Page 24 - Banking Finance July 2021

LEGAL UPDATE

"In the said judgment, this court did The court also turned down the other The apex court then vacated a
not consider the important aspect of connected pleas of the petitioners for September 3, 2020, stay order that
violation of the right to privacy which extension of time period under the restrained banks from declaring as
has been held to be an intrinsic part of RBI's restructuring scheme for specific NPAs loan accounts that were not
the right to life and personal liberty sectors based on Kamath Committee classified as NPAs prior to August 31,
under Article 21 of the Constitution of recommendations and temporary 2020.
India," the banks had said in their cessation of declaration of NPAs by
However, the court had extended the
petition. banks due to the pandemic's second
wave, as put into effect after the first compound interest relief, which in an
"The main contention of the applicants October 2020 government directive
for recall of the judgment in Jayantilal wave of the pandemic.
N. Mistry (supra) is that the judgment A bench of Justices Ashok Bhushan and was restricted to loans up to Rs 2
has far-reaching consequences and MR Shah, while refusing to entertain crore, to all borrowers, saying no
the applicants who are directly and a PIL filed by one advocate Vishal distinction could be made between
substantially affected were not made Tiwari, observed that the government small and large borrowers. Icra had
parties and heard," the Supreme Court had other pressing matters to address said the move could cost a total of Rs
said in its latest order. like vaccination, issues connected with 13,500-14,000 crore to the exchequer
In its order, the Supreme Court noted migrant workers, etc. They further if the government agrees to foot the
that though the information sought noted that it is for the government to bill. The earlier waiver for loans up to
under the RTI Act pertained to the assess the situation and take Rs 2 crore was estimated to cost ~Rs
banks, it was the decision of the RBI appropriate decisions and also that RBI 6,500 crore to exchequer (which the
which was in challenge and decided by had already announced certain government agreed to bear). Banks
the court. financial packages as per its May 6 have approached the government for
circular. the additional Rs 7,000-7,500 crore,
"No effort was made by any of the
The apex court had on March 23 but the latter has so far been non-
applicants in the miscellaneous
applications to get themselves restrained lenders from charging committal, implying a burden on banks.
impleaded when the transferred cases interest on interest/compound The petitioner, while claiming that the
were being heard by this Court," it said. interest/penal interest during the six- second wave of the pandemic has
month loan moratorium period
The apex court clarified that it was not made at least one crore people jobless,
between March 1 to August 31, 2020.
ruling on the correctness of its 2015 However, it refused to extend the loan said the relief given by the RBI circular
judgment and the dismissal would not moratorium period beyond March 1 to was not sufficient to address the
affect the rights of the applicants to August 31, 2020, saying it is a problems of the middle-class families.
seek other remedies available to them "No such monetary relief and packages
economic policy decision and should be
under the law. has been declared by the sovereign in
left to the government and RBI.
this stressed time and people are
Covid-19: Supreme Court That was the end of an intense legal under tremendous pressure to
rejects plea for fresh loan battle that dragged on for several maintain the EMIs and is always under
months. The apex court which had
moratorium relief repeatedly expressed concerns over the threat of accounts being declared
The Supreme Court rejected a plea the plight of the borrowers, especially NPA. With no salary, revenue for
individuals it has turned out to be a
seeking a fresh loan moratorium relief those hit hard by the pandemic like
in the wake of the second Covid wave power and real estate, finally refused hopeless situation for individuals. The
as implemented in the aftermath of to alter the broad contours of the RBI on May 6, 2021 has issued a
the first, saying such decisions with moratorium package, by accepting the circular for resolution plan 2.0, which
financial ramifications are best left to government-RBI's view that complete cannot be said adequate relief to all in
the policymakers - the government interest relief for all classes of the present circumstances being
and RBI - as "judges are not experts in borrowers would jeopardise the arbitrary, unfair and just an eyewash,"
financial matters". banking system. the petition stated. T

24 | 2021 | JULY | BANKING FINANCE