Small Scale Industrial … vs Union Of India on 23 March, 2021


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Supreme Court of India

Small Scale Industrial … vs Union Of India on 23 March, 2021

Author: M.R. Shah

                                                        REPORTABLE
                         IN THE SUPREME COURT OF INDIA
                         CIVIL ORIGINAL JURISDICTION
                         WRIT PETITION (C) NO. 476 OF 2020
          Small Scale Industrial Manufactures
          Association (Regd.)                      …Petitioner

                               Versus
          Union of India and others                …Respondents

                                    WITH
                         WRIT   PETITION(C)   NO. 542 OF 2020
                         WRIT   PETITION(C)   NO. 945 OF 2020
                         WRIT   PETITION(C)   NO. 937 OF 2020
                         WRIT   PETITION(C)   NO. 1024 OF 2020
                         WRIT   PETITION(C)   NO. 1025 OF 2020
                         WRIT   PETITION(C)   NO. 1006 OF 2020
                         WRIT   PETITION(C)   NO. 959 OF 2020
                         WRIT   PETITION(C)   NO. 955 OF 2020
                         WRIT   PETITION(C)   NO. 506 OF 2020
                         WRIT   PETITION(C)   DIARY NO. 12389 OF 2020
                         WRIT   PETITION(C)   NO. 568 OF 2020
                         WRIT   PETITION(C)   NO. 606 OF 2020
                         WRIT   PETITION(C)   NO. 608 OF 2020
                         WRIT   PETITION(C)   NO. 711 OF 2020
                         WRIT   PETITION(C)   NO. 785 OF 2020
                         WRIT   PETITION(C)   NO. 802 OF 2020
                         WRIT   PETITION(C)   NO. 829 OF 2020
                         WRIT   PETITION(C)   NO. 826 OF 2020
                         WRIT   PETITION(C)   NO. 964 OF 2020
Signature Not Verified   WRIT   PETITION(C)   NO. 1029 OF 2020
Digitally signed by
Sanjay Kumar
Date: 2021.03.23
                         WRIT   PETITION(C)   NO. 1157 OF 2020
12:42:37 IST
Reason:                  WRIT   PETITION(C)   NO. 1132 OF 2020
                         WRIT   PETITION(C)   NO. 1178 OF 2020
                         WRIT   PETITION(C)   NO. 1190 OF 2020
                                                                        1
                          JUDGMENT




M.R. SHAH, J.

1. Writ Petition (Civil) No. 476 of 2020 has been preferred

under Article 32 of the Constitution of India by the Small Scale

Industrial Manufactures Association, Haryana for an appropriate

writ, direction or order directing the Union of India and others to

take effective and remedial measures to redress the financial

strain faced by the industrial sector, particularly MSMEs due to

the Corona Virus Pandemic. It appears that the writ petitioner is

not satisfied with the steps taken by the RBI vide notification

dated 27.03.2020. According to the petitioner, the Covid­19

Regulatory Package notified by the RBI vide notification dated

27.03.2020 insofar as the terms loans, working capital facilities

and restructuring of Stressed Account is inadequate, ineffective

and does not offer any substantial relief, aid or assistance to the

industries particularly MSMEs. According to the petitioner, the

above­mentioned Regulatory Package will not in any manner

salvage the MSMEs and help them recover from financial losses

2
that have been caused due to the unforeseen circumstances.

With the above broad grievances, it is prayed as under:

(a) issue writ/writs including a writ of mandamus or
any other writ or direction in the nature thereof, directing
the respondents to permit the lending institutions not to
recover interest component from the industries
particularly MSMEs on Term Loans and Working Capital
Facilities availed by them for three months from
01.03.2020 to 31.05.2020;

(b) issue writ/writs including a writ of mandamus or
any other writ or direction in the nature thereof, directing
the respondents to permit the lending institutions to
grant interest free moratorium period for Term Loan and
not recovery of interest on Working Capital Facilities for
three months from 01.03.2020 to 31.05.2020;

(c) issue writ/writs including a writ of mandamus or
any other writ or direction in the nature thereof, directing
the respondents to allow restructuring of Stressed
Accounts;

(d) issue writ/writs including a writ of mandamus or
any other writ or direction in the nature thereof, directing
the respondents to extend the date for depositing GST
from 20th of every month to 30th of every month for a
period of six months;

(e) issue writ/writs including a writ of mandamus or
any other writ or direction in the nature thereof, directing
the respondents to refund the pending GST amounts and
utilise pending GST amounts for payment of Government
expenses for the MSMEs industries.

1a. Writ Petition (Civil) No.542 of 2020 under Article 32 of the

Constitution of India has been preferred by the petitioners –

CREDAI – Maharashtra Chambers of Housing Industry and

3
another which has been filed for and on behalf of the real estate

sector challenging notification dated 27.03.2020 issued by the

RBI with a prayer that the same may be declared as ultra vires to

the extent it charges interest on the loan amount during the

moratorium period (which has been declared between March 1,

2020 till August 31, 2020). Therefore, the main grievance in this

writ petition is to continue not to charge the interest on the

outstanding portion of the term loans during the moratorium

period.

1b. By way of Writ Petition (Civil) No. 945 of 2020 preferred

under Article 32 of the Constitution of India, the petitioner, a

practising Advocate, has prayed for an appropriate writ, direction

or order directing the Union of India – Ministry of Finance,

Ministry of Home Affairs and the RBI to extend the moratorium

period till 31st December, 2020, which was lastly extended vide

notification dated 23.05.2020.

1c. Writ Petition (Civil) No. 937 of 2020 has been preferred

under Article 32 of the Constitution of India by the Contract

Carriage Operators Association to quash notification dated

27.03.2020 issued by the RBI to the extent charging interest

during the moratorium period. It is also prayed to direct the RBI

4
to extend the period of moratorium by another six months,

without any interest being levied on the loans availed by the

members of the petitioner organisation.

1d. Writ Petition (Civil) No. 1024 of 2020 has been preferred

under Article 32 of the Constitution of India by the petitioner –

Confederation of Real Estate Developers Association of India

(CREDAI), for and on behalf of the private real estate developers

in Chhattisgarh, also challenging notification dated 27.03.2020

issued by the RBI to the extent charging interest on the loan

amount during the moratorium period. It is also prayed for an

appropriate writ, direction or order directing the respondents –

Union of India to take adequate measures of reliefs to the disaster

affected persons in accordance with letter and spirit of Disaster

Management Act, 2005, more particularly Sections 12 and 13 of

the said Act, more particularly to the reliefs with respect to waiver

of loan and/or interest on all kind of loans availed by the

borrowers/disaster affected persons through a well informed and

formulated policy.

1e. Writ Petition (Civil) No. 1025 of 2020 under Article 32 of the

Constitution of India has been preferred by the Chhattisgarh

Sponge Iron Manufacturers Association, also challenging

5
notification dated 27.03.2020 issued by the RBI, which has been

further extended vide notification dated 23.05.2020 to the extent

it charges interest on the loan amount during the moratorium

period. It is also prayed to direct the Union of India and others to

take steps/grant reliefs to the disaster affected persons in

accordance with letter and spirit of Disaster Management Act,

2005, more particularly in terms of Sections 12 and 13 of the said

Act.

1f. Writ Petition (Civil) No. 1006 of 2020 has been preferred

under Article 32 of the Constitution of India by an individual M/s

Supertech Limited for an appropriate writ, direction or order

directing the RBI and the National Housing Bank to instruct all

the banks/financial institutions/non­banking financial

companies to restructure all loan accounts availed by the

petitioner on its projects and to calculate the repayment @ 8%

simple interest from the date of disbursement till its final

repayment in the light of paragraphs 28 to 30 of the decision of

this Court dated 10.06.2020 passed in Writ Petition (Civil) No.

940 of 2017 (Amrapali group matter) and to protect the interest of

the home buyers.

6
1g. Writ Petition (Civil) No. 959 of 2020 under Article 32 of the

Constitution of India has been preferred by Federation of Self­

Financing Technical Institutions and others for an appropriate

writ, direction or order directing the Union of India – Ministry of

Finance, RBI and others to provide such financial relief to its

members freezing all financial liabilities of financial institutions of

the petitioners – banks and financial institutions. It is also

prayed for waiver of the penal interest charged for a period of one

year or until such time as it takes for the pandemic to abate. It is

also further prayed to direct the Union of India – Ministry of

Finance and the RBI to direct the financial institutions to grant

additional credit facility of Rs. 2 crores to each member

institutions of the petitioners without interest to meet salary cost

and other overheads during the Covid­19 pandemic. It is also

further prayed to direct to the financial institutions to reschedule

the loan instalments for one academic year without any charge of

interest over the interest for the unpaid period.

1h. Writ Petition (Civil) No. 955 of 2020 under Article 32 of the

Constitution of India has been preferred by the CREDAI – HR for

and on behalf of the real estate sector for an appropriate writ

directing the respondents – Union of India, RBI and others to

7
provide such financial relief to its members, freezing all financial

liabilities of such members towards banks and financial

institutions. It is also further prayed to direct the RBI to apply

Circular dated 27.03.2020 to all banks, non­banking financial

companies, housing finance companies and other financial

institutions compulsorily and mandatorily to all loan accounts

without any discrimination or classification.

1i. Writ Petition (Civil) No. 506 of 2020 under Article 32 of the

Constitution of India has been preferred by one private limited

company challenging notification dated 27.03.2020 issued by the

RBI to the extent charging interest on the loan amount during the

moratorium period.

1j. Writ Petition (Civil) Diary No. 12389 of 2020 under Article 32

of the Constitution of India has been preferred by the Shopping

Centres Association of India (SCAI) for and on behalf of its

members who are engaging in Malls and Shopping Centres

challenging notification dated 27.03.2020 issued by the RBI to

the extent charging interest on the loan amount during the

moratorium period. It is also prayed to extend the moratorium

period beyond August, 2020. An application has also been filed

8
for exemption from paying court fee and notarized affidavits. The

said prayer is allowed in terms of clause 3 of the application.

1k. Writ Petition (Civil) No. 568 of 2020 under Article 32 of the

Constitution of India has been preferred by CREDAI – MCHI,

Mumbai for and on behalf of its members – real estate developers

for an appropriate writ, direction or order for waiver of interest in

respect of its instalments due as on March, 2020 until end of

fourth quarter of financial year 2020­2021. It is also further

prayed to direct the RBI and financial institutions to make

available additional source of finance in the nature of grant of

additional loans, working capital facilities, guaranteed emergency

credit line and construction finance etc.

1l. Writ Petition (Civil) No. 606 of 2020 under Article 32 of the

Constitution of India has been preferred by an individual also

challenging notification dated 27.03.2020 issued by the RBI as

ultra vires to the extent it charges interest on the loan amount

during the moratorium period. It is prayed to direct the

respondents to provide relief in repayment of loan by not charging

interest during the moratorium period declared by notification

dated 27.03.2020, further extended by notification dated

23.05.2020.

