjoint reading of the relevant provisions of theDMA 2005, which are referred to hereinabove, it cannot be said that thefunctions of all the Ministries are to be discharged by the NDMA whichshould take decision qua the area in each Ministry. It also cannot be saidthat the functions of the Ministries will stand transferred to the NDMAEand will have to be discharged by the NDMA either directly or indirectlyfor the purpose of disaster management. Various Ministries under theCentral Government have to take various relief measures within theirrespective spheres for remedying the effects of the disaster. From thepleadings, it is borne out that in fact there is already a National DisasterManagement Plan prepared even prior to the Covid-19 pandemic. UnderFthe National Plan, there is a National Disaster Management InstitutionalMechanism, which is reproduced hereinabove. The said plan alsoenvisages nodal ministries for management of different disasters. Forexample, if the disaster is due to drought, Ministry of Agriculture andFarmers Welfare would be the nodal agency; if the disaster is due toGfloods, Ministry of Housing and Urban Affairs would be the nodal agencyand if the disaster is due to “biological emergencies”, the Ministry ofHealth and Welfare would be the nodal agency. The disaster due toCovid-19 pandemic would fall under disaster due to “biologicalemergencies”. However, it appears that Covid-19 pandemic disaster isof such a nature that it could not be confined to one nodal ministry andH

whatever measures/reliefs are required to be taken/given are providedby every Ministry in each and every day needed. Therefore, variousreliefs/packages are provided by different Ministries, such as, Ministryof Railways, Ministry of Finance, Ministry of Health and Family Welfareetc. It also appears that even considering the very nature of the pandemicwhich would have PAN-India impact, empowered groups wereconstituted by the National Disaster Management Authority. Therefore,when there is already in existence a National Plan, which might havebeen prepared even prior to the Covid-19 pandemic, it cannot be saidthat there is no National Plan by the NDMA at all. National Plan wouldbe for a long term and even with respect to disaster to happen in future.For every disaster, there shall not be a new National Plan. National Planwould be comprehensive in nature which is already there in existence.Therefore, the submission of Shri Sibbal, learned Senior Advocate thatthere is no National Plan at all and therefore the NDMA has failed toperform its duty cannot be accepted.

30. Now so far as the submission on behalf of the learned counselfor the respective petitioners that the NDMA has failed to perform itsduty cast under Section 13 of the Act is concerned, at the outset, it isrequired to be noted that the word used in Section 13 is “may” and not“shall”. As per the settled proposition of law, while interpreting aparticular provision, the language used is to be read as it is. On a fairreading of Section 13, it appears that the legislature has deliberatelyused the word “may”. This “may” is used after considering the objectand purpose of the Act as a whole as well as the role to be placed by theCentral Government through different ministries, role to be placed bythe State Government, role to be played by the District Authority at thedistrict level. In the present case, the Ministry of Finance and the RBIhave already come out with different packages/reliefs in repayment ofloans or grant of fresh loans to the persons affected by disaster.

30.1 Even the Central Government through Ministry of Financeand the RBI has taken various steps for granting reliefs to the disasteraffected borrowers. The Central Government has announced the ‘GaribKalyan Package’ for Rs.2.00 lakh crores, involving free food grains,pulses, gas cylinders and cash payment to women, poor senior citizensand farmers; ‘Aatma Nirbhar Package’ for various sectors like powersector, real estate sector, MSME sector. The Central Government alsopromulgated Emergency Credit-Linked Guarantee Scheme of Rs. 3 lakh A

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Acrores providing additional credit at lower rate of interest, with 100%Government Guarantee and no fresh collateral. The scheme has beenextended with higher financial limits to 27 Covid-19 impacted sectorsincluding restaurant and hotel sectors. The Central Government has alsogranted Rs. 20,000 crores Subordinate Debt with partial credit guaranteefor over two lakhs stressed MSME units including from hospitality sector.BThe Central Government has also granted Rs. 50,000 crores Fund ofFunds for providing growth equity to MSMEs. The Central Governmenthas also come out with a new definition of MSMEs for improving turnovercaps for better access of schemes/benefits. There are other reliefs alsoannounced by the Central Government. The Central Government hasCalso declared the moratorium from March to August, 2020. Theproceedings under the IBC are also suspended during the moratoriumperiod.

30.2 As per the provisions of the DMA 2005, the responsibilitiesand functions of the discharge of functions by the NDMA would beDconfined to Section 6 of the Act. However, on-ground disastermanagement and relief measures shall have to be undertaken by theCentral Ministries and the State Government Ministries depending uponthe need of the disaster and only in a case where the NDMA is satisfiedthat the reliefs which are already announced are not sufficient and/or nosteps are taken at all with respect to the reliefs mentioned in Section 13,Ethe National Authority may recommend the reliefs in repayment of loansetc. Therefore, it cannot be said that the National Authority has failed toperform its duty as cast under Section 13 of the Act.

30.3 At this stage, it is required to be noted and so stated in theaffidavit dated 31.08.2020 filed on behalf of the Union of India thatFNDMA also took cognizance of the issues being dealt with by the RBIand sent its “views and recommendations” given by O.M. dated28.08.2020 and the NDMA also opined that RBI may consider grantingfurther reliefs, as deemed appropriate, after considering and taking intoaccount the financial relief packages issued by the Ministry of Finance,Gas well as, other relief measures that have already been issued/declaredby the RBI itself. The “views and recommendations” of the NDMAwere communicated to the RBI vide letter dated 31.08.2020. Therefore,it cannot be said that the NDMA has not stepped into at all. It is to benoted that even as per Section 13 of the Act, the National Authority“may” and “recommend” relief in repayment of loans or grant of freshH

loans to the persons affected by disaster on such concessional terms asmay be appropriate. Thereafter, as per the “views and recommendations”of the NDMA, RBI has come out with Resolution framework and onthe basis of the same the lenders/bankers after getting the approval oftheir Board of Directors have come out with the policies. Thus, from theabove, it cannot be said that NDMA has failed to perform its duty castunder Section 13 of the Act. From the above, it also cannot be said thatthere is no National Plan in existence at all.

