As the extended lockdown threatens the economy of the country, the Judicial system stepped up to provide relief to various industrial companies, irrespective of the opinions of the regulators not having any merit in the matter. Many companies had approached various courts at different levels, including the Supreme Court appealing for the delay in repayment of loans and other financial burdens due to the halt of production and revenue caused by the pandemic.
Despite the announcements of the RBI, there was a case filed in the Delhi High Court between Anant Raj Ltd. and Yes Bank on 6 April amidst the lockdown. The court had stated that the bank “cannot classify the borrower as non-performing because it was after the RBI’s moratorium date of 1 March 2020.” Between 2016 and 2018 Anant Raj Ltd., a real estate company, had borrowed Rs 1,570 crore of which Rs1,056 was returned according to records. Further the date of repayment was 1 January and as it was not paid, it would have become a non-performing asset or NPA as of 31 March and thus the court asked Anant Raj Ltd. to pay the due by 25 April 2020.
A second case was filed in the Bombay High court between Transcon Iconica against ICICI Bank which also resulted in a similar judgement. Transcon Iconica has a term loan of ₹80 crores from ICICI Bank for a construction project in Mumbai suburbs. Of this, ₹30 crores have been disbursed and repayment of the principal was to start from 15 February.
The court ordered that the extended period be excluded that the period of moratorium during which there is a lockdown will not compute the 90-day NPA declaration period. It also added that irrespective of the continuance of the moratorium, the borrower will have to repay the debt in case of the lifting of the lockdown at an earlier date.
Prior to this, lenders had appealed to the RBI to allow distressed companies before 1 March some leeway in bad loans. This was rejected by the RBI at that time, however, the Judiciary seems to have intervened in these cases.
Another case of delaying NPAs was filed against the Punjab & Sind bank. Following the
example of the Delhi high court, the court also prevented the lender from declaring an
educational society’s loan as an NPA.
Therefore, the cases being addressed by the judiciary have not been limited to NPAs. Another such example is the Bombay High Court’s decision barring the IDBI Trusteeship Services Ltd. from “invoking pledged shares of Future Retail on behalf of the UBS AG” during this period of extended lockdown.