9
1m. Writ Petition (Civil) No. 608 of 2020 under Article 32 of the

Constitution of India has been preferred by the Association of

Power Producers and others for and on behalf of the private

power developers in India, owning power plants in the country for

an appropriate writ, direction or order directing the RBI to issue

directions to lending institutions not to charge interest on interest

accrued during the moratorium period in terms of notification

dated 27.03.2020. It is also prayed to direct the RBI to extend

moratorium on interest and principal for an additional period of

six months ending on 31.03.2021 without treating any member of

the petitioner no.1 as defaulter. It is also further prayed to direct

the RBI to de­link interest rates issued by lending institutions

from credit rating till such time that the stress on the power

sector caused due to the Covid­19 pandemic is eased. It is also

further prayed to direct the RBI to provide a special dispensation

to the lenders to allow extension of the Scheduled Commercial

Operation Date of projects under construction, due to delays in

completion of under­construction projects on account of Covid­19

and the lockdown, by another one year while maintaining the

“standard” asset categorisation. It is also further prayed to direct

the respondents to include Non­Convertible Debentures as part of

10
the relief granted by the RBI in its notification dated 27.03.2020,

as well as, any other Covid­19 related relief which may be

granted.

1n. Writ Petition (Civil) No. 711 of 2020 under Article 32 of the

Constitution of India has been preferred by Coimbatore Jewellery

Manufacturers Association for and on behalf of its members to

declare that part of notification dated 27.03.2020 issued by the

RBI, as extended by notification dated 23.05.2020, as ultra vires

to the extent it charges interest on the loan amount during the

moratorium period. It is also prayed to direct the Union of India

and the RBI to provide relief in repayment of loan by not charging

interest during the moratorium period declared by notification

dated 27.03.2020, further extended by notification dated

23.05.2020. It is also further prayed to extend the moratorium

period on payment of instalments/interest by a further period of

18 months, in exercise of powers under Section 21 read with

Section 35A of the Banking Regulation Act, 1949.

1o. Writ Petition (Civil) No. 785 of 2020 under Article 32 of the

Constitution of India has been preferred by CREDAI Tamil Nadu

praying for waiver of interest/penal interest for a period of one

year or until such time as it takes for the pandemic to abate. It is

11
also prayed to direct the respondents to provide such financial

relief to the members of the association including freezing all

financial liabilities of such members towards banks and financial

institutions from whom the members of the petitioner’s

association have taken loans, for a further period of six months.

It is also further prayed to direct the respondents to provide such

financial relief including one­time restructuring for all accounts of

real estate projects which were standard as on 31.12.2019.

1p. Writ Petition (Civil) No. 802 of 2020 under Article 32 of the

Constitution of India has been preferred by the Textile and

Knitwear Association challenging notifications dated 27.3.2020

and 23.05.2020 issued by the RBI as ultra vires to the extent

charging interest on the loan amount during the moratorium

period. It is also prayed to direct banks and financial institutions

not to charge the interest on the due payments towards

principal/interest for a period of three years.

1q. Writ Petition (Civil) No. 829 of 2020 under Article 32 of the

Constitution of India has been preferred by the Northern India

Textile Mills Association also challenging notifications dated

27.03.2020 and 23.05.2020 to the extent charging interest during

the moratorium period.

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1r. Writ Petition (Civil) No. 826 of 2020 under Article 32 of the

Constitution of India has been preferred by the Federation of

Industrial and Commercial Organization (FICO) also challenging

notification dated 27.03.2020 to the extent charging interest on

the loan amount during the moratorium period. It is also prayed

to direct the respondent – RBI to direct banks and financial

institutions to make all due payments towards principal/interest

in a three­year period after expiry of the forbearance period,

without charging any interest on the same.

1s. Writ Petition (Civil) No. 964 of 2020 under Article 32 of the

Constitution of India has been preferred by Chattisgarh Laghu

and Sahayak Udyog Sangh for and on behalf of its members

declaring the portion of notification dated 27.03.2020 issued by

the RBI, as extended by notification dated 23.05.2020, charging

the interest and also interest on interest (penal interest) during

the moratorium period as ultra vires.

1t. Writ Petition (Civil) No. 1029 of 2020 under Article 32 of the

Constitution of India has been preferred by an individual

challenging notifications dated 27.03.2020 and 23.05.2020 to the

extent charging interest on the loan amount during the

moratorium period.

13
1u. Writ Petition (Civil) No. 1157 of 2020 under Article 32 of the

Constitution of India has been preferred by the Chhattisgarh

Udyog Mahasangh also challenging notifications dated

27.03.2020 and 23.05.2020 to the extent charging

interest/interest on interest (penal interest) on the loan amount

during the moratorium period. It is also prayed to direct the

Union of India to take adequate and effective measures of reliefs

to the disaster affected persons in accordance with letter and

spirit of Disaster Management Act, 2005, more particularly in

terms of Sections 12 and 13 of the said Act, and such reliefs

including inter alia suitable waiver of loan and/or interest on all

kind of loans availed by the borrowers/disaster affected persons

through a well informed and formulated policy.

1v. Writ Petition (Civil) Nos. 1132 of 2020 and 1178 of 2020

under Article 32 of the Constitution of India have been preferred

by Chhattisgarh Hotel and Restaurant Association and Raipur

Automobile Dealers Association (RADA) respectively for the same

reliefs as have been prayed in Writ Petition (C) No. 1157 of 2020.

1w. Writ Petition (Civil) No. 1190 of 2020 under Article 32 of the

Constitution of India has been preferred by a private limited

company – Fabworth Promoters Private Limited for an appropriate

14
writ, direction or order directing the Union of India – Ministry of

Finance and RBI and others challenging the RBI Circular dated

August 06, 2020 to the extent mentioned in 10A and 10B. It is

also prayed to direct not to charge any additional interest or

additional charges of any nature by the lending institutions,

including but not limited to, towards grant of additional finance

while approving a resolution plan under the RBI Covid­19

Resolution Framework dated August 06, 2020. It is also further

prayed for an appropriate writ, order directing the respondents to

formulate a relief package/policy to make effective provisions for

the hospitality sector including but not limited to make available

additional source of finance in the nature of grant of additional

loans, working capital facilities, guaranteed emergency credit line

etc., without payment of any additional interest on the existing

contractual rates of interest or additional charges of any nature.

It is also further prayed to direct the respondents to formulate a

relief package/policy making it mandatory for all lending

institutions to pass on the benefit of reduction of repo rates by

RBI to all loans and facilities granted by all lending institutions.

2. Considering the reliefs sought in the respective writ

petitions, referred to hereinabove, the reliefs sought by the

15
respective petitioners in their respective petitions can be broadly

bifurcated into four parts, namely, (1) waiver of compound

interest/interest on interest during the moratorium period; (2)

waiver of total interest during the moratorium period; (3)

extension of moratorium period; and (4) there shall be sector­wise

economic packages/reliefs.

Submissions on behalf of the respective Petitioners

3. Shri Ravindra Shrivastava, learned Senior Advocate

appearing on behalf of the respective petitioners in Writ Petition

(C) Nos. 964/2020, 1024/2020, 1025/2020, 1132/2020,

1157/2020 and 1178/2020 has made the following submissions:

i) that this Court ought not to limit the scope for relief and

directions only qua waiver of compound interest which is limited

to a highly restricted segment of the class of borrowers. It is

submitted that shorn of technicalities of pleadings and specific

prayers, this Court must take cognizance in public interest of the

severity and the magnitude of the disaster and mould the relief

accordingly to extend an effective measure of relief to an utterly

distressed class of people affected by the pandemic of Covid­19;

16

ii) that Covid­19 pandemic is a disaster in itself of an

unprecedented history. It undoubtedly requires disaster

management;

iii) that the “disaster management” must be and can only be

addressed under the statutory regime of law enacted by the

Parliament. The question of executive response will come into

play only after the special law on the aspect of “disaster

management” has run its full course. There is no way that the

issues arising out of the disaster of Covid­19 can be addressed

without travelling the course of path under the Disaster

Management Act, 2005 (hereinafter referred to as the “DMA

2005”);

iv) that the Statement of Objects and Reasons of DMA 2005

specifically states that the DMA 2005 has been enacted to provide

for requisite institutional mechanisms for drawing up and

monitoring the implementation of the disaster management

plans, ensuring measures by various wings of Government for

prevention and mitigating effects of disasters and for undertaking

a holistic, coordinated and prompt response to any disaster

situation. It is submitted that the preamble of the Act states that

17
it is an Act to provide for the effective management of disasters

and for matters connected therewith or incidental thereto;

v) that by reason of the very provision of Section 72 of the Act

which accords to it overriding effect, DMA 2005 is a special law

and is a complete code in itself;

vi) that the aspects of “disaster management” which inter alia

includes grant of relief and concessions to the distressed

community of borrowers affected by the disaster, has not at all

been considered, addressed and much less sought to be remedied

under the statutory framework. Whatever little has been seen is

only executive response. The conspectus of the provisions of

DMA 2005 simply imposes legal and statutory duty on statutory

authorities who have to perform the legal obligation in the

interest of the distressed community of people suffering the

disaster and its impact. It is submitted that in the matter of

grant of reliefs and concessions and adopting measures for

minimising the pains and agony of the disaster, the statutory

authorities have not risen at all to their task and legal duty;

vii) it is submitted that Covid­19 pandemic is a “disaster” within

the meaning of Section 2(d) of the Act. It is submitted that not

only disaster but it is a “disaster of severe magnitude” within the

18
contemplation of Section 13 of the Act. Any disaster inflicted on

mankind within the territory of India, requires “disaster

management” to be carried out by several tier of authorities as

are established under the Act; the National Disaster Management

Authority being the foremost, seemingly omnipotent and

omnipresent. It is submitted that the “disaster management” is

defined in Section 2(e) of the Act;

viii) that the “disaster management” is a continuous and

integrated process of planning, organising, coordinating

implementing measures which are necessary and expedient for

“…Mitigation or reduction of risk of any disaster or its severity or

consequences…”. That the issues which arises squarely fall

within the meaning and amplitude of “disaster management”

which is statutorily mandated under Section 2(e) of the Act;

ix) that the word “mitigation” has been defined in Section 2(i)

and the word “resources” has been defined in Section 2(p) of the

DMA 2005;

x) that in the present case the steps for disaster management

have not been undertaken by the statutory authorities under the

Act, which makes out a plain and simple case of issue of

19
mandamus to put the statutory authorities in action for

performing their duties under the law;

xi) that while Section 11 mandates duty to draw up a plan for

disaster management for the whole country, at least this Court

has not been informed of any such national plan;

xii) that Section 12 of the Act imposes a mandatory duty on the

National Authority to recommend guidelines for the minimum

standards of relief to be provided to ‘persons affected by disaster’

which includes inter alia the reliefs mentioned in three sub­

clauses in Section 12 of the Act. The width and scope of the

Section is widest and admits of no limitations. The expression

minimum standards of relief to ‘persons affected by disaster’ are

all such reliefs which are necessary and required for sustenance

and survival of meaningful living existence of the ‘people affected

by disaster’. This will include within its fold monetary relief and

concessions, apart from other measures;

xiii) that the Union of India has filed various affidavits but none

of them places on record any recommendation of National

Authority for guidelines for providing minimum standards of relief

for ‘persons affected by disaster’ in discharge of legal duty under

the Act;

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xiv) that Section 13 of the Act is more specific and directly

pertinent to the issues which have been raised in these petitions.