31. Now so far as the charging of penal interest/interest on interest/compound interest during the moratorium period is concerned, it standsabsolutely on a different footing. At this stage, it is required to be notedthat in fact the Central Government has come out with a policy decisionsubsequently by which it is decided not to charge the interest on intereston the loans up to Rs. 2 crores. However, such relief is restricted to thefollowing categories:

(i) MSME loans up to Rs.2 crore

(ii) Education loans up to Rs.2 crore

(iii) Housing loans up to Rs.2 crore

(iv) Consumer durable loans up to Rs.2 crore

(v) Credit card dues up to Rs.2 crore

(vi) Auto loans up to Rs.2 crore

(vii) Personal loans to professionals up to Rs. 2 crore

(viii) Consumption loans up to Rs.2 crore There is no justification shown to restrict the relief of not charginginterest on interest with respect to the loans up to Rs. 2 crores only andthat too restricted to the aforesaid categories. What are the basis torestrict it to Rs. 2 crores are not forthcoming. Therefore, as such, thereis no rational to restrict such relief with respect to loans up to Rs. 2crores only. Even otherwise, it is required to be noted that the schemedated 23.10.2020 granting relief/benefit of waiver of compound interest/interest on interest contains eligibility criteria and it provides that anyborrower whose aggregate of all facilities with lending institution is morethan Rs. 2 crores (sanctioned limit or outstanding amount) will not beeligible for ex-gratia payment under the said scheme. Therefore, if thetotal exposure of the loan at the grant of the sanction is more than Rs. 2

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Acrores, the borrower will be ineligible irrespective of the actualoutstanding. For Example, if the borrower has been sanctioned a loan ofRs. 5 crores and has availed of the same, even though he might haverepaid substantially bringing down the principal amount of less than Rs.2 crores as on 29.02.2020, but because of the sanction of the loan amountof more than Rs. 2 crores, he will be ineligible. It also further providesBthat the outstanding amount should not be exceeded to Rs. 2 crores andfor this purpose aggregate of all facilities with the lending institution willbe reckoned. Therefore, if a borrower, for example, MSME Categoryhas availed and has outstanding of business loan of Rs. 1.99 crores andalso has dues of its credit card of Rs. 1.10 lakhs, thereby making theCaggregate to Rs. 2.10 crores, it stands ineligible. Therefore, the aforesaidconditions would be arbitrary and discriminatory.

31.1 Even otherwise, it is required to be noted that compoundinterest/interest on interest shall be chargeable on deliberate/willful defaultby the borrower to pay the installments due and payable. Therefore, it isDin the nature of a penal interest. By notification dated 27.03.2020, theGovernment has provided the deferment of the installments due andpayable during the moratorium period. Once the payment of installmentis deferred as per circular dated 27.03.2020, non-payment of theinstallment during the moratorium period cannot be said to be willful andtherefore there is no justification to charge the interest on interest/Ecompound interest/penal interest for the period during the moratorium.Therefore, we are of the opinion that there shall not be any charge ofinterest on interest/compound interest/penal interest for the period duringthe moratorium from any of the borrowers and whatever the amount isrecovered by way of interest on interest/compound interest/penal interest Ffor the period during the moratorium, the same shall be refunded and tobe adjusted/given credit in the next instalment of the loan account.

32. In view of the above and for the reasons stated hereinabove,the present petitions seeking reliefs, namely, (i) total waiver of interestduring the moratorium period; (ii) to extend the period of moratorium;G(iii) to extend the period for invocation of the resolution mechanism,namely 31.12.2020 provided under the 6.8.2020 circular; (iv)that thereshall be sector-wise reliefs provided by the RBI; and (v)that the CentralGovernment/RBI must provide for some further reliefs over and abovethe relief packages already offered stand dismissed. Connected IAsstand disposed of.H

SMALL SCALE INDUSTRIAL MANUFACTURES ASSOCIATION(REGD.) v. UNION OF INDIA [M. R. SHAH, J.]

However, it is directed that there shall not be any charge of intereston interest/compound interest/penal interest for the period during themoratorium and any amount already recovered under the same head,namely, interest on interest/penal interest/compound interest shall berefunded to the concerned borrowers and to be given credit/adjusted inthe next instalment of the loan account. All these petitions are partlyallowed to the aforesaid extent only and as observed for the reliefs, thepetitions are dismissed. Interim relief granted earlier not to declare theaccounts of respective borrowers as NPA stands vacated. However,there shall be no order as to costs.

Writ Petition (Civil) No. 955 of 2020

Writ Petition (Civil) No. 955 of 2020 stands disposed of in termsof the statement made by Shri V. Giri, learned Senior Advocate appearingon behalf of the RBI that Circular dated 27.03.2020 shall be applicableto all banks, non-banking financial companies, housing finance companiesand other financial institutions compulsorily and mandatorily.

Divya Pandey

Writ Petitions partly allowed.

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