SC: Moratorium Relief Extended by RBI to Loans Bearing Interest upto Rs. 2 Crores in 8 Categories

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The Petition was filed before the Supreme Court to declare the notification dated 27.03.2020 issued by Reserve Bank of India to be ultra vires to the extent interest is charged on the loan amount during the moratorium period, as the moratorium on loans is granted to provide relief to borrowers during the lockdown.

Facts

This Petition was filed under Article 32 of the Constitution, to declare the notification dated 27.03.2020 issued by Reserve Bank of India to be ultra vires to the extent it charged interests on the loan amount during the moratorium period, as it would defeat the purpose of permitting moratorium on loans. The Petitioner has borrowed a home loan of ₹37,48,000 from ICICI Bank. Thus, this Petition relates to the Petitioner as the notification dated 27.03.2020 provides for a moratorium on Term Loans and Working Capital Facilities for three months(1 March 2020 and 31 May 2020) but the interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period as well. This moratorium period was further extended till 31.08.2020, by notification dated 23.05.2020. 

Arguments

The Petitioner pleaded that the imposition of interest on the outstanding portion during the moratorium period was completely devastating and causes hindrance in the Right to Life under Article 21 of the Constitution. The equitable distribution of additional interest burden of three months’ moratorium on future EMIs, would increase the customer’s monthly bill. 

The payment of interest was against the principle of natural justice because, on one hand, the government had ceased the working of individuals by imposing lockdown to contain the spread of COVID-19 and on the other asking for loan interest during the moratorium. The moratorium was further extended but the notification still stated that interest shall accrue on the outstanding portion of term loans during the moratorium.

The Petitioner submitted that though the moratorium was granted no relief had been availed by the borrowers. The two-limb submission was made by the Petitioner i.e., if the moratorium was granted for three months then the amount payable including principal and interest should not be charged during the period. Secondly, at least demand for interest on interest should not be made.

The relief sought by Petitioner from the Court is to issue any order, writ, or direction like Mandamus or any other appropriate writ to declare the portion of the impugned notification dated 27.03.2020, ultra vires to the extent the interest charged on term loans during the moratorium and direct the respondent to provide relief by not charging interest during the moratorium. 

The Respondent submitted that they were fully aware of the situation prevailing in different sectors and took appropriate measures constituting measures to mitigate financial suffering as well. 

In the affidavit dated 23.10.2020, a decision was taken to provide a waiver of interest on interest up to ₹ 2 crores in eight categories approved by the Union Cabinet. This affidavit also provided for crediting of different amounts between the simple and compound interest in the account of eligible borrowers for the period between 1.03.2020 and 31.08.2020.  

The amount has to be credited by the lending institution to the eligible borrowers irrespective of whether they availed of the moratorium. The lending institution can claim reimbursement of such payment from the Central Government through the State Bank of India. The petitioner seemed to be satisfied with this measure.  

The Petitioner is fully covered under the decisions of the Union of India as noted above since the benefits have been conferred to the housing loan up to ₹ 2 crores.

Decision of the Court

The present Petition was disposed of with the directions to the Respondent to ensure that all steps be taken to implement the decision dated 23.10.2020 of the Government of India, Finance Ministry so that the benefits conferred percolates to those for whom financial benefits had been envisaged and extended.

All Interlocutory Applications and Impleadment Applications stand disposed of.  

Click here to read the Judgement in Gajendra Sharma v Union of India.


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