The Parliament is cognizant of the fact that an occurrence of

disaster of severe magnitude can inevitably seriously impair the

ability and capacity of the borrowers for repayment of loans and

further the ‘persons affected by disaster’ may require for living

existence grant of fresh loans. Being aware of such a contingency

which is most likely to occur in cases of disaster of severe

magnitude, the National Authority has been enjoined upon with

legal duty to “recommend relief” – in repayment of loans or grant

of fresh loans to persons affected. It is submitted that what

would be form of relief in the payment of loan or grant of fresh

loans on concessional terms, is the exclusive domain and

authority of the National Authority. It is submitted that the relief

envisaged under Section 13 of the Act has to be meaningful and

substantive; it has to be based on rational consideration and not

a pittance. A legal and faithful discharge of duty cast upon the

National Authority would require the Authority in minimum to

undertake an empirical study of the severity of the magnitude

and in proportion the requirement of the number and class of

people and the exact nature of relief to be extended which is

21
possible only after collection of relevant data and undertaking a

study by experts;

xv) that Section 13 which casts duty upon the National

Authority to recommend relief in the matter of repayment of loans

and/or grant of fresh loans on concessional terms does not make

any differentiation among the class of ‘persons affected by

disaster’. The class of persons affected by disaster is one

integrated class as the Covid­19 pandemic has affected every

single individual person, the difference may be of degree. Section

13 intends to provide relief in the matter of repayment of loans

etc. to all the persons affected by the disaster and does not admit

of any classification. While this much is the minimum scheme of

law, the National Authority has not made any recommendation

with regard to relief in the repayment of loans and/or for grant of

fresh loans to persons affected by disaster on such concessional

terms as may be appropriate. There has been a complete inaction

on the part of the National Authority in performing the legal duty.

It is submitted that any recommendations of the National

Authority under Section 13 of the DMA 2005 have not been

brought to the notice of this Court;

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xvi) that some of the measures which are suggested to have been

taken are only executive measures and are dehors of the

provisions of Sections 12 and 13 of the DMA 2005. Those

measures cannot be read in substitution of the requirements of

Sections 12 and 13. The only and exclusive authority to make

recommendations either under Section 12 or 13 of the Act is only

the National Authority. It is submitted that in view of the clear

provision of the Act entrusting the duty of making

recommendations for extending reliefs for persons affected by

disaster is on the National Authority. The case on behalf of the

UOI so stated in paragraph 29 of affidavit dated 31.08.2020 that

as the reliefs/measures in financial sector were being examined

and supervised by the Ministry of Finance, the NDMA did not step

in as, by its very nature, it may not have expertise in dealing

with the complex policy decisions effecting the financial stability

of the nation in general and that of banking sector in particular,

is not only incorrect, unacceptable but rather uncharitable to the

highest body of NDMA.

It is submitted that therefore the NDMA has not stepped in

despite the clear mandate under Section 13 of the Act. It is

submitted that the entire executive government both, at the level

23
of Centre and the State are under the command of the National

Authority and bound to act in aid of the National Authority in

discharging its duties. It is submitted that the National Authority

is not an expert body is unacceptable. It is submitted that the

National Authority has all the powers to seek assistance from

other bodies for performing its legal duties. The task of Disaster

Management also includes capacity building and augmentation of

resources which the National Authority can work on. Lack of

resources in terms of funds is neither an answer nor an excuse

for not performing its duties and obligations under the DMA to

provide relief to the persons affected by disaster;

xvii) that the Ministry of Finance and the RBI do have an

important role to play but their role is and can only be to aid and

assist the National Authority in formulation of the measures of

relief. The actual decision and based thereon the

recommendations to various stakeholders including the lending

institutions is solely the jurisdiction and authority of the National

Authority, which jurisdiction and power can neither be delegated

nor abdicated. The measures formulated by the Ministry of

Finance and RBI have to have the approval and sanction of the

24
National Authority which alone has the authority to make their

recommendations;

xviii) that even the government in discharge of executive functions

and providing administrative response have to act as “parens

patriae” which doctrine is embedded in the preamble of the

Constitution. It is submitted that the government in democracy

or any other government has to act only and only for the welfare

of the people. In support of his submission, reliance is placed on

the decision of this Court in the case of Charan Lal Sahu v. Union

of India, (1990) 1 SCC 613 (paragraph 35).

It is submitted that therefore when the doctrine of parens

patriae gets attracted, the lack of resources or financial

considerations resulting in denial of relief to the needy persons

affected by disaster is no answer and cannot be pressed into

service. It is submitted that the government is simply bound to

arrange its coffers in such a manner that the relief cannot be

denied. Reliance is placed upon the decision of this Court in the

case of Union Carbide Corporation Limited v. Union of India, (1991)

4 SCC 584;

25
xix) that the bogey of financial burden and stress on the banks

to drive them unviable is raised without any basis on record

much less based on empirical study and collection of relevant

data which is the basic requirement particularly of rule of law.

On the duty of undertaking empirical study based on collection of

relevant and quantifiable data, reliance is placed on the decision

of this Court in the case of Kailash Chand Sharma v. State of

Rajasthan, (2002) 6 SCC 562; and the decision of the Constitution

Bench judgment in the case of M. Nagaraj v. Union of India,

(2006) 8 SCC 212 (paragraphs 44 to 46);

xx) that while it is the case of the petitioners that there are no

recommendations issued by the NDMA in terms of Section 13 of

the DMA 2005, the cryptic correspondence annexed with the

affidavit of the Union of India dated 31.08.2020 shows that

certain views and recommendations have been expressed by the

NDMA vide O.M. dated 28.08.2020. While referring to para 5 of

the said affidavit, it is submitted that thus, on the showing of the

Union of India itself, whatever is the nature of views and

recommendations of the NDMA, it is clear and categorical of one

thing that the measures adopted by the RBI and the Government

of India, the Ministry of Finance before the NDMA have not found
26
to be adequate and satisfactory. It is clearly stated by the NDMA

that the borrowers may require further relief from the banking

sector and that the RBI may consider granting further relief to the

borrowers;

xxi) that while the Ministry of Finance vide its letter dated

31.08.2020 seems to have communicated to the RBI the aforesaid

views and recommendations of NDMA regarding relief and

repayment of loans by borrowers affected by Covid­19 pandemic,

there is nothing on record to show any further consideration

much less any grant of further relief by the RBI, pursuant to the

views and recommendations of the NDMA;

xxii) Now so far as the waiver of compound interest by way of Ex­

Gratia Scheme vide memo dated 23.10.2020 is concerned, it is

vehemently submitted that the very use of the word “ex­gratia” is

inappropriate and indicates complete lack of empathy and a

misdirected approach of the Union of India. What the persons

affected by the disaster are entitled to at the hands of the

statutory authority and also the welfare Government towards

disaster management and within its contemplation extension

reliefs and concessions, is misconceived as matters of bounty

and/or charity described as ex­gratia. The distressed class of

27
persons affected by the disaster are entitled to reliefs and

concessions as a matter of right because that flows from the legal

and statutory duty imposed by the statutory law of Parliament –

DMA 2005 and the supreme law of the land, i.e., the Constitution

of India. It is submitted that it is because of this approach of a

gratis underlying the scheme that both the statutory authorities

and Union of India have miserably failed to address the issue in

right perspective and grant relief and concessions to the persons

affected by the disaster in an effective, meaningful and

substantial manner;

xxiii) that even the Scheme dated 23.10.2020 contains the

eligibility criteria as under:

“4. Eligibility criteria under the scheme

(1) Borrowers in the following segments/classes of loans, who have loan
accounts having sanctioned limits and outstanding amount of not
exceeding Rs.2 crore [aggregate of all facilities with lending
institutions] as on 29.02.2020, shall be eligible under the Scheme:

      (i)    MSME loans
      (ii)   Education loans
      (iii)  Housing loans
      (iv)   Consumer durable loans
      (v)    Credit card dues
      (vi)   Automobile loans
      (vii) Personal loans to professionals
      (viii) Consumption loans

Any borrower whose aggregate of all facilities with lending institutions
is more than Rs.2 Crore (sanctioned limits or outstanding amount)
will not be eligible for ex­gratia payment under this scheme.

28
(2) The aforesaid eligibility shall be subject to the following further
conditions and stipulations:

(i) Account should be standard as on 29 th February 2020, i.e., loan
should not be a Non­performing Asset (NPA) as on 29 th
February, 2020.

(ii) Lending institution must be either a banking company, or a
Public Sector Bank, or a Co­operative Bank [i.e., an Urban Co­
operative Bank or a State Co­operative Bank or a State Co­
operative Bank or a District Central Co­operative Bank], or a
Regional Rural Bank, or an All­India Financial Institution, or a
Non­Banking Financial Company or a Housing Finance
Company registered with RBI or National Housing Bank as the
case may be. A Non­Banking Financial Company as the case
may be. A Non­Banking Financial Company­Micro Finance
Institution should be a member of a Self­Regulatory
Organization (SRO) recognized by RBI.

(iii) The ex­gratia payment under this scheme shall be admissible
irrespective of whether the borrower in sub­clause (1) has fully
availed or partially availed or not availed of the moratorium on
repayment announced by RBI vide its circular DOR. No.
BP.BC.47/21.04.048/2019­20, dated 27th March, 2020 and
extended on 23rd May, 2020.”

It is submitted that a perusal of the aforesaid will show that

the relief and concession which was announced in the affidavit of

the Union of India dated 02.10.2020 has been further restricted

making it wholly arbitrary and eyewash. It is submitted that the

following restrictions are obvious from paragraph 4:

i. That it is applicable to the borrowers in the 7 class/segments;
ii. It is applicable to the borrowers who have loan accounts having
sanction limits and outstanding amount of not exceeding 2 crores;
iii. The aggregate of all facilities with lending institutions should not
exceed 2 crores as on 29.02.2020;

iv. That the account should be standard as on 29.02.2020 i.e. the
loan should not be a non performing asset as on that date.

29
It is submitted that the eligibility criteria enshrined in para

4 of the scheme has stark contrast with affidavit dated

02.10.2020. It is submitted that the Ministry of Finance has

added more and drastic conditions reducing it to an illusion of

reliefs and concessions. The arbitrary and irrational criteria is so

striking that the scheme is virtually nugatory. In the first place,

para 18 of the affidavit dated 02.10.2020 as well as para 4 of the

scheme, both make it evident that if the total exposure of the loan

at the grant of sanction is more than Rs. 2 crores, the borrower

will be ineligible irrespective of the actual outstanding. For

example, if the borrower has been sanctioned a loan of Rs. 5

crores and has availed of the same, even though he might have

repaid substantially bringing down the principal amount to less

than Rs. 2 crores as on 29.02.2020 but because of the sanction of

the loan amount of more than Rs. 2 crores, he stands ineligible.

