Bombay High Court directs ICICI Bank to exclude Moratorium Period during Lockdown from 90-Day NPA timeline

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Extending ad-interim relief to Mumbai-based Transcon Skycity and Transcon Iconica, the Bombay High Court has prima facie ruled that the period of lockdown will be excluded while calculating the 90 days for declaration of an account as a non-performing asset.

The order was passed by a Single Judge Bench of Justice GS Patel. The Petitioners, Transcon Skycity Pvt Ltd and Transcon Iconica Pvt Ltd had availed finance facilities from ICICI Bank, which were to be repaid in instalments. However, the Petitioners defaulted on two bills due on January 15, 2020, and February 15, 2020.

The Court was informed that as in keeping with the relevant RBI circulars and notifications if there has been a default and the account changed into not regularised inside ninety days of the date of default then the borrower’s account turned into categorised as an NPA. It became brought that mindful of the exigencies bobbing up out of the COVID-19 lockdown, the RBI issued around and a press word pointing out that that there could be a 3-month moratorium regarding the repayments and classifications as NPAs, starting March 1.

The complaint of the Petitioners before the High Court changed into that ICICI Bank had not replied to the Petitioners’ requests for extending the moratorium for its mortgage money owed.

The Petitioners contended that the moratorium duration need to be excluded even for the computation of any balance days of the NPA-assertion, otherwise, the moratorium itself might be meaningless. ICICI Bank challenged the maintainability of the writ petitions against it and argued that the Court ought to be sluggish in extending the sort of comfort via an advert-meantime order that may be construed to apply throughout the board.

After considering the submissions made through the parties, the Court stated that the query becomes whether the moratorium length ordered via RBI became excluded inside the computation of the 90-day duration for amounts that fell due previous to March 1, 2020 and which continue to be unpaid or in default.

Leaving the issue of maintainability of the writ petition open, the Court opined,

“What desires to be performed is to style a viable order limited to the facts of this unique case ensuring that it units no precedent for ICICI Bank in different cases and yet ensuring that the Petitioners have sufficient range to be able to carry their debt..”

Thus, given the records of this situation, and spotting the need to sufficiently guard the hobbies of both sides, the Court prima facie ordered that the length of the moratorium at some point of which there’s a lockdown will not be reckoned through ICICI Bank for the functions of computation of the 90-day NPA assertion period.

If the lockdown extends beyond May 31, 2020, then these days could be deferred as a result, regardless of whether or not the moratorium itself is extended past May 31, 2020, the Court said. It delivered that in case the lockdown is lifted before May 31, 2020, the Petitioners may have 15 days after the ending of the lockdown to regularize the fee underneath the primary instalment and a further three weeks thereafter to regularize the charge underneath the second instalment.

To be abundantly clear about these provisions: this order is therefore not a backward extension of the moratorium to January 2020. It is based on, and handiest on, the cutting-edge lockdown length which makes normal functioning impossible. The moratorium length of 1st March 2020 to 31st May 2020 does not provide the Petitioners with any extra advantages regarding the previous defaults, i.e. People who passed off earlier than 1st March 2020.

Thus, the relief to the Petitioners is co-terminus with the lockdown length, now not the declared end of the moratorium. The Court added that neither would ICICI Bank be held accountable or chargeable for these extensions, nor might the order serve as a precedent for every other borrower who’s in default. Each of these instances will be assessed on their own merits, the Court stated.

Case Background

Transcon Iconica had availed a term mortgage of Rs. 80 crores from ICICI Bank for a production mission inside the Mumbai suburbs. Out of the whole loan, Rs 30 crores has been allotted. There changed into a facility agreement between the parties which specifies a reimbursement agenda of 18 instalments and hobby instalment. As according to RBI tips, if the price of default quantity isn’t made within ninety days of such default, the account is said a Non-Performing Asset. However preserving in thoughts the exigencies confronted because of the outbreak of the worldwide pandemic of coronavirus, last month RBI had introduced that all industrial banks and non-banking financial businesses are accredited to allow a 3-month moratorium on the charge of instalments of period loans splendid as on March 1, 2020. Therefore, the query before the Court turned into whether or not the moratorium period is excluded inside the computation of the ninety-day duration for quantities that fell due to March 1, 2020, and which stays unpaid or in default.

Disabling Insolvency Proceedings

The lockdown has badly hit the financial performance of corporate groups. There’s an excessive probability that financial and operational creditor will claim insolvency lawsuits against many such companies. To avoid this from taking place, Finance Minister Nirmala Sitharaman earlier announced that the authorities may additionally keep in mind postponing Sections 7, 9 and 10 of the IBC for six months if the cutting-edge situation keeps beyond April 30.

The flow will disable the creditors and promoters from starting up insolvency court cases towards agencies. According to the RBI policies, if a charge is not made and the accounts aren’t regularised within 90 days of the date of default, the borrower’s account is classified as NPA. There is a call for the exclusion of lockdown length at the same time as computing the 90 days for NPA.

The Bombay High Court has exceeded an interim order that the lockdown duration has to be excluded from computing the ninety-day length for declaring a loan account as Non-Performing Asset (NPA). The loan account changed into already on default on March 1, 2020, the date from which the moratorium suggested by way of the Reserve Bank of India as a part of COVID-19 comfort bundle is applicable. The petitioner inside the case claimed complete gain of the RBI’s remedy package.


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