The lockdown period must be excluded from computing the 90-day period for declaring a loan account as Non-Performing Asset(NPA), said Justice G.S. Patel passing an interim order to this effect. Interim relief to was given to Transcon, Skycity, Transcon Iconica.
The court said:
“the period of 1st March 2020 until 31st May 2020 during which there is a lockdown will stand excluded from the 90-day NPA declaration computation until — and this is the condition — the lockdown is lifted”.
Dr. Birendra Saraf, Senior Advocate and DSK Legal team comprising of Samit Shukla, Associate Partner; Saloni Shah, Associate and Shivani Khanwilkar, Associate with Advocates Munaf Virjee, Rushabh Parekh and Akash Agarwal appeared for the Petitioners i.e. Transcon Skycity and Transcon Iconica.
Senior Advocate Viraag Tulzapurkar with Advocates Bindi Dave, Ieshan Sinha, Aayesh Gandhim, Dhruvi Mehta appeared for Wadia Ghandy & Co.
The petitioner in the case claimed full benefit of the RBI’s relief package, with respect to NPA declaration of a loan account already in default as on March 1. The bank, ICICI Bank, opposed the plea.
The Petitioners, Transcon Skycity Pvt Ltd and Transcon Iconica Pvt Ltd had availed finance facilities from ICICI Bank, which were to be repaid in instalments. The Petitioners defaulted on two payments due on January 15, 2020 and February 15, 2020.
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The issue of the Petitioners before the High Court was that ICICI Bank had not responded to the Petitioners’ requests for extending the moratorium for its loan accounts. The court was informed about the classification of borrower’s account as NPA if there was a default and the account was not regularised within 90 days of the date of default.
Reliance was also placed on a Delhi High Court order passed in the case of Anant Raj Ltd vs Yes Bank. The petitioners. The Petitioners contended that the moratorium period must be excluded even for the computation of any balance days of the NPA-declaration, otherwise, the moratorium itself would be meaningless.
ICIC bank argued that Court should be slow in passing such ad interim order and also challenged the maintainability of the writ petition.
Court stated that the question was whether the moratorium period ordered by RBI was excluded in the computation of the 90-day period for amounts that fell due prior to March 1, 2020 and which remain unpaid or in default, after hearing the submissions made by the parties.
The Court opined,
“What needs to be done is to fashion a workable order limited to the facts of this particular case ensuring that it sets no precedent for ICICI Bank in other cases and yet ensuring that the Petitioners have enough latitude to be able to service their debt.”
The court said that that neither would ICICI Bank be held accountable or liable for these extensions, nor would the order serve as a precedent for any other borrower who is in default. the Petitioners will have 15 days after the ending of the lockdown to regularize the payment under the first instalment and a further three weeks thereafter to regularize the payment under the second instalment, in case the lockdown is lifted before 31st May 2020.
The court further clarified,
“To be abundantly clear about these provisions: this order is therefore not a backward extension of the moratorium to January 2020. It is predicated on, and only on, the current lockdown period which makes normal functioning impossible. The moratorium period of 1st March 2020 to 31st May 2020 does not per se give the Petitioners any additional benefits in regard to the prior defaults, i.e. those that occurred before 1st March 2020. Thus, the relief to the Petitioners is co-terminus with the lockdown period, not the declared end of the moratorium”.
-Bombay High Court
Read the order here