It is submitted that more remarkable is the condition that the

outstanding amount should not exceed Rs. 2 crores and for which

purpose the aggregate of all facilities with the lending institutions

will be reckoned. It means that hypothetically a borrower, for

example MSME category, has availed and has outstanding of

business loan of Rs. 1.99 crores and also has a due on his credit

30
card of Rs.1.10 lakh thereby making the aggregate to Rs.2.10

crores, he stands ineligible. This cannot be justified by any logic;

xxiv) that even the categorisation of borrowers limited to 8

categories only is not based on collection of any data and any

empirical study in an objective manner, much less a study of the

severity of the magnitude and effect of the pandemic disaster on

the borrowers, the classification on the borrowers limited to 8

categories has no nexus with the object sought to be achieved. It

is submitted that it cannot be suggested nor can it be accepted

logically that the borrowers outside 8 categories are not or would

not be affected by the severity of the disaster, i.e, the pandemic

and make them the class of persons affected by the disaster

entitling to a similar treatment on parity. On what basis the

categorisation limited to 8 categories has been made is not

discernible nor can be comprehended;

xxv) that affidavit dated 02.10.2020 shows that there is a

classification between ‘small borrowers’ and ‘big borrowers’. It is

submitted that this classification is wholly arbitrary. It is

submitted that in the process of this classification a sizable and

much bigger class of ‘middle class borrowers’ has been completely

excluded and no treatment has been accorded to the class of

31
borrowers situated between the small and big classes. It is

submitted that this classification therefore is clearly unrealistic

and unscientific. It is submitted that neither any study has been

done nor the classification has been made on any rational basis

which has nexus with the ground reality;

xxvi) that the classification of borrowers is both discriminatory

and arbitrary and thereby in violation of Article 14 of the

Constitution. It is submitted that the classification is solely

irrational, unreal, unscientific and highly subjective, thereby

suffering from the vice of arbitrariness violating Article 14 of the

Constitution;

xxvii) that the classification has no nexus at all with the

object sought to be achieved whereas the object is clear,

statutory, constitutional and singular, i.e., extending reliefs to

ameliorate the distress and miseries of the distress class of

persons which are severely hit by the disaster of pandemic and do

constitute a sizable and significant class of persons affected by

the disaster requiring disaster management;

xxviii) that the impugned classification is based on whims

and caprice of the executive rather than an objective and real

consideration. No material is available on record to show the

32
basis of the classification. The Union of India cannot seek to

clothe a decision which is so evidently discriminatory and

arbitrary under the protective shield of policy decision inasmuch

as any policy can neither be arbitrary nor discriminatory. In

support of his submissions, Shri Ravindra Shrivastava has

heavily relied upon the decisions of this Court in the cases of

Rattan Arya v. State of T.N. (1986) 3 SCC 385; State of W.B. v.

Anwar Ali Sarkar 1952 SCR 284: AIR 1952 SC 75 (paras 83 & 84);

and D.S. Nakara v. Union of India, (1983) 1 SCC 305 (paras 13 &

14);

xxix) that even within the class of classified eligible borrowers, the

arbitrariness is writ large because categories and the borrowers of

each categories are inherently dissimilar but are sought to be

painted with one brush. They are made to wear the shoes of one

size to fit in all. The borrowers in 8 categories compared with

each other unequal. For example, a business loan to MSME

category is considered at par with home loan and educational

loan. The conditions of the loans and interests are bound to be

different so much so the credit card holders and consumer

durable loans and automobile loans are inherently dissimilar,

also the personal loans to professional and the MSME loans are
33
different in content. It is submitted that thus unequals are being

treated as equals which itself is a case of classic discrimination.

Reliance is placed on the decision of this Court in the case of

Roop Chandra Adlakha v. Delhi Development Authority, 1989

Supp. (1) SCC 116 (paras 19 & 20);

xxx) that even charging interest on interest/compound interest

can be said to be in the form of penal interest. It is submitted

that the penal interest can be charged only in case of wilful

default. It is submitted that in view of the effect of pandemic due

to Covid­19 and even otherwise defer the payment of loan during

the moratorium period as per circular dated 27.3.2020, it cannot

be said that there is any wilful default which warrants interest on

interest/penal interest/compound interest. It is submitted that

there shall not be any interest on interest/penal

interest/compound interest charged for and during the

moratorium period;

xxxi) that even otherwise limiting relief and concessions to the

victims of disaster to waiver of compound interest alone is

arbitrary, insufficient, irrational and discriminatory. It is

submitted that the so­called waiver of compound interest can

only be one of the measures but ought not to be allowed to be the

34
end of the road by closure of the case as has been sought by the

Union of India. Only a proper and objective study will reveal

whether relief more than the waiver of compound interest is the

dire need of the persons affected by the disaster. Sections 12 and

13 of the DMA 2005 envisage reliefs in terms of more than what

is sought to be done under the pretence of ex­gratia scheme. It is

submitted that even a judicial notice can be taken that the

severity of the impact and consequences of the disaster upon the

common class of people, such as employees, businessmen,

farmers, workers, industrialists, professionals etc. are beyond

description. To a significant class of people, the impact of the

disaster has threatened their very survival and meaningful

existence of life and liberty. It is submitted that therefore it is a

complete misconception of the Union of India that relief of waiver

of compound interest is sufficient to provide redress within the

meaning of Sections 12 and 13 of the DMA 2005. It is submitted

that the measures of reliefs were required to be laid down sector

and group wise classified on the basis of common denominating

factors, which have not been done;

xxxii) Now so far as the measures proposed by RBI vide

circular dated 6.8.2020 is concerned, it is vehemently submitted

35
that the same cannot be said to be a relief of ‘disaster

management’ which otherwise is arbitrary and discriminatory. It

is submitted that the RBI Circular dated 6.8.2020 is a sheet

anchor of case of both the Union of India and the RBI. This

circular seeks to provide for the resolution framework for Covid­

19 based on the “Prudential Framework for Resolution of Stressed

Assets Directions 2019” dated 7.6.2019. It is submitted that on

the face of it the resolution framework only adopts and

incorporates the circular dated 2.6.2019, which is prior to onset

of pandemic disaster;

xxxiii) that the RBI is not the authority though it may have

supportive role to play to take a decision in regard to the

measures of relief and concession to the disaster affected persons

arising out of the task of disaster management under DMA 2005.

It is submitted that the circular is not a substitute for the

decision of the NDMA under Sections 12 and 13 of the DMA

2005;

xxxiv) that though the resolution framework mentions Covid­

19 but is not tailor made suited to the extraordinary and

unprecedented impact, consequences and distress caused to the

persons affected by the disaster of pandemic Covid­19. The

36
resolution framework for the stressed assets governed by the

prudential framework cannot be ipso facto applied for grant of

reliefs and concessions to the disaster affected persons under the

task of disaster management. The prudential norms have

nothing to do with the peculiarities of impact and consequences

of the disaster such as Covid­19 the management of which has

entailed into repeated nationwide lockdown unprecedented in

history and its continuous cascading impact and consequences

hitting across the life and liberties, business, industries and

environment. Importation of prudential norms designed for

resolution framework for stressed assets for lessor conditions of

economic distress is only whimsical and irrational. It is

submitted that it is, as such, dereliction of duty;

xxxv) that the resolution framework as per 6.8.2020 has itself

been held to be inadequate by none other than the NDMA as is

evident from the views and recommendations of NDMA contained

in the OM dated 28.08.2020. Having taken cognizance of RBI

Circular dated 6.8.2020 the NDMA has observed that the

borrowers require further relief from the banking system and

exalted the RBI to grant further relief. Such inadequate measure

37
of so­called resolution framework in the RBI circular dated

6.8.2020 ought not be accepted by this Court;

xxxvi) that the resolution framework in RBI circular is highly

bank centric and leans not only heavily but only in favour of the

banks and lending institutions rather than walking extra mile for

the distress class of persons and borrowers. The resolution

framework by virtue of the conditions of eligibility in paragraph 2

thereof is per se discriminatory and arbitrary. MSME borrowers

whose aggregate exposure to lending institutions collectively is

Rs. 25 crores or less on 1.3.2020 are not eligible for resolution

framework. This classification is solely arbitrary and is based on

no intelligible differentia having nexus with the object. It is

submitted that the resolution framework is applicable only to

those borrowers who are having distress on account of Covid­19

but in what manner such factor would be determined is not

provided for, leaving therefore, the benefit of the resolution

framework to subjective satisfactory and arbitrariness of the

banks, it has been left to the unguided, ultimate and final

discretion of the banks to lay down their individual policies and

framework creating gross inequality and introducing total

subjectivity;

38
xxxvii) It is further submitted by Shri Ravindra Shrivastava,

learned Senior Advocate appearing on behalf of some of the

petitioners that the trigger for filing these petitions and the Court

taking the cognizance thereof are conditions of exceeding distress,

financial and otherwise which seriously impinge upon the

fundamental rights of Article 14, 19 and 21 of the Constitution in

their full ramifications. It is submitted that the occasion for this

Court is an extraordinary human tragedy of unparallel origin and

precedence and therefore requiring extraordinary statutory legal

and constitutional response by the statutory authorities and the

Government of India. It is submitted that the issues are far more

important to be asked to be closed on the basis of few affidavits

and circulars which fall far short from the requirements of

constitutional and statutory duties. It is submitted that the

statutory authorities must act without any more delay, the

Government of India being the parens patriae has to act in a

meaningful manner and meaning of the doctrine as the father of

the citizens of the republic and therefore the ultimate custodian

and guardian of their welfare. It is submitted that the role of the

parens patriae by the Government of India has not been

39
discharged as per the doctrine which has been explained by the

Constitution Bench in Charan Lal Sahu (supra);

xxxviii) that the very nature of the issues involved in this case

and of which cognizance is required to be taken are such that

there is an eminent need in public interest of continuous

monitoring of the statutory and executive action by this Court

and further issuance of continuous directions and mandamus to

all the authorities concerned. It is submitted that neither the

magnitude and severity of the disaster which has continuous and

cascading effect and considering the very concept of “disaster

management” under the Act as an integrated and continuous

process, the relief and measures adopted or required to be

adopted cannot be a sort of one­time grant or package. It is

submitted that with the evolution of situation there is a strong

public interest and need for this Court to keep exercising its

constitutional jurisdiction under Article 32 of the Constitution so

that the authorities do not fail, they remain active and vigilant

and enormous class of victims of the disaster do not remain

crying for the redressal of the grievances. In support of his

submission, heavy reliance is placed on the decision of this Court

40
in the case of T.N. Godavarman Thirumulkpad v. Union of India

(1997) 2 SCC 267.

4. Dr. Abhishek Manu Singhvi, learned Senior Advocate

appearing on behalf of the power sector has further submitted in

addition to what is submitted by Shri Ravindra Shrivastava,

learned Senior Advocate that during the lock down due to Covid­

19 pandemic, power sector is badly affected. It is submitted that

therefore there shall be a special package of relief for the power

sector. It is submitted that therefore not enabling/considering

the impact of lockdown due to pandemic, vis­à­vis power sector

and not providing special package for the power sector, unequals

are treated equally. It is submitted that therefore the

NDMA/UOI/RBI must devise suitable and appropriate sector

specific measures essentially for the continued operation of the

power generation sector.

4.1 It is submitted that the RBI Circular relating to Covid­19

relief packages viz. impugned RBI notifications, RBI Circulars

dated 6.8.2020, 7.9.2020 have left the option of providing relief to

the discretion of lenders instead of making it mandatory. It is

submitted that as per the aforesaid notifications, the lenders are

permitted to grant a moratorium of three months on payment of

41
all instalments for repayment of term loans and working capital

facilities falling due during the moratorium period. It is

submitted that as per paragraphs 14 and 15 of Part B of circular

dated 6.8.2020, the decision to provide relief has been left to the

discretion of the lenders; as per paragraph 18 of circular dated

06.08.2020, the resolution process has to be invoked by not less

than 75% of lenders by value and not less than 60% of lenders by

number. It is further submitted that paragraph 7 of circular

dated 7.9.2020 provides a window to the lenders to vary from the

provisions of the circular dated 6.8.2020.

4.2 It is further submitted that in order to ensure that relief is

granted to borrowers impacted by the spread of Covid­19

pandemic and the subsequent national lockdown, the above­

mentioned circulars ought to be binding on all lenders who would

otherwise qualify as “financial creditors” under the Insolvency

and Bankruptcy Code, 2016.

