GAJENDRA SHARMA Vs. UNION OF INDIA
LAWS(SC)-2020-11-38
SUPREME COURT OF INDIA
Decided on November 27,2020

Gajendra Sharma Appellant
VERSUS
UNION OF INDIA Respondents


Cited Judgements :-

NAGRAJ STEEL SCRAP VS. UNION OF INDIA [LAWS(BOM)-2021-9-47] [REFERRED TO]


JUDGEMENT

ASHOK BHUSHAN,J. - (1.)By this writ petition filed under Article 32 of the Constitution, the petitioner has prayed for directions declaring the notification dated 27.03.2020 issued by Reserve Bank of India as ultra vires to the extent it charges interest on the loan amount during the moratorium period.
(2.)The petitioner's case and the pleadings in the writ petition briefly noted are:-
2.1 The petitioner has availed a home loan of amount of Rs.37,48,000/- from the ICICI Bank. After declaration of Coronavirus (COVID-19) as a pandemic by World Health Organisation, the National Disaster Management Authority exercising the jurisdiction under Section 6 of the Disaster Management Act, 2005 to take effective measures to prevent the spread of COVID-19 across the country and for mitigation of the threatening disastrous situation has issued notification dated 27.03.2020 directing the Ministry, Departments of Government of India, State Governments and the State authorities to take measures for ensuring social distancing so as to prevent the spread of COVID-19 in the country. Necessary guidelines were also issued under Section 10(2)(1) by the National Executive Committee.

2.2 The Reserve Bank of India on 27.03.2020 issued Statement of Development and Regulatory Policies where inter alia certain regulatory measures were announced to mitigate the burden of debt servicing brought about by disruptions on account of COVID-19 pandemic and to ensure the continuity of viable businesses. The notification dated 27.03.2020 was issued by the Reserve Bank of India for rescheduling of payments - Term Loans and Working Capital Facilities. Relevant part of the notification relevant for the present case is as follows:-

"(i) Rescheduling of Payments -Term Loans and Working Capital Facilities

2. In respect of all term loans (including agricultural term loans, retail and crop loans), all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies) ("lending institutions") are permitted to grant a moratorium of three months on payment of all instalments 1 falling due between March 1, 2020 and May 31, 2020. The repayment schedule for such loans as also the residual tenor, will be shifted across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period."

2.3 The petitioner's case in the writ petition is that when all the means of livelihood have been curtailed by the Government of India by imposition of complete lockdown pan India, due to worldwide spread of COVID-19 pandemic, the petitioner has no way to continue to his work and earn livelihood. The petitioner's case is that imposition of interest during the moratorium period is ultra vires and shall defeat the purpose of permitting the moratorium of loans.

2.4 Referring to notification dated 27.03.2020, petitioner pleads that Reserve Bank of India has by the notification made it clear that interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period. Petitioner's case is that the above action of imposition of interest during the moratorium period is completely devastating and causes hindrance and obstruction in right to life guaranteed by Article 21 of the Constitution. Petitioner's case is that the additional interest burden for three months' moratorium period is also equally divided in all future EMIs, which is to increase the monthly bill of the customer.

2.5 The petitioner's case is that the notification qua payment of interest violates the principle of natural justice as the Government on one hand ceased the working of the individuals and on other hand asking to pay the loan interest during moratorium. The petitioner's case is that although the initial lockdown was for a period of three weeks but it was extended further. The Reserve Bank of India by a subsequent notification dated 23.05.2020 due to the extension of the lockdown and due to disruption on account of COVID-19 has directed all commercial banks to extend the moratorium by another three months, i.e., from 01.06.2020 to 31.08.2020 on payment of all installments in respect of term loans. The notification dated 23.05.2020 directed for repayment schedule for term loans as also the residual tenor will be shifted across the board. Notification further stated that "interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period".

2.6 The petitioner in the writ petition has prayed for following reliefs:-

a) Issue an appropriate Writ, Order or Direction in the nature of mandamus or any other appropriate writ or Direction declaring the portion of impugned Notification dated 27.03.2020 issued by Respondent No.2 as ultra vires to the extent it charges interest on the loan amount during the moratorium period, which create hardship to the Petitioner being borrower and creates hindrance and obstruction in "right to life" guaranteed by Article 21 of the Constitution of India; and

b) Issue a Writ, Order or Direction in the nature of Mandamus thereby directing the Respondents to provide relief in repayment of loan by not charging interest during the moratorium period declared by Notification dated 27.03.2020; and/or

c) Pass any other order or orders which may be deemed fit and proper in the facts and circumstances of the case and in the interest of justice."

2.7 Notices were issued in the writ petition. While hearing the matter on 17.06.2020 the submission of the learned counsel for the petitioner have been noted to the following effect:-

"We have heard learned counsel for the petitioner(s).

Learned counsel for the petitioner(s) submits that under the Disaster Management Act, 2005, the Central Government has ample power and jurisdiction to grant relief with regard to loan which is specifically provided for. It is submitted that the circular of the Reserve Bank of India dated 27.03.2020 although grant moratorium but substantially no relief is given to the borrowers. The two-fold submissions have been made by learned counsel for the petitioner(s). It is submitted that if moratorium is being granted for a period of three months, the entire amount payable including principal and interest should not be charged during moratorium 3 period. Secondly, at least the demand of interest on interest should not be made and these reliefs can be extended by the Central Government and the Reserve Bank of India."

2.8 In the writ petition, affidavits have been filed both by the Union of India as well as the Reserve Bank of India. In the affidavits filed on behalf of the Union of India, it was pleaded that the Central Government is fully conscious of the difficulties faced by the various sectors and the stakeholders of various sectors within the purview of the Ministry of Finance and other Ministries. It is further pleaded that Finance Ministry, after the outbreak of the COVID-19 pandemic globally, has taken several measures of relief dealing with the potential problems faced by several sectors and in several spheres of all financial worlds. In the affidavit filed dated 31.08.2020, details of number of measures to mitigate financial suffering have been enumerated. It has been further pleaded that Finance Ministry took the initiative and interacted with Reserve Bank of India requesting the Reserve Bank of India to provide for various measures of relief to the borrowers. The affidavit also enumerates different reliefs and measures taken by Reserve Bank of India with regard to moratorium. Reference has been made to two circulars dated 06.08.2020 issued by Reserve Bank of India facilitating revival of real sector activities and mitigating the impact on the ultimate borrowers by enabling lenders to grant concessions to borrowers for COVID-19-related stress in personal, MSME and corporate loans. The Union of India has filed further affidavits dated 09.10.2020, 23.10.2020 and 17.11.2020.

2.9 The Reserve Bank of India has also filed a counter affidavit, a consolidated counter affidavit dated 09.10.2020, additional affidavit dated 09.10.2020 and further additional affidavit dated 01.11.2020. Indian Bank Association has also filed affidavits bringing on record various circulars issued by Reserve Bank of India, State Bank of India etc.

(3.)We have heard Shri Rajiv Dutta, learned senior counsel for the petitioner. Shri Tushar Mehta, learned Solicitor General, Shri V. Giri, learned senior counsel and Shri Ramesh Babu M.R., learned counsel appearing for the Reserve Bank of India and some of the counsels, who had appeared for intervenors.
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