The Bombay High Court held that the circulars issued by the Reserve Bank of India (RBI) providing for moratorium on repayment of term loans are not applicable to mutual funds and debentures.
The Division Bench of Justices RD Dhanuka and VG Bisht said that it is clear from the terms of the RBI circulars that the moratorium is allowed to be granted by lending institutions to borrowers in cases of term loans only. Noting that the provision of moratorium is discretionary, the Court said that a direction mandating such grant of moratorium for mutual funds and debentures has not been passed by the RBI.
The respondent body is a public sector undertaking which falls under the meaning of “public financial institution” under Section 2(72) of the Companies Act. Therefore, it would also fall under the ambit of the meaning of “State” under Article 12 of the Constitution of India and the matter would be amenable to writ jurisdiction, the petitioner had claimed.
The petitioner was represented by Senior Counsel Aspi Chinoy, along with Senior Counsel Janak Dwarkadas, and Advocates Rohan Dakshini, Namrata Shah, S Laskari, Ashna Contractor, and Bhavin Shah, instructed by Rashmikant and Partners.
The respondents were represented by Senior Counsel Darius Khambata along with Advocates Pheroze Mehta, Vividh Tandon, Shanksen Gupta, Manini Bharati, Chhavi Jain, and Uttara Srinivasan, instructed by Trilegal.
The petitioner in the instant case had moved the Bombay High Court seeking benefit of the RBI circulars on moratorium period for mutual funds and debentures. The petitioner had made a private placement of a certain number of unlisted, redeemable, and non-convertible debentures back in March 2015. The redemption date of the same was July 8 of this year.
Having made these submissions, the petitioner claimed that the principles behind the RBI circulars on moratorium for mutual funds and debentures should therefore be extended to the petitioner. It was also claimed that it was only since March of this year that the petitioner has defaulted in paying installments of mutual funds and debentures due to the COVID-19 pandemic.
The Court agreed that the writ jurisdiction of the Court could not be invoked in the instant matter.
“In our view even if respondent No.1A falls within the definition prescribed under Section 2 (72) of the Companies Act, merely on that ground the respondent No.1A cannot be subjected to the writ jurisdiction of this Court under Article 226 of the Constitution of India. In our view, Writ Petition itself is not maintainable on that ground.”
With these observations, the Court disposed of the matter.