4.3 It is further submitted that by leaving the application of the

said RBI circulars to the discretion of the individual lenders,

borrowers, who are under severe financial stress on account of

Covid­19, are denied appropriate relief as lenders tend to focus on

their own statutory and internal compliances and interests. It is

42
submitted that the purpose of providing a relief framework for the

borrowers affected by the Covid­19 pandemic stands defeated

since lenders are incentivised to recover their costs. It is

submitted that in such a scenario, the RBI ought to have made it

mandatory for all lenders to provide relief under the impugned

RBI notifications, Circulars dated 6.8.2020 and 7.9.2020

available at the option of the borrowers and not at the discretion

of the lenders in order to provide relief to borrowers impacted by

the outbreak of Covid­19.

5. Shri Kapil Sibbal, learned Senior Advocate appearing on

behalf of CREDAI – Real Estate Sector has vehemently submitted

that Real Estate Sector is also badly and severely affected due to

nationwide lock down. It is submitted that the measures

undertaken by the UOI/RBI are arbitrary, discriminatory, illusory

and inadequate and does not offer any reliefs to the Real Estate

Sector, when Real Estate Sector because of its importance and

contribution towards country’s economy requires special

consideration.

5.1 It is further submitted that the Union of India/NDMA have

failed to perform their statutory duty cast under Sections 12 and

13 of the DMA 2005. It is submitted that while providing reliefs,

43
no data is collected with respect to impact on individual sectors.

It is submitted that even as required under the DMA 2005, there

is no national plan prepared while considering the disaster –

Covid­19 pandemic.

5.2 It is further submitted that even the terms of reference of

Kamath Committee are ex­facie contrary to the aim and object of

policies framed by the RBI/UOI, which was primarily to mitigate

and alleviate the debt burden of the borrowers. It is submitted

that the Kamath Committee Report,

(i) proceeds on the basis that businesses which were shut down due
to Government action [i.e. National Lockdown] and defaulters.

(ii) The Terms of Reference of Kamath Committee are only aligned for
interest of the lending institutions and not for continuous viability
of businesses as seen from the chart annexed.

(iii) The stringent conditions so imposed are difficult to comply and will
turn all businesses into NPA.

(iv) Restructuring plan is required to be approved by December 2020
although the Real Estate sector has barely commenced functioning
due to COVID – 19 restrictions i.e. the “force majeure’ even
continues and no proposal is possible.

(v) The ratios of borrowing limits / net asset value which were never
there in the original loan agreements are imposed under the
Restructuring Policy.

(vi) Moratorium Policy expired on 31.08.2020 and due to the inability
of the businesses in the real estate sector to make payments
during the months of September, October and November 2020,
their credit rating has already been downgraded to Grade “D” and
as NPAs. Therefore, they do not qualify for restructuring.

(vii) Being a restructured loan, banks will have to make additional 10%
integral provisioning for such lending and as a result of credit
rating downgrading, the banks will have to charge few percentage
basis points for all such loans.

44
5.3 It is further submitted that the banks are the beneficiaries of

the policies framed by the RBI, who have profiteered at the peril

of borrowers who are unable to withstand the effects of the

disaster. It is submitted that the real estate sector is seeing a

continuous decline in sales, investments, leasing and pricing in

2021 owing to the effect of Covid­19 pandemic. Shri Sibbal,

learned Senior Advocate has further submitted that if the

moratorium period is not extended till 31st March, 2021 and if the

reliefs as sought for in the writ petition are not granted, then

majority of all accounts will be qualified as NPA as per RBI

Prudential norms on Income Recognition; asset classification and

provisioning pertaining to advances; virtually no accounts would

qualify for restructuring under the Restructuring Policy, since it

is made applicable only to those accounts which are not in

default for more than 30 days as on 01.03.2020 and credit rating

of members of the CREDAI will be downgraded and permanently

impaired, resulting in the witnesses of the members of the

association becoming commercially unviable. It is submitted that

real estate sector is one of the most affected sectors on account of

the lockdown and the ongoing pandemic. The precarious

situation has adversely affected not only over 1400 members of

45
CREDAI – MCHI but also the 270 ancillary industries dependent

on the real estate industry. If the sector suffers such irreparable

loss, all the allied industries would also be severely affected.

Therefore, it is prayed in para 8 to grant the following reliefs:

8.1The Moratorium Policy be made mandatory and extended by the
Respondent No.2 from 01.09.2020 until 31st March, 2021 or
complete normalcy is achieved, whichever is earlier.

8.2All borrowers in the real estate sector must be granted the
benefit of interest waiver (including interest on interest), as the
case may be, till complete normalcy is achieved or till the
Resolution Plan under Restructuring Policy is approved [if
invoked], whichever is earlier.

8.3Restructuring Policy dated 07.08.2020 and 07.09.2020 to be
simplified, broad based and implemented across board without any
classification so that the true object of bailing out the borrowers
under stress [precipitated by the national disaster / pandemic /
force majeure event] and supporting the revival of the Indian
economy / its GDP through its focal sector i.e. real estate can be
seamlessly achieved.

8.4All accounts which have not been declared as NPA as on
01.03.2020 are to be made eligible for restructuring without any
further provisioning of 10% by banks.

6. The other learned Advocates appearing for the other

respective petitioners, such as, Textile Association, Healthcare

Sector, Hotelier Association, Shopping Centres and Malls,

Travellers and other industries have by and large made the

submissions which are narrated hereinabove and therefore they

are not repeated again here.

Reply on behalf of the Union of India

46

7. All these petitions are opposed by Shri Tushar Mehta,

learned Solicitor General of India, appearing for the Union of

India, Shri Harish Salve, learned Senior Advocate appearing on

behalf of the Indian Bank Association, Shri V. Giri, learned Senior

Advocate appearing on behalf of the RBI and Shri Mukul Rohatgi,

learned Senior Advocate appearing on behalf of the SBI.

7.1 Shri Tushar Mehta, learned Solicitor General has taken us

to various affidavits/additional affidavits filed on behalf of the

Union of India. He has also taken us to the various provisions of

the DMA 2005, which shall be referred to and dealt with

hereinbelow:

Shri Tushar Mehta, learned Solicitor General has submitted

that it is a fact and nobody can dispute that the pandemic has

caused stress to large and small business and to individual

borrowers who have lost their jobs and livelihoods. That they

need relief which will help them to get back on their feet. It is

submitted that however different segments/sectors have suffered

differently. It is submitted that to mitigate the burden of debt

servicing brought about the disruptions in the market conditions

on account of Covid­19 pandemic, RBI came out with a circular

dated 27.03.2020 which permitted lending institutions to grant a

47
moratorium on payment of all instalments of term loams falling

due between 1.3.2020 and 31.5.2020, which came to be extended

till 31.08.2020. It is submitted that one of the grievances

pertains to grant of waiver from paying interest which has

accrued during the moratorium period while making the

repayment of loan after the moratorium is over. It is submitted

that one other grievance is waiver from paying interest on

interest/compound interest accrued during the moratorium

period. It is submitted 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.

7.2 It is submitted that the Finance Ministry, after the outbreak

of the COVID­19 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. All these

measures were taken as a responsible and measured response to

mitigate the problems faced by the sudden outbreak of the

pandemic and keeping in mind­

(i) The financial stability of the economy;

48

(ii) The additional unforeseen and unexpected financial burden imposed on
the exchequer to provide relief packages to citizens at large, adversely
affected due to the pandemic;

(iii) The very nature of the pandemic whose duration remains uncertain;

(iv) The difference in implications of the reliefs granted for various sectors;
and

(iv) The fact that the resources of any country would not be unlimited.

It is further submitted that the Central Government has

also taken a number of measures to mitigate financial suffering,

which include, inter alia, the following: ­

(i) Agriculture loans: 3% subvention on interest rate payable on
prompt repayment has been made admissible despite availing
moratorium.

(ii) Housing loans: Subvention on interest rate under Pradhan
Mantri Awas Yojna has been extended by one more year up to
31.03.2021.

(iii) Small business borrowers: 2% subvention on interest rate
has been introduced for small business loans under Pradhan
Mantri Mudra Yojana.

(iv) Micro Food Processing Units: Credit­linked subsidy of
Rs.10,000 crore has been introduced for 2 lakh food­processing
micro­enterprises.

(v) Micro, Small and Medium Enterprises (MSMEs): Emergency
credit line of up to Rs.3 lakh crore, backed by 100% guarantee
from the Government, at capped rate of interest has been
launched.

(vi) Stressed MSMs: Financing for stressed MSMEs has been
enabled through launch of a subordinate debt scheme.

(viii) Non­Banking Finance Companies (NBFCs): Partial Credit
Guarantee Scheme of Rs.45,000 crore and Special Liquidity
Facility of Rs.30,000 crore have been launched for liquidity to
NBFCs.

49
7.3 It is further submitted that the Ministry of Finance was fully

alive to the problems of the borrowers which obviously cannot be

a homogenous class, but by its very nature, has various

categories of borrowing, namely, corporate loans, MSME loans

and personal loans etc. It is submitted that these three broad

categories may have several sub­categories within it, having their

own peculiar problems/difficulties and, therefore, needing

peculiar remedies and solutions. It is submitted that because of

the very nature of the problems faced by various kinds and

categories of stakeholders and the wide­ranging difference in the

problems faced by several sub­sections of those categories, it was

consciously considered that it would not have been possible for

the Ministry to provide for a “one size fits all” approach and it

would be advisable that steps be taken for grant of

relief/solutions for the problems arising during the pandemic

through the regulator of the banking sector, viz., the RBI.

7.4 It is submitted that it was for this reason that the Ministry

of Finance took the initiative and started interaction with RBI in

this behalf, requesting the RBI to provide for various measures of

relief to the borrowers. The Finance Ministry and RBI remained

50
in touch and considering the very nature of the reliefs to be

considered and provided, RBI took the decision requiring all

banks to take various measures for relief.

It is submitted that while taking such financial policy

decisions having implications on the stability of the economy, the

decisions are required to be taken keeping in mind several

administrative and financial considerations/exigencies, duly

keeping in mind the following complex issues that are required to

be considered:

(i) That there are a variety of borrows as stated above, namely
corporate borrowers (including large industry and large
enterprises), Micro, Small and Medium Enterprise (MSME)
borrowers, and retail/personal borrowers which include, inter alia,
borrowers for housing loans, education loans, vehicle loans, etc.

(ii) That there are several categories of banks and other lending
institutions that are required to be kept in view while taking
financial and economic decisions that are very sensitive for
financial stability of the country. These may include scheduled
commercial banks (which include, inter alia, Regional Rural Banks,
small finance banks, local area banks, nationalized banks, etc.),
Urban Co­operative Banks (UCBs), State Co­operative Banks
(StCBs) and District Central Co­operative Banks (DCCBs) that
cater to rural credit in the country, Non­Banking Financial
Companies (NBFCs), Housing Finance Companies (HFCs), all India
financial institutions, etc.

(iii) That the structuring of the loan in each category of
bank/lending institution and each category of borrower would be
different not only in terms of the rate of interest and in terms of
duration of the lending facility but also in several other distinct
aspects.

51

(iv) In any banking sector when financial assistance is rendered by
way of loans, a balance has to be maintained with the interest of
crores of depositors, most of whom are merely depositors and
surviving on the interest they receive on their deposits. On an
approximate basis, there are over 197 crore deposit accounts in the
country in commercial banks alone, in which depositors have
deposited their money and are earning interest.

7.5 It is further submitted that to mitigate the burden of debt

servicing brought about by disruptions on account of Covid­19

pandemic, the circulars issued by RBI permitted lending

institutions to …. (a) to grant a moratorium on payment of all

instalments, including interest, of terms loans falling due between

1.3.2020 and 31.8.2020; and (b) defer recovery of interest on

working capital loans for the period from 1.3.2020 to 31.8.2020.

