Page 24 - Banking Finance June 2020

LEGAL UPDATE

LEGAL

CASES
CASES
CASES
CASES
CASES

RBI circulars granting moratoriums related circulars issued year it had defaulted in making pay-
by RBI on March 27 and May 23. ments of certain instalments to the
moratorium on loan instal- tune of Rs 44 crore despite demands
"A perusal of the said circular clearly
ment payment not appli- indicates that it applies to all Commer- raised by the respondent.
cable to mutual funds, cial Banks, all Primary (Urban) Co-op- It said it was not in a position to recover
debentures: Bombay HC erative Banks, States Co-operative school fees from students since March
Banks, District Central Cooperative and, therefore, it was unable to make
The Bombay High Court has held that Banks, All India Financial Institutions, payments to discharge the obligation
the Reserve Bank of India (RBI) All Non-Banking Financial Companies under the Debenture deed. In view of
circulars issued on March 27 granting this, the Essel Group Company sought
a moratorium on payment of and also deals with terms loans and an extension of the redemption date in
instalments of term loan for three working capital facilities provided by view of the demand notice issued by UTI
months and the May 23 circular sub- those entities." Asset Management on June 4.
sequently extending moratorium on It added, "It is clearly beyond reason- To support its argument, Zee Learn
loan repayments would not apply to able doubt that those two circulars referred to RBI circulars issued on
mutual funds and debentures. would not apply in case of mutual March 27 and May 23, which asked

A moratorium period is a time during funds and debentures." banks to grant moratorium and defer
the loan term when the borrower is The Zee Learn, an Essel Group Com- payment of term loan instalments and
not required to make any repayment. argued that the principles behind these
pany, through senior counsels Aspi
A Division Bench of Justices R D Chinoy and Janak Dwarkadas, said it circulars should be extended to the
Dhanuka and V G Bisht passed the or- had made a private placement of 650 petitioner Zee Learn so as to make it
der through videoconferencing on July unlisted redeemable NCDs of Rs 10 lakh entitled to the moratorium.
13, after hearing a writ plea filed by each for cash at par aggregating to Rs However, UTI Asset Management
Zee Learn seeking a three-month Company, through senior counsel
moratorium of non-convertible deben- 65 lakh in March, 2015 with 10.40% Darius Khambata, opposed the plea
tures (NCDs) due to the UTI Mutual XIRR (extended internal rate of return) and said petitioner Zee Learn had de-
Fund after the government allows payable at the time of maturity and faulted even before the pandemic
schools to reopen, subject to balance can be redeemed on July 8. since June last year. Khambata said it
debenture amount continuing to bear Zee Learn further said that, as per had to make payment to 21,000 small
interest at 10. 4 % per annum until the agreement, it had made various pay- investors and relief granted to Zee
extended date. ments to UTI Asset Management Com- Learn would affect them. The peti-
The bench noted that the entire peti- pany Ltd, however, in view of Covid-19 tioner is liable to face consequences for
tion was based on reliance placed on pandemic situation from March, this the default committed and need to

24 | 2020 | JUNE | BANKING FINANCE