The Supreme Court of India on 26th August said that the problem with Indian economy was created due to the government’s decision to impose the strict lockdown to curb the spread of COVID-19. A Bench comprising of Justices Ashok Bhushan, M R Shah and Subhash Reddy while hearing the loan moratorium case, asked the centre to clear its stand on additional interests charged by banks during the moratorium period and asked why it has not yet filed an affidavit in the matter. The centre had to clarify its position under the Disaster Management Act and file an affidavit entailing its powers. The Court asked the Solicitor General Tushar Mehta who was representing the centre to give a timeline on when it will file the affidavit in the loan moratorium case. Tushar Mehta sought a time extension of a week to file the affidavit.
Justice M R Shah expressed his concern about the current economic situation and said to Mehta that this is not the time for the centre to think about business. The Court was hearing the petition challenging the levy of interest on loan repayment during the moratorium. Senior advocate Kapil Sibal, appearing on behalf of petitioner, said that “Moratorium period is ending on Aug 31. September 1 onwards, we will all be in default. These loans will then become NPAs. It will create a bigger issue.” Kapil Sibal asked for an extension of loan moratorium till all the issues are sorted. Solicitor General Mehta objected to Sibal. The Court said government cannot leave everything to be decided by banks. Court also said that centre has not clarified its stand even though it has “ample powers” under the Disaster Management Act to grant the waiver. Tushar Mehta said “There cannot be a solution which is one-size fits all”. Then Supreme Court said “you cannot be interested only in business and not about the sufferings of the people.” Justice Ashok Bhushan said that “The problem has been created by your lockdown. This is also not the time to consider about the business. The plight of the people has also to be considered. You have to tell us your stand on two things: Disaster Management Act and if the interest on interest will be accounted for.” The petitioners said that the interest creates hardship, hindrances and objection in right to life guaranteed under the Constitution of India. RBI had informed the court earlier that there cannot be an interest waiver during moratorium on term loan repayment as such a move will put the financial health and stability of banks at risk. On the Court’s comment about government that ‘hiding behind the RBI’, Mr Mehta said that ‘My Lordships may not say that. We are working in coordination with RBI.’ The Bench was hearing a plea filed by Agra resident GajendraSharma who sought a direction to declare the portion of the RBI’s notification of 27th March as ultra-virus to the extent it charges interest on the loan amount during the moratorium period.
On 17th June, The Apex Court had heard the matter pertaining to the plea against charging of additional interest in the loan moratorium case. During that hearing the Court had asked the government to interfere in the matter and questioned charging of additional interest by banks during the loan moratorium period. RBI had announced an optional six month moratorium for customers towards fixed term loans and EMI payments. The moratorium period is going to end on 31st August. Moratorium means you don’t have to pay your EMIs for that time period and no penal interest will be charged. It is not a concession of any type and is a deferment of the payment to provide some relief to borrower facing liquidity issues.The Apex Court has granted a week’s time to the government to clarify its stand on the matter and the Court has now posted the matter for hearing on 1st September.
Rajeev Ranjan @ Samacharline