The Supreme Court bench headed by Justice Ashok Bhushan on September 2 heard a batch  of pleas seeking interest waiver on loan moratorium granted by Reserve Bank of India (RBI). [Ganjendra Sharma & ohers vs. UOI Writ Petition(s)(Civil) No(s).476/2020]

The RBI had on March 1, 2020 announced a moratorium on debt repayment of term deposits for three months, which was later extended till August 31 to help businesses and individuals tide over the financial problems on account of disruption in normal business activities.  The move also intended to provide borrowers relief during the COVID-19 pandemic.

But the aggrieved petitioners raised challenged the impugned order on the following ground:

Senior advocate Mr.  Rajiv Dutta, appearing  on behalf of the petitioner Gajendra Sharma  in a plea challenging the levy of interest on loans during the moratorium period. Petitioner has taken home loan from a bank, assailed the accrual of interests on EMIs even during the moratorium period. RBI rolled out the impugned scheme of moratorium and Petitioner was under the impression that he shall be liable for repayment after the moratorium period but and later he were told that compound interest would be charged.

 Mr. Dutta claimed that it will be double whammy for borrower as petitioner will be paying interest on interest, The counsel  also contended that central, RBI have given so much relief to banks and we are not given any relief in actual terms,  hence we cannot be penalized for availing a scheme by being charged the interest on interest. RBI is only a regulator and are not agents of the banks as they are treating themselves. Petitioner alleged that banks want to make profits during this pandemic COVID-19

Senior advocate C A Aryama Sundaram, appearing for Confederation of Real Estate Developers’ Associations of India (CREDAI), told the bench that moratorium should be extended for at least six months. If interest can’t be waived, then please reduce it to a level on which banks pay their depositors prayed Mr Sundaram.

Mr. Sundaram referred to the August 6 circular of RBI which gave power to banks to decide on moratorium to industries.

Counsel appearing for Shopping Centres Association of India, Mr. Ranjit Kumar contended that Shopping centers and malls couldn't perform well during the lockdown as against pharma, FMCG and IT sectors that did well. Relief should be given sector wise.

Earlier, the Apex court had said that the question is not of waiver of complete interest for the entire moratorium period but it is limited only to interest charged on interest by banks.

The learned Solicitor General Mr Tushar Mehta, appearing for the Centre and RBI, had said that the economy contracted by 23 % in the April-June quarter due to corona virus-related lockdown and restrictions.

The Centre also told the top court that waiver of interest on deferred EMIs during the moratorium period would be against the basic canons of finance and unfair to those who repaid loans as per schedule. COVID-19 pandemic is a force majeure situation. Counsel asked top court to direct RBI, bank to discharge duties under the Disaster Management Act (DMA).

The Hon'ble bench also observed that the banks are free to restructure loans but they cannot penalise honest borrowers by charging interest on deferred EMI payments under the moratorium scheme during the COVID-19 pandemic.

RBI, however, has come out with a scheme which provides for extension of the moratorium for two years to certain stressed borrowers. The Ministry of Finance had filed an affidavit before the court which had asked the Centre and the RBI to review the move to charge interest on EMIs and interest on the interest during the moratorium period introduced under the scheme due to the COVID-19 pandemic.

After the Centre and the RBI shared their inputs regarding the moratorium on repayment of loans saying it should be extendable to two years under certain conditions, the Supreme Court on Wednesday will be hearing petitions seeking interest waiver on loan moratorium granted by Reserve Bank of India (RBI).

The SC shall resume its at 2 PM on September 3.

This news has been reported by Ms. Suheena.