HON’BLE SUPREME COURT DIRECTED THE UNION OF INDIA TO IMPLEMENT ITS DECISION VIDE CIRCULAR DATED 23.10.2020 RELATING TO CHARGING OF INTEREST ON THE LOAN AMOUNT DURING THE MORATORIUM PERIOD FROM 1.3.2020 TO 31.8.2020 I.E FOR SIX MONTHS SO THAT BENEFIT AS CONTEMPLATED BY THE GOVERNMENT OF INDIA PERCOLATES TO THOSE FOR WHOM THE FINANCIAL BENEFITS HAVE BEEN ENVISAGED AND EXTENDED.
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Bench of the Hon’ble Supreme Court disposed of a Petition seeking directions
declaring the notification dated 27.03.2020 issued by Reserve Bank of India as
ultra vires to the extent it charges interest on the loan amount during the
moratorium period. The relevant part of the Notification under challenge is
under the heading (i) Rescheduling of Payments – Term Loans and Working Capital
Facilities. 2. In respect of all term loans (including agricultural term loans,
retail and crop loans), all commercial banks (including regional rural banks,
small finance banks and local area banks), co-operative banks, all- India
Financial Institutions, and NBFCs (including housing finance companies)
(“lending institutions”) are permitted to grant a moratorium of three months on
payment of all instalments1 falling due between March 1, 2020 and May 31, 2020.
The repayment schedule for such loans as also the residual tenor, will be shifted
across the board by three months after the moratorium period. Interest shall
continue to accrue on the outstanding portion of the term loans during the
moratorium period.” The moratorium period as granted by the Reserve Bank of
India vide orders dated 27.03.2020 and 23.05.2020 have continued from
01.03.2020 to 31.08.2020, i.e., for the period of six months. In its detailed
order, the Hon’ble Supreme Court noted that in the affidavit dated 23.10.2020
filed on behalf of the Union of India, it has been stated:-"The Central
Government took many Policy decisions for granting various reliefs for the
Covid pandemic which is a 'disaster' within the meaning of the Disaster
Management Act, including a policy decision whereby the following borrowers
were declared eligible for 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. The Affidavit also stated that the preparation of the Scheme in
this behalf was under contemplation and it was also necessary to formalise the
said policy decision by following certain mandatory procedure required by law. It
was also stated in the affidavit that the aforesaid decision taken by the
Ministry of Finance Government of India, has been approved by the Union Cabinet
in its meeting held on 21.10.2020. Pursuant to approval by the Union Cabinet,
the Ministry of Finance has issued Scheme providing for, broadly, the following
mechanism, (a) The eligible borrowers mentioned in the previous Affidavit [and
described in detail in the Scheme will be "eligible beneficiaries"
under the Scheme. Under the Scheme, all lending institutions [as defined under
clause 3 of the Scheme] shall credit the difference between compound interest
and simple interest in the respective accounts of eligible borrowers for the
period between 1.3.2020 to 31.8.2020. This amount shall be credited by each of
the lending institutions referred to in clause 3 of the Scheme, irrespective of
whether such eligible borrowers have fully availed or partially availed or have
not availed of the moratorium viz. deferment in payment of installments as per
the Circulars dated 27.3.2020 and 23.5.2020 issued by RBI. (b) After crediting
the said amount in the respective accounts of eligible borrowers, the lending institutions
would claim reimbursement from the Central Government through the nodal agency
of State Bank of India as stipulated under the Scheme. While disposing of the
Petition the Hon’ble Supreme Court recorded that the Union of India having
taken specific measures vide its circular dated 23.10.2020, which has been
brought on the record and follow-up measures have also been taken in
consequence thereof, we dispose of the present writ petition with directions to
the respondents to ensure that all steps be taken to implement the decision
dated 23.10.2020 of the Government of India, Ministry of Finance so that
benefit as contemplated by the Government of India percolates to those for whom
the financial benefits have been envisaged and extended.
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