GAJENDRA SHARMA versus UNION OF INDIA AND ANR. on 27 November 2020

1. By this writ petition filed under Article 32 of the Constitution,the petitioner has prayed for directions declaring the notification dated27.03.2020 issued by Reserve Bank of India as ultra vires to the extentit charges interest on the loan amount during the moratorium period.

2. The petitioner’s case and the pleadings in the writ petition brieflynoted are:- 2.1 The petitioner has availed a home loan of amount ofRs.37,48,000/- from the ICICI Bank. After declaration of Coronavirus(COVID-19) as a pandemic by World Health Organisation, the NationalDisaster Management Authority exercising the jurisdiction under Section6 of the Disaster Management Act, 2005 to take effective measures toprevent the spread of COVID-19 across the country and for mitigationof the threatening disastrous situation has issued notification dated27.03.2020 directing the Ministry, Departments of Government of India,State Governments and the State authorities to take measures for ensuringsocial distancing so as to prevent the spread of COVID-19 in the country.Necessary guidelines were also issued under Section 10(2)(1) by the ABCD

EF

G

H

ANational Executive Committee.

2.2 The Reserve Bank of India on 27.03.2020 issued Statementof Development and Regulatory Policies where inter alia certain regulatorymeasures were announced to mitigate the burden of debt servicing broughtabout by disruptions on account of COVID-19 pandemic and to ensureBthe continuity of viable businesses. The notification dated 27.03.2020was issued by the Reserve Bank of India for rescheduling of payments– Term Loans and Working Capital Facilities. Relevant part of thenotification relevant for the present case is as follows:- “(i) Rescheduling of Payments – Term Loans and WorkingCapital FacilitiesC

“(i) Rescheduling of Payments – Term Loans and WorkingCapital FacilitiesC

2. In respect of all term loans (including agricultural term loans,retail and crop loans), all commercial banks (including regionalrural banks, small finance banks and local area banks), co-operative banks, all- India Financial Institutions, and NBFCs(including housing finance companies) (“lending institutions”) areDpermitted to grant a moratorium of three months on payment ofall instalments falling due between March 1, 2020 and May 31,2020. The repayment schedule for such loans as also the residualtenor, will be shifted across the board by three months after themoratorium period. Interest shall continue to accrue on theEoutstanding portion of the term loans during the moratoriumperiod.”

2.3 The petitioner’s case in the writ petition is that when all themeans of livelihood have been curtailed by the Government of India byimposition of complete lockdown pan India, due to worldwide spread ofCOVID-19 pandemic, the petitioner has no way to continue to his workFand earn livelihood. The petitioner’s case is that imposition of interestduring the moratorium period is ultra vires and shall defeat the purposeof permitting the moratorium of loans.

2.3 Referring to notification dated 27.03.2020, petitioner pleadsthat Reserve Bank of India has by the notification made it clear thatGinterest shall continue to accrue on the outstanding portion of the termloans during the moratorium period. Petitioner’s case is that the aboveaction of imposition of interest during the moratorium period is completelydevastating and causes hindrance and obstruction in right to lifeguaranteed by Article 21 of the Constitution. Petitioner’s case is that theadditional interest burden for three months’ moratorium period is alsoH

equally divided in all future EMIs, which is to increase the monthly bill ofthe customer.

A

2.5 The petitioner’s case is that the notification qua payment ofinterest violates the principle of natural justice as the Government onone hand ceased the working of the individuals and on other hand askingto pay the loan interest during moratorium. The petitioner’s case is thatalthough the initial lockdown was for a period of three weeks but it wasextended further. The Reserve Bank of India by a subsequent notificationdated 23.05.2020 due to the extension of the lockdown and due todisruption on account of COVID-19 has directed all commercial banksto extend the moratorium by another three months, i.e., from 01.06.2020to 31.08.2020 on payment of all installments in respect of term loans.The notification dated 23.05.2020 directed for repayment schedule forterm loans as also the residual tenor will be shifted across the board.Notification further stated that “interest shall continue to accrue on theoutstanding portion of the term loans during the moratorium period”.

B

C

D

2.6 The petitioner in the writ petition has prayed for followingreliefs:- a)Issue an appropriate Writ, Order or Direction in the natureof mandamus or any other appropriate writ or Directiondeclaring the portion of impugned Notification dated27.03.2020 issued by Respondent No.2 as ultra vires to theEextent it charges interest on the loan amount during themoratorium period, which create hardship to the Petitionerbeing borrower and creates hindrance and obstruction in“right to life” guaranteed by Article 21 of the Constitution ofIndia; and F

b)Issue a Writ, Order or Direction in the nature of Mandamusthereby directing the Respondents to provide relief inrepayment of loan by not charging interest during themoratorium period declared by Notification dated 27.03.2020;and/or G

c)Pass any other order or orders which may be deemed fitand proper in the facts and circumstances of the case and inthe interest of justice.”