It is submitted that under the aforesaid circulars a moratorium

on payment of both, principal and interest was by its very nature

a temporary standstill arrangement which gives relief to the

borrowers in the two ways, namely, (i) the account does not

become NPA despite non­payment of dues; and (ii) Credit

Information Companies shall ensure that the moratorium does

not adversely impact the credit history of the borrowers.

It is submitted that while the standstill applicable to bank

loans results in the bank not getting its funds back during the

52
period of moratorium, the bank continues to incur cost on bank’s

deposits and borrowings. It is submitted that since a moratorium

offers certain advantages to borrowers, there are costs associated

with obtaining the benefit of a moratorium.

7.6 It is submitted that immediately upon the serious effects of

Covid­19 being felt in the country, the Ministry of Finance

addressed a letter to the RBI dated 1.4.2020 which was after

moratorium declared by the RBI. Vide the said letter, the

Ministry of Finance requested the RBI to do something more than

the moratorium.

7.7 It is submitted that any moratorium is transient by its very

nature and has to end one day. It is submitted that thus, the

best interest of the economic health of the country, as well as that

of the respective borrowers would be best served by paving the

way for a more durable long­term solution of debt restructuring.

It is submitted that the revival of the stressed borrowers is

contingent upon debt restructuring of their loans/dues rather

than hinge on extending the moratorium. It is submitted that the

RBI has come out with two circulars dated 6.8.2020, facilitating

revival of real sector activities and mitigating the impact on the

ultimate borrowers by enabling lenders to grant concessions to

53
borrowers for Covid­19 related stress in personal, MSME and

corporate loans. It is submitted that this would enable lenders to

implement individual resolution plans in respect of the loans

having stress on account of Covid­19 pandemic. It is submitted

that the said approach would also enable continuance of

classification of such loans as standard, i.e., without treating

them as NPA.

7.8. It is submitted that the RBI Circulars dated 6.8.2020 take

care of all categories of lending institutions and all categories of

borrowings as aforesaid, while leaving the nature and the kind of

the relief to be given to the lending institution since each category

of lending institution would have its own bank/institution –

specific financial scenario in terms of the nature of advance, the

nature of borrowers, rate of interest etc.

That Circular dated 6.8.2020 takes care of the MSME

Sector, personal loans and corporate loans, keeping in mind the

overall financial stability of the economy, economic stability of

banking sector and interest of the depositors in mind. It is

submitted that considering the fact that the time limit for

continuance of the present economic issues is uncertain, as a

policy it is undesirable to either give any “one size fit all”

54
solutions, nor would it be desirable to provide for a static relief

formula. Such reliefs are given depending upon the availability of

resources and without compromising the financial stability of the

banking sector, and are always subject to changes keeping in

mind the evolving dynamic situation at various stages.

7.9 It is submitted that with the framework under the RBI

Circulars dated 6.8.2020, banks are fully empowered to resolve

Covid­19 related stress and customise relief to individual

borrowers through grant of various concessions in terms of:­

i) alteration in the rate of interest and haircut on amount payable
as interest;

(ii) extension of the residual tenor of the loan, with or without
moratorium, by up to two years;

(iii) waiving penal interest and charges;

(iv) rescheduling repayment;

(v) converting accumulated interest into a fresh loan with a
deferred payment schedule; and

(vi) sanction of additional loan.

7.10 It is submitted that so far as the question of waiver of

compound interest/interest on interest is concerned, the said

issues are required to be examined in the context of the larger

financial constraints faced by the country in particular and the

world in general. It is submitted that as a part of effective fiscal

55
planning, which is being done at a stage where nobody is aware

as to the time till when the present situation may continue, with

either more or less gravity, a delicate balancing act is required by

Government in dealing with the financial impacts of the

pandemic. It has to conserve financial resources for a long and

uncertain battle on the public health front, which has its own

huge financial implications. Businesses need to survive.

Lending institutions too must survive and promises made to

depositors have to be honoured. Jobs and livelihoods need to be

safeguarded and every attempt is to be made to bring back the

economic growth. Therefore, use of public resources for any

category of stakeholders must be carefully calibrated.

Unintended consequences can arise and financial stability itself

could be imperilled, if due consideration is not given to all

relevant aspects.

7.11 It is submitted that right from the initial entry of the

pandemic in our country, which started facing its effects

[including the financial impact], the Central Government has

proactively taken steps either itself or through RBI, which already

had their financial impact, which was/is required to be kept into

56
consideration while taking further decisions either while granting

moratorium which, in fact, is deferment [and not waiver] as well

as while taking the present decision regarding relief in

compounding of interest. The following steps taken by the

Central Government have their own financial impacts which

would require the Central Government to rationalise any kind of

waiver at this stage as going any further than what is stipulated

hereunder may be detrimental to the overall economic scenario,

and the economy and the nation or the banking sector may not

be able to take the financial constraints resulting therefrom.

7.12 It is submitted that as such the Central Government has

already given various reliefs and by providing various reliefs there

already exists substantial financial burden. It is submitted that

having realised that the pandemic has caused stress to large and

small businesses and to individual borrowers who have lost jobs

and livelihoods and they need relief which will help them get back

on their feet, it has necessitated multi­pronged relief. It is

submitted that the Central Government has announced the

following reliefs, (1) Garib Kalyan Package; and (2) Aatma Nirbhar

Package.

57
It is submitted that the Garib Kalyan Package was for

Rs.1.70 lakh crore involving free food grains, pulses and gas

cylinders and cash payment to women, poor senior citizens and

farmers. More than 42 crore poor people received financial

assistance of Rs. 65,454 crores under the package. It is

submitted that the Aatma Nirbhar Package was for Rs. 20 lakh

crores, involving support to MSMEs, Non­Banking Finance

Companies, agriculture, sectors allied to agriculture, contractors,

street vendors, State Governments, relief in provident fund

contribution, extension of subsidy on home loans etc.

7.13 It is submitted that so far as the question of interest on

interest is concerned, what is “moratorium” is required to be

considered. It is submitted that the word “moratorium” is

categorically defined by the RBI, while issuing various circulars.

The relevant circulars of RBI show that “moratorium” was never

intended to be “waiver of interest”, but “deferment of interest”. In

other words, if a borrower takes benefit of the moratorium, his

liability to make payment of contractual interest (both normal

interest and interest on interest) gets deferred for a period of

three months and subsequently three months thereafter. It is

58
submitted that this decision was taken keeping the larger

economic scenario in mind, more particularly the burden which

would otherwise fall upon the banks which will have to perforce

pass it on the depositors and/or upon the Government which will

have its own detrimental impact on other welfare measures. It is

submitted that after a very careful and major consideration of

several fiscal and financial criteria, its inevitable effects and

keeping the uncertainty of the existing situation in mind, the

payment of interest and interest on interest was merely deferred

and was never waived.

It is submitted that even the borrowers have understood the

difference between the waiver in the interest on loan and the

deferment of payment of instalments for that loan and, therefore,

a majority of the borrowers have, in fact, not taken the benefit of

the moratorium, which is nothing but deferment of payment of

instalments.

7.14 Now so far as the waiver of interest is concerned, it is

submitted that if the Government were to consider waiver of

interest on all the loans and advances to all classes and

categories of borrowers corresponding to the six­month period for

59
which the moratorium was made available under the relevant RBI

circulars, the estimated amount is more than Rs. 6 lakh crores.

It is submitted that if the banks were to bear this burden, it

would necessarily wipe out a substantial and a major part of

their net worth, rendering most of the banks unviable and raising

a very serious question mark over their very survival. It is

submitted that this was one of the main reasons why waiver of

interest was not even contemplated and only payment of

instalments was deferred.

7.15 It is submitted that even otherwise the lending activity of

any bank is always enabled by the deposits that

depositors/customers hold in the lending banks. Such

depositors are much more in number than the number of

borrowers. It is submitted that it is estimated that in the Indian

Banking system for every ‘loan account’ there are about 8.5

‘deposit accounts’. The banks can pay interest to depositors only

because borrowers pay interest to the bank. This transaction of

depositors/banks/borrowers is inevitably a part of a chain that

can never be permitted to be broken. It is submitted that

therefore the contractual interest on all outstanding advances

60
will have to be charged even during the period of deferment and if

this compounding interest is not received from the borrowers for

any particular period, a commensurate denial of interest to

customers holding deposits is inevitable and unimaginable and

would obviously be unacceptable considering the categories of

depositors.

7.16 It is submitted that waiving compound interest/waiving

interest would result in very substantial and significant financial

burden. There are several categories of banks, like Private Sector

Banks, Small Finance Banks, Regional Rural Banks, Cooperative

Banks, NBFCs etc. The classes and categories of borrowers also

varies throughout the nation, and these can be broadly classified

as big borrowers and small borrowers. It is submitted that it is

impossible for banks to bear the burden resulting from waiver of

compound interest/interest without passing on the financial

impact to the depositors or affecting their net worth adversely,

which would not be in the larger national economic interest.

It is submitted that the Government bearing this burden

would have an impact on several other pressing commitments

being faced by the nation, including meeting direct costs

61
associated with pandemic management, addressing basic needs

of the common man and mitigating the common man’s problems

arising out of loss of livelihood.

7.17 It is submitted that in view of the aforesaid cumulative

circumstances, after careful consideration and weighing all

possible options, the Central Government has decided to

continue the tradition of handholding the small borrowers and,

therefore, now the Government has granted the relief of waiver of

compound interest during the moratorium period, limited to the

most vulnerable categories of borrowers. It is submitted that this

category of borrowers, in whose case, the compounding of

interest will be waived, would be MSME loans and personal loans

up to Rs. 2 crores of the following categories:

  (i)     MSME loans up to Rs.2 crore

  (ii)    Education loans up to Rs.2 crore

  (iii)   Housing loans up to Rs.2 crore

  (iv)    Consumer durable loans up to Rs.2 crore

  (v)     Credit card dues up to Rs.2 crore

  (vi)    Auto loans up to Rs.2 crore

(vii) Personal loans to professionals up to Rs. 2 crore

(viii) Consumption loans up to Rs.2 crore

62
It is submitted that the aforesaid decision has been taken,

after examining the possible fiscal scenario in case of a

complete/partial waiver and after gathering the material details

for reaching the decision­making process, and while keeping in

mind the interest of particular class of borrowers during the

unprecedented period the country is facing.

7.18 It is further submitted that the resolution framework

announced by the RBI provides that loan accounts which slip

into NPA between invocation and implementation may be

upgraded as standard on the date of implementation itself. It is

further submitted that so far as the apprehension that credit

rating agencies may record a downgrade to NPA for defaults

during the moratorium, it is submitted that Securities and

Exchange Board of India (SEBI) has already issued a Circular on

30.03.2020 providing for relaxation from recognition of default

due to the moratorium. On 31.08.2020, it has further specified

that in cases of restructuring, the same may not be considered a

default by rating agencies.

7.19 It is further submitted that to give further relief,

Government has already suspended the operation from

63
25.03.2020 of Sections 7, 9 and 10 of the Insolvency and

Bankruptcy Code, 2016 to protect corporate borrowers impacted

by the Covid­19 crises. It is submitted that even the Kamath

Committee set up by the RBI has recommended financial

parameters for debt restructuring of 26 sectors affected by Covid­

19. It is submitted therefore that whatever best could be done by

the Government of India, the same has been done.

7.20 Now so far as the issues raised by a number of petitioners

and interveners seeking Sector­specific Reliefs, it is submitted

that the various measures taken by the Government and the RBI,

referred to hereinabove, include not only reliefs applicable across

the board but also reliefs for the specific sectors. The

petitioners/interveners cannot pray for sector­specific relief by

either waiver or restructuring by way of present proceedings

under Article 32 of the Constitution of India as the question of

such financial stress management measures require examination

and consideration of several financial parameters and its impact

and are not suited for being judicially decided or be subjected to

judicial review.

64
It is submitted that even otherwise, the Aatma Nirbhar

Package offers sector­specific reliefs for the power sector, real

estate sector, MSME sector. It is submitted that more than

Rs.90,800 crore liquidity injection for power distribution

companies has been sanctioned, substantially enabling power

distribution companies to pay their outstanding dues to power

producers and transmission companies. It is submitted that the

Government advisory has been issued for extension of

registration and completion dates of real estate projects under

RERA by treating Covid­19 as an event of force majeure. It is

submitted that Credit­linked Subsidy Scheme for Housing

(Pradhan Mantri Awas Yojana) has been extended by one year,

providing subsidy for purchase of residential real estate. It is

submitted that so far as relief to MSME Sector is concerned, an

Emergency Credit line up to Rs. 3 lakh crores, backed by 100%

Government Guarantee, has been launched to enable MSMEs to

get back to regular operations. It is submitted that Rs.1.87 lakh

crore has already been sanctioned with Credit Guarantee Scheme

for Subordinate Debt has been launched to help stressed and

NPA MSME units. It is submitted that 2% subvention on interest

rate is being given for small business loans.

65
7.21 It is further submitted that with regard to reliefs sought by

various petitioners/applicants in terms of extension of

moratorium, applicability of the resolution framework, fixation of

interest rate, transmission of rate cuts, delinking of interest rate

from credit rating of the borrower and moratorium on repayment

of non­credit instruments that the setting of interest rates and

other norms for restructuring which includes moratorium

involves evaluating projections of cash flows and viability. This,

in turn, requires expertise, technical knowledge of financing, and

experience in dealing with the subject. Therefore, eligibility of

proposals, benchmarks for viability, assessment of

reasonableness of assumptions and finally acceptance and

monitoring of resolution plans are matters best dealt with

between the borrowers and the lending institutions concerned.

7.22 It is submitted that the Central Government and all stake

holders have discharged their responsibility in the best possible

manner under the circumstances which, by themselves, are

unprecedented circumstances. It is submitted that all the

decisions taken by the Central Government, the RBI as a

regulator and the lending institutions are taken keeping in mind

66
the severe financial stress globally as well as nationally and while

ensuring that the sources are utilized so that the national

economy and the economy of the banking sector can withstand

the present financial situation, the duration of which is

unknown.

7.23 Now so far as the submission that the National Plan, as

required to be prepared under Section 11 of the DMA 2005 has

not been prepared and that the NDMA has failed to perform its

duty cast under Sections 12 & 13 of the DMA 2005 is concerned,

Shri Mehta, learned Solicitor General has submitted as under:

(i) that the DMA 2005 contemplates a “National Plan” under

section 2(l) of the Act. Such plan is to be prepared under Section

11 of the DMA 2005. That the NDMA has, in fact, prepared an

exhaustive and comprehensive “National Disaster Management

Plan” which takes care of several disaster known to humanity,

like cyclone and wind, floods, urban flood, earthquake, tsunami,

landslides, snow avalanche, draught, cold waves, thunderstorm,

lightening etc. cloud burst and hailstorm, glacier lake outbreak

flood, heat wave, chemical (industrial) disaster, nuclear and

67
radiological emergencies, biological and public health

emergencies, fire hazard and forest fire hazard;

(ii) that the present disaster can fall under “biological and

public health emergencies” under clause 7.15 of the National

Disaster Management Plan. That there are certain disasters

which are and have been globally known to be unknown to the

humanity as a race. It is submitted that what the entire world is

facing in the Covid­19 is, one such unforeseen disaster termed as

“global catastrophe”. It is submitted that the National Plan which

is made in November, 2019, envisages such rarest of the rare

“global catastrophe risk events”. It is submitted that by its very

nature, such a global catastrophe cannot be either predicted or

prevented nor can any straightjacket procedure for its

management be laid down. Each country will have to respond to

such global catastrophe in the best possible manner under the

circumstances in the spheres of public health, finance etc. The

present situation falls in the category of “global catastrophe risk”

as stipulated in clause 2.8 of the National Disaster Management

Plan.

68
7.23.1 It is submitted that in light of the aforesaid, the

responses and the reliefs measures taken by the nodal Ministries

are required to be considered. It is submitted that it was not

possible to lay down any straight­jacket methodology of dealing

with such disaster and each country in the world is responding

to the challenges in the best possible manner with rationalised

utilization of resources.

7.23.2 It is submitted that in the context of the

unprecedented position, the scheme of DMA 2005 is required to

be examined. After referring to the Statement of Objects and

Reasons of the DMA 2005, it is submitted by Shri Mehta, learned

Solicitor General that the Statement of Objects and Reasons as

well as the scheme of the Act, the Act envisages a statutory

mechanism to deal with the disaster. It is submitted that so far

as the National Disaster Management Authority (NDMA) is

concerned, it is established under Section 3 of the Act with the

Hon’ble Prime Minister of India as its Chairperson with other

members to be nominated by the Hon’ble Prime Minister and

discharges the powers and functions enumerated under Section

6 of the Act. It is submitted that the NDMA is an administrative

69
body having limited function stipulated in Section 6 of the Act. It

is not envisaged to be a “Super Government” which becomes

repository of all functions and powers of the Ministries and

Departments of the Government. It is submitted that it is not

that once a disaster as defined under Section 2(d) of the Act takes

place, the functions of all Central Government Ministries stand

vested in the NDMA and each and every measure shall be taken

either only by the NDMA and not by the respective

Ministries/Departments or at least vetted or ratified by NDMA.

7.23.3 After referring to Sections 2 (a), (b), (c), (d), (e), (i), (m),

(n), (o) and (p) and Section 6 of the Act, it is submitted by Shri

Mehta that the disaster management under the Act by NDMA is

restricted to Section 6 of the Act, while the nodal ministries

under the National Plan take the steps. It is submitted that the

NDMA itself would not start taking mitigating or relief measures

unless and so long as the Central Government (acting through

various Ministries/Departments) fails to do so. Referring to

Sections 35 and 36 of DMA 2005, it is submitted that it is for the

respective ministries or departments of the Government of India

70
which take steps for giving relief measures as a part of disaster

management.

7.23.4 It is submitted that the NDMA is alert and is

functioning much prior to the outbreak of pandemic in our

country through Advisory Committee under Section 7, National

Executive Committee under Section 8 and sub­Committees under

Section 9 of the Act. It is submitted that under the National Plan

which is a statutory plan prepared under the Act, an institutional

framework is provided which is as under:

71
It is submitted that therefore the National Disaster Management

Plan also envisages nodal ministries for management of different

disasters. It is submitted that National Plan prepared by the

NDMA itself envisages that each category of disaster will be dealt

with by a nodal ministry.

7.23.5 It is submitted that Covid­19 was a disaster of such a

nature that it could not be confined to one nodal ministry.

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Whatever measures/reliefs were required to be taken/given were

provided by every ministry in each and every way needed. It is

submitted that the Ministry of Railways provided free rails for

transport of migrants, Ministry of Health and Family Welfare

dealt with the substantial part of disaster management namely

taking care of public health and hospital infrastructure, Ministry

of Agriculture & Farmer Welfare provided for various reliefs in the

agriculture sector, Ministry of Housing and Urban Affairs issued

separate relief measures for real estate sector etc.

Similarly, Ministry of Finance, whose role otherwise was to

finance the measures undertaken by other Ministries also

undertook several reliefs in terms of financial package and either

directly or through RBI relief ensures for stressed accounts.

7.23.6 It is submitted that considering the very nature of the

pandemic which was not confined to any specific geographic

location but at PAN­India impact having adversely affecting the

various fields of human life, the disaster management authority

consisted “Empowered Groups” under Section 10(2)(h) and (i) for

comprehensive action and integrated response. The same was

published by the Chairperson of National Executive Committee

73
constituted under Section 8 of the Act. One of the empowered

groups was “economic and welfare measure”. It is submitted that

the said empowered group functions as a limb of NDMA as the

same is constituted under the Act by the Chairman of the

National Executive Committee.

7.23.7 It is submitted that the petitioners are under some

misconception that the functions of all ministries are to be

discharged by the NDMA and the NDMA should take a decision

for the area in each ministry. It is submitted that so far as the

economic impact of the present disaster is concerned, it is

essentially the function of the Ministry of Finance and RBI to

take measures under Section 36 of the Act and the question of

NDMA stepping into will not arise.

7.24 Now so far as the reliance placed by the petitioners upon

Section 13 of the Act is concerned, it is submitted that in Section

13 the word used is “may”. It is submitted that the word “may”

used in Section 13 shall have to be read as an enabling

discretionary provision and not mandatory. The legislature has

in its wisdom and foresight refrained from using the word “shall”.

It is submitted that the interpretation of the word “may” as

74
“shall” will lead to consequences which are never intended by the

legislature. It will also lead to disastrous consequences.

7.24.1 It is submitted that the provision of Section 13 is an

enabling provision in which in any given set of facts the NDMA

can “recommend” relief in repayment of loans or grant of fresh

loans. If the word “may” be used as “shall”, the only consequence

it may have is a mandate of law to grant relief in repayment of

loan or grant of fresh loan despite [and without looking into an

over financial and economic impact on the national economy] en

bloc. The meaning of the word “shall” would mean NDMA giving

financial relief only in one sector namely banking sector [as the

contingencies mentioned in Section 13 are relatable to Banking

Sector] even at the cost of destroying the economy of the nation,

destroying the stability of the banking sector and even at the cost

of “disaster management” in other areas [like public health,

medical infrastructure etc.] other than banking sectors.

7.24.2 Section 13 may perhaps be used in case of localized

disasters like Bhopal Gas tragedy or earthquake in Gujarat.

However, when a national disaster takes place, the disaster is to

be managed through several ministries. Food Ministry will

75
distribute food which would involve expenditure, agricultural

ministry will give boost to the agricultural sector by various relief

measures, Health Ministry will take charge of treatment and

public health issues, Home Ministry will implement measures for

prevention of spread and other ministries will have to do same in

their respective spheres.

7.24.3 Use of the word “may” and “shall” would mean the

entire economy of the country shall have to be divested and used

in and through banking sector leaving all other areas untouched

and even at the cost of national economy and the stability of the

banking sector. It is submitted that this could never have been

the intention of the legislature.

In support of above, Shri Mehta, learned Solicitor General

has relied upon the decisions of this Court in the cases of Pradip

Kumar Maity v. Chinmoy Kumar Bhunia (2013) 11 SCC 122 (para

6); Chinnamarkathian v. Ayyavoo (1982) 1 SCC 159 (paras 24 to

26); Official Liquidator v. Dharti Dhan (P) Ltd. (1977) 2 SCC 166

(paras 7 to 10); Bachahan Devi v. Nagar Nigam, Gorakhpur (2008)

12 SCC 372 (para 18); Delhi Administration v. Umrao Singh (2012)

76
1 SCC 194 (para 13); and Union of India v. Kumho Petrochemicals

Co. Ltd. (2017) 8 SCC 307 (paras 34 &35).