2.7 Notices were issued in the writ petition. While hearing thematter on 17.06.2020 the submission of the learned counsel for the H

840

Apetitioner have been noted to the following effect:- “We have heard learned counsel for the petitioner(s).

Learned counsel for the petitioner(s) submits that underthe Disaster Management Act, 2005, the Central Government hasample power and jurisdiction to grant relief with regard to loanBwhich is specifically provided for. It is submitted that the circularof the Reserve Bank of India dated 27.03.2020 although grantmoratorium but substantially no relief is given to the borrowers.The two-fold submissions have been made by learned counsel forthe petitioner(s). It is submitted that if moratorium is being grantedCfor a period of three months, the entire amount payable includingprincipal and interest should not be charged during moratorium 3period. Secondly, at least the demand of interest on interest shouldnot be made and these reliefs can be extended by the CentralGovernment and the Reserve Bank of India.”

2.8 In the writ petition, affidavits have been filed both by the UnionDof India as well as the Reserve Bank of India. In the affidavits filed onbehalf of the Union of India, it was pleaded that the Central Governmentis fully conscious of the difficulties faced by the various sectors and thestakeholders of various sectors within the purview of the Ministry ofFinance and other Ministries. It is further pleaded that Finance Ministry,Eafter the outbreak of the COVID-19 pandemic globally, has taken severalmeasures of relief dealing with the potential problems faced by severalsectors and in several spheres of all financial worlds. In the affidavitfiled dated 31.08.2020, details of number of measures to mitigate financialsuffering have been enumerated. It has been further pleaded that FinanceMinistry took the initiative and interacted with Reserve Bank of IndiaFrequesting the Reserve Bank of India to provide for various measuresof relief to the borrowers. The affidavit also enumerates different reliefsand measures taken by Reserve Bank of India with regard to moratorium.Reference has been made to two circulars dated 06.08.2020 issued byReserve Bank of India facilitating revival of real sector activities andGmitigating the impact on the ultimate borrowers by enabling lenders togrant concessions to borrowers for COVID- 19 related stress in personal,MSME and corporate loans. The Union of India has filed further affidavitsdated 09.10.2020, 23.10.2020 and 17.11.2020.

2.9 The Reserve Bank of India has also filed a counter affidavit,a consolidated counter affidavit dated 09.10.2020, additional affidavitH

dated 09.10.2020 and further additional affidavit dated 01.11.2020. IndianBank Association has also filed affidavits bringing on record variouscirculars issued by Reserve Bank of India, State Bank of India etc.

3. We have heard Shri Rajiv Dutta, learned senior counsel for thepetitioner. Shri Tushar Mehta, learned Solicitor General, Shri V. Giri,learned senior counsel and Shri Ramesh Babu M.R., learned counselappearing for the Reserve Bank of India and some of the counsels, whohad appeared for intervenors.

4. Hearing of this writ petition took place alongwith other writpetitions on different dates. When the matter was heard on 19.11.2020,learned counsel on behalf of the petitioner, Shri Rajiv Dutta submittedthat in view of the affidavits, which have been filed in the present writpetition by the respondent No.1, this writ petition be disposed of. We,thus, proceed to decide the Writ Petition (C) No. 825 of 2020.

5. In course of hearing of these petitions, learned senior counselfor the petitioner, Shri Rajiv Duta has expressed satisfaction on themeasures taken by the Government of India with respect to borrowersin which category the petitioner belongs. Learned senior counsel for thepetitioner submits that the decision of the Central Government to foregointerest on eight specified categories of loans paid upto Rs.2 Crores hascome as a great relief.

6. Shri Tushar Mehta, learned Solicitor General submits that theCentral Government is fully conscious of the difficulties faced by thevarious sectors and the stakeholders of various sectors and the FinanceMinistry, after the outbreak of COVID-19, has taken several measuresof reliefs dealing with the potential problems faced by several sectorsand in several spheres of all financial worlds. Shri Mehta has referred tonumber of measures taken by the Central Government to mitigate thefinancial suffering as detailed in its affidavits as noted above. In itsaffidavit dated 23.10.2020, it is stated that the decision taken by theCentral Government for granting various reliefs for the COVID-19pandemic for benefit of waiver of interest upto Rs.2 Crores in eightcategories has been approved by the Union Cabinet in its meeting dated21.10.2020 and Ministry of Finance has issued directions dated 23.10.2020on the subject, which has been brought on record alongwith the affidavit.Shri Mehta submits that in pursuance of circular dated 23.10.2020, as afollow-up towards the implementation of the aforesaid decision, the StateBank of India has informed that as on 13.11.2020, as per provisional, AB

C

D

E

F

G

H

Aunaudited information received so far from various lending institutions,such lending institutions have released ex-gratia amount of an aggregateexceeding Rs.4,300 Crores in over 13.12 Crore accounts of borrowerscovered under the Scheme.

7. Shri Giri also submits that Reserve Bank of India has also takenBfollow-up action in pursuance of the policy decision taken by the FinanceMinistry. He submits that the Reserve Bank of India has issued Circulardated 26.10.2020 to all commercial banks, all primary co-operative banksand all All India Financial Institutions and all non-banking financialcompanies and were advised to be guided by the Scheme announced bythe Government of India dated 23.10.2020.C8. We have considered the submissions of the learned counsel forthe parties and have perused the records.

9. The pandemic COVID-19 has not only caused serious threatto the health of the people but has also cast its shadow on the economicDgrowth of the country as well as other countries in the entire world. Dueto lockdown imposed by the Government of India in exercise of powersunder the Disaster Management Act, 2005, there can be no denial thatmost of the businesses including private sector as well as public sectorhas been adversely affected. For several months, large number ofindustries were not allowed to function and exemptions were grantedEonly to few of the industries to run and carry on its activities, whichwere found essential and necessary in the fact situation. Although,gradually, due to Unlock- 1, 2 and 3, the industries and other businessactivities have been restored and the economy of the country is on trackalthough at a slow pace. The moratorium period as granted by the ReserveBank of India vide orders dated 27.03.2020 and 23.05.2020 haveFcontinued from 01.03.2020 to 31.08.2020, i.e., for the period of six months.As submitted by the learned Solicitor General and reflected by theaffidavits filed on behalf of the Union of India, it is clear that CentralGovernment was fully conscious of the difficulties faced by the varioussectors and the stakeholders of various sectors and different measuresGby Finance Ministry have been taken in the above reference, which hasbeen detailed in the affidavits dated 31.08.2020, 09.10.2020 and23.10.2020.

10. For the purposes of the present case, it is relevant to noticeparagraphs 3 and 4 of the affidavit dated 23.10.2020 filed on behalf ofHthe Union of India in which following has been stated:- “3. I state and submit that as submitted in the previous affidavits,the Central Government took many Policy decisions for grantingvarious reliefs for the Covid pandemic which is a 'disaster' withinthe meaning of the Disaster Management Act, including a policydecision whereby the following borrowers were declared eligiblefor the benefit of waiver of 'interest on interest':

(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) Automobile loans up to Rs. 2 crore

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

(viii) Consumption loans up to Rs. 2 crore It is submitted that the preparation of the Scheme in this behalfwas under contemplation and it was also necessary to formalisethe said policy decision by following certain mandatory procedurerequired by law.

4. I state and submit that the aforesaid decision taken by theMinistry of Finance Government of India, has been approved bythe Union Cabinet in its meeting held on 21.10.2020. Pursuant toapproval by the Union Cabinet, the Ministry of Finance has issuedScheme providing for, broadly, the following mechanism, (a) The eligible borrowers mentioned in the previous Affidavit[and described in detail in clause 4 of the Scheme annexedherewith and marked as Annexure R-1] will be "eligiblebeneficiaries" under the Scheme.

Under the Scheme, all lending institutions [as defined underclause 3 of the Scheme] shall credit the difference betweencompound interest and simple interest in the respectiveaccounts of eligible borrowers for the period between 1.3.2020to 31.8.2020.

This amount shall be credited by each of the lendinginstitutions referred to in clause 3 of the Scheme, irrespective A

B

C

D

E

F

G

H

Aof whether such eligible borrowers have fully availed orpartially availed or have not availed of the moratorium viz.deferment in payment of instalments as per the Circularsdated 27.3.2020 and 23.5.2020 issued by RBI.

(b) After crediting the said amount in the respective accounts ofBeligible borrowers, the lending institutions would claimreimbursement from the Central Government through thenodal agency of State Bank of India as stipulated under theScheme.

It is submitted that the aforesaid decision is taken after carefulCconsideration, keeping in mind the overall economic scenario,the nature of borrowers, impact on the economy and suchother factors as a policy decision earmarking the abovereferred class of borrowers for grant of benefits.”

11. The case of the present petitioner, who has taken housing loanDis fully covered by the decisions of the Union of India as noted above,since the benefit has been extended to the housing loan upto Rs.2 Crores,i.e., in pursuance of the aforesaid decisions of the Government of India,the Ministry of Finance had issued order dated 23.10.2020 – OperationalGuidelines with regard to COVID-19 Reliefs, details of order dated23.10.2020 contains a heading “COVID-19 Relief”, relevant portion ofEthe Scheme is to the following effect:- “COVID-19 Relief Scheme for grant of ex-gratia payment of difference betweencompound interest and simple interest for six months toFborrowers in specified loan accounts (1.3.2020 to31.8.2020)

Operational Guidelines

1. Name of the scheme

This scheme shall be called "Scheme for grant of ex-gratia paymentGof difference between compound interest and simple interest forsix months to borrowers in specified loan accounts (1.3.2020 to31.8.2020)".

2. Object of the scheme

H

In view of the unprecedented and extreme COVID-19 situation,the object of the Scheme is to provide ex-gratia payment ofdifference between compound interest and simple interest by waysof relief for the period from 1st March 2020 to 31st August 2020to borrowers in specified loan accounts. Such payment does notconstitute a contractual, legal or equitable liability of the CentralGovernment and is only an ex-gratia payment to the followingdesignated class of borrowers in view of the COVID-19 pandemic.

3. Applicability of the scheme

This scheme shall apply to all lending institutions, which must beeither 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 District Central Co-operative Bank], or aRegional Rural Bank, or an All India Financial Institution, or aNon- Banking Financial Company or a Housing Finance Companyregistered with Reserve Bank of India (RBI) or National HousingBank as the case may be. A Non-Banking Financial Company—Micro Finance Institution should be a member of a Self- RegulatoryOrganisation (SRO) recognised by RBI.

4. Eligibility criteria under the scheme

(1) Borrowers in the following segments/classes of loans, whohave loan accounts having sanctioned limits and outstanding amountof not exceeding Rs. 2 crores [aggregate of all facilities with lendinginstitutions] as on 29.2.2020, shall be eligible under the Scheme:

(i) MSME loans

(ii) Education loans

(iii) Housing loans

(iv) Consumer durable loans

(v) Credit card dues

(vi) Automobile loans

(vii) Personal loans to professionals

(viii) Consumption loans

Any borrower whose aggregate of all facilities with lending AB

CD

E

F

G

H

Ainstitutions is more than Rs. 2 crores (sanctioned limits oroutstanding amount) will not be eligible for ex-gratia payment underthis scheme.

xxxxxxxxxxxxxxx”

12. The decision of the Government of India dated 23.10.2020Bhas also been communicated to all the banks and other financial institutions.The Reserve Bank of India has also issued necessary instructions in theabove regard. In the affidavit filed on 17.11.2020 on behalf of the Unionof India, in paragraphs 3 and 4 following has been stated:-

“3. It is submitted that as a follow-up towards the implementationCof the aforesaid Scheme, the nodal agency, i.e. State Bank ofIndia, has informed that as on 13.11.2020, as per provisional,unaudited information received so far from various lendinginstitutions, such lending institutions have released ex-gratia amountof an aggregate exceeding Rs. 4,300 crore in over 13.12 croreaccounts of borrowers covered under the said Scheme. The dataDreceived is subject to final reconciliation and audit. Informationfrom some remaining lenders are still being received.

4. It is further submitted that various lending institutions have putin place Board-approved policies for restructuring of accounts asEper RBI circular dated 6.08.2020. Restructuring/resolution ofeligible accounts are being undertaken by lending institutions oncase-by-case basis. Resolution plans in respect of eligible personal,MSME and corporate loans are to be invoked by 31.12.2020, andtime is still available to the account holders for such invocation.”

F13. Learned Solicitor General referring to above measures takenby the Union of India submits that above measures have been taken bythe Government of India in exercise of jurisdiction under the DisasterManagement Act, 2005 to mitigate the hardships and miseries of fewsectors. Shri Mehta submits that with regard to other specified sectors,different other measures have been taken, which we need not note forGthe purposes of this case and which shall be separately considered whileconsidering writ petitions raising such issues.

14. As noted above, Shri Rajiv Dutta, learned senior counsel forthe petitioner has expressed its satisfaction on the measures taken bythe Government of India redressing grievances of the petitioner to theH

extent as noted above. The Union of India having taken specific measuresvide its circular dated 23.10.2020, which has been brought on the recordand follow-up measures have also been taken in consequence thereof,we dispose of the present writ petition with directions to the respondentsto ensure that all steps be taken to implement the decision dated23.10.2020 of the Government of India, Ministry of Finance so that benefitas contemplated by the Government of India percolates to those forwhom the financial benefits have been envisaged and extended. All IAs,impleadment applications stand disposed of.

Devika Gujral

Writ Petition Disposed

A

B

C

D

E

F

G

H