7.24.4 It is further submitted that the NDMA has not done

anything is otherwise also factually incorrect. It is submitted

that it is uncharitable and unfair to the unprecedented effort

made by the NDMA and various ministries including the Ministry

of Finance. It is submitted that in view of the hearing which took

place before this Court earlier, the NDMA also took cognizance of

the issues being dealt with by the RBI and sent its “views and

recommendations” vide OM dated 28.08.2020 and opined that in

view of the same the RBI may consider granting further reliefs as

deemed appropriate after considering and taking into account the

financial relief packages issued by the Ministry of Finance, as

well as, other relief measures that have already been issued and

declared by RBI itself. It is submitted that “views and

recommendations” of NDMA were communicated to RBI vide

letter dated 31.08.2020.

7.24.5 It is submitted that the “views and recommendations”

of the NDMA deal with broad financial policy decisions having

economic implications and other implications in the banking

77
sector. Therefore, the Ministry of Finance, vide letter dated

31.08.2020, forwarded the “views and recommendations” of the

NDMA to RBI requesting it to consider the “views and

recommendations” of NDMA regarding relief in repayment of

loans by borrowers affected by Covid­19, so that RBI may

consider the same while charting further course of action

depending upon, inter alia, the aforesaid parameters.

7.24.6 It is submitted that therefore in light of the RBI

Circulars dated 27.3.2020, 23.5.2020 and 6.8.2020, read with

the “views and recommendations” of the NDMA regarding relief in

repayment of loans by borrowers affected by Covid­19 expressed

vide OM dated 29.08.2020 and also in light of the various

measures taken by the Central Government, appropriate reliefs

and concessions for repayment of loans by the borrowers affected

by Covid­19 have already been granted. The RBI framework

under the circulars dated 6.8.2020 also adequately addresses the

various concerns expressed by the respective petitioners.

7.25 It is submitted by Shri Mehta, learned Solicitor General that

the packages/reliefs offered by the Central

Government/RBI/Lenders are in the realm of policy decisions. It

78
is submitted that a conscious decision has been taken after

considering every pros and cons and considering various factors

and the priorities in the larger public interest and the economy of

the country. It is submitted that as observed and held by this

Court in the case of Arun Kumar Agrawal v. Union of India (2013)

7 SCC 1 that the matters relating to economic issues, have

always an element of trial and error and so long as a trial and

error is bona fide and with best intentions, such decisions cannot

be questioned as arbitrary, capricious or illegal. It is submitted

that in the aforesaid decision in paragraph 43, this Court has

considered the decision of the Supreme Court of the United

States in the case of Metropolis Theatre Co. v. Chicago, which took

the view that the problems of Government are practical ones and

may justify, if they do not require, rough accommodation,

illogical, if may be, and unscientific. Mere errors of Government

are not subject to our judicial review. It is only its palpably

arbitrary exercises which can be declared void. Shri Mehta has

heavily relied upon paragraphs 41 to 49 of the aforesaid decision,

in which this Court considered various earlier decisions.

79
7.25.1 Relying upon the decision of this Court in the case of

Peerless General Finance and Investment Co. Ltd. v. RBI, (1992) 2

SCC 343, it is submitted that as observed by this Court the

function of the Court is to see that lawful authority is not abused

but not to appropriate to itself the task entrusted to that

authority. It is further observed that the Courts are not to

interfere with economic policy which is the function of experts. It

is not the function of the courts to sit in judgment over matters of

economic policy and it must necessarily be left to the expert

bodies. It is submitted that it is further observed that the

functions of the Court are not to advise in matters relating to

financial and economic policies for which bodies like RBI are fully

competent. It is further observed that the Court can only strike

down some or entire directions issued by the RBI in case the

Court is satisfied that the directions were wholly unreasonable or

violative of any provisions of the Constitution or any statute. He

has relied upon paragraphs 31, 37 and 38 of the aforesaid

decision.

7.25.2 It is further submitted that in the case of Federation of

Railway Officers Association v. Union of India (2003) 4 SCC 289, it

80
is observed that on matters affecting policy and requiring

technical expertise the court would leave the matter for decision

of those who are qualified to address the issues.

7.25.3 It is further submitted that in the case of Dhampur

Sugar (Kashipur) Ltd. v. State of Uttaranchal, (2007) 8 SCC 418, it

is observed by this Court that it is well established that courts

are ill­equipped to deal with the policy matters. It is further

observed that in complex social, economic and commercial

matters, decisions have to be taken by governmental authorities

keeping in view several factors and it is not possible for courts to

consider competing claims and conflicting interests and to

conclude which way the balance tilts. It is submitted that it is

further observed that the court cannot strike down a policy

decision taken by the Government merely because it feels that

another policy decision would have been fairer or wiser or more

scientific or logical. The court can interfere only if the policy

decision is patently arbitrary, discriminatory or mala fide.

7.25.4 On exercise of judicial review, Shri Mehta, learned

Solicitor General has relied upon the following decisions of this

Court, Arun Kumar Agrawal (supra); State of M.P. v. Nandlal

81
Jaiswal
, (1986) 4 SCC 566; BALCO Employees’ Union (Regd.) v.

Union of India, (2002) 2 SCC 333; Peerless General Finance and

Investment Co. Ltd. (supra); Dalmia Cement (Bharat) Ltd. v. Union

of India (1996) 10 SCC 104; Villianur Iyarkkai Padukappu Maiyam

v., Union of India (2009) 7 SCC 561; Narmada Bachao Andolan v.

Union of India, (2000) 10 SCC 664; and R.K. Garg v. Union of India

(1981) 4 SCC 675.

Reply on behalf of the Reserve Bank of India

8. Shri V. Giri, learned Senior Advocate appearing on behalf of

the Reserve Bank of India has made the following submissions:

i) that the RBI has been constituted by the provisions of

Section 3 of the Reserve Bank of India Act, 1934 (for short, ‘RBI

Act’). It has been vested with the responsibility of

superintendence and control of the banking business in the

country under the provisions of the Banking Regulation Act,

1949 (for short, ‘BR Act’). That in view of the various provisions

of the BR Act and the RBI Act, the RBI is obliged to see that the

82
banking business is carried on by banks, prudently and adhering

to sound principles of banking. That the BR Act has conferred

upon the RBI the powers to issue directions under Section 35A to

the banking companies generally or to any banking company in

particular, in public interest or in the interest of the Banking

Policy or to prevent the affairs of the banking company being

conducted in a manner detrimental to the interest of its

depositors or in a manner prejudicial to the banking company.

Furthermore, under Section 21 of the BR Act, the RBI is

conferred with specific powers to determine the policy in relation

to advances to be followed by the banking companies;

ii) that the Legislature has conferred various powers on RBI

empowering it to determine the banking policies to be followed by

the banking companies. That the RBI being the regulator of the

banking sector, took cognizance of the probable stress caused in

the financial situation and conditions of the citizens of this

country – the consequent stress upon the economy due to

outbreak of Covid­19 pandemic and issued a statement on

Development and Regulatory Policies dated 27.03.2020 with the

following objective and purpose:

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i) Expanding liquidity in the system sizeably to ensure
that financial markets and institutions are able to
function normally on the face of COVID­19 related
dislocations;

ii) Reinforcing monetary transmission so that bank credit
flows on easier terms are sustained to those who have
been affected by the pandemic;

iii) Easing financial stress caused by COVID­19 disruptions
by relaxing repayment pressures and improving access
to working capital; and

iv) Improving the functioning of markets in view of the high
volatility experienced with the onset and spread of the
pandemic.

iii) that with a view to ease the financial stress by relaxing

“repayment pressures”, the said Statement on Development and

Regulatory Policy provided for moratorium on term loans. That

following the aforesaid Statement on Development and

Regulatory Policies, a circular was issued titled ‘Covid­19 –

Regulatory Package dated 27.03.2020’, thereby providing detailed

instructions qua the regulatory measures issued by way of the

said Statement. That it provided for rescheduling of payments –

term loans and working capital facilities. That the circular dated

27.03.2020 came to be further modified by the RBI vide Circulars

dated 17.4.2020 titled ‘Covid­19 Regulatory Package – Asset

Classification and Provisioning’ and 23.5.2020 titled ‘Covid­19

Regulatory Package’ whereby the moratorium period came to be

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extended by another three months, i.e., from 1.6.2020 to

31.8.2020 on payment of all instalments in respect of term loans;

iv) that the aforesaid policies/circulars were issued with the

objective of mitigating the burden of debt servicing brought about

by disruptions on account of Covid­19 pandemic and to ensure

the continuity of viable business. It is submitted that therefore,

the regulatory package is, in its essence, in the nature of a

moratorium/deferment and cannot be construed to be a waiver.

It is submitted that, however, in order to ameliorate the

difficulties faced by borrowers in repaying the accumulated

interest for the moratorium/deferment period, it was further

provided in the circular dated 23.5.2020 that in respect of

working capital facilities, lending institutions may, at their

discretion, convert the accumulated interest for the deferment

period up to 31.08.2020, into a funded interest term loan which

shall be repayable not later than 31.03.2021. Further, in respect

of term loans, it has been provided that the repayment schedule

for such loans, including interest as well as principal, as also the

residual tenor, will be shifted across the board;

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v) that the lending institutions are required to frame Board

approved policies for providing the reliefs pursuant to circulars

issued by the RBI from time to time to all eligible borrowers and

disclosed in public domain. Since the customer profile,

organizational structure and spread of each lending institution is

widely different from others, each lending institution is best

placed to assess the requirements of its customers. Therefore,

the discretion was left to the lending institutions concerned;

vi) that the banks are commercial entities that intermediate

between the depositors and the borrowers and are expected to

run on viable commercial considerations. That the banks being

custodians of depositors’ money, their actions need to be guided

primarily by the protection of depositors’ interests. Any

borrowing arrangement is a commercial contract between the

lender and the borrower and the interest rates reflect the same.

That the interest on advances forms an important source of

income for banks and after meeting the cost of funds, the banks

also need to sustain reasonable interest margins for viable

operations;

86

vii) that otherwise the RBI being cognizant of the enormity of

the challenges faced in the wake of Covid­19 has already

announced several measures to mitigate the immediate impact

on the real sector as well as financial sector, namely, Circulars

dated 27.3.2020, 17.4.2020 and 23.5.2020. It is submitted that

the aforesaid circulars/policies were announced with the primary

objective of enabling all key constituents in the economy, most

importantly the borrowers, to cope with the economic fallout.

The overriding objective was to prevent financial markets from

freezing up; ensure normal functioning of financial

intermediaries; ease the stress faced by households and

businesses; and keep the life blood of finance flowing. It is

submitted that many measures/policy decisions have been

announced by the RBI to mitigate the impact of Covid­19, which

are as under:

Major Policy Announcements to Mitigate
the Impact of COVID­19
I. Reduction in Policy Rates

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March 27,  Policy repo rate was reduced by 75 bps to
2020 4.4 per cent. The reverse repo rate was
reduced by 90 bps to 4.0 per cent creating
an asymmetrical corridor1.

April 17,  The reverse repo rate was reduced by 25
2020 basis points to 3.75 per cent.

May 22,          The policy repo rate was reduced by 40 bps
2020              to 4.0 per cent and reverse repo was
                  reduced to 3.35 per cent.

                    II.    Liquidity Operations




1 The purpose of this measure relating to reverse repo rate is to make it
relatively unattractive for banks to passively deposit funds with the Reserve
Bank and instead, to use these funds for on-lending to productive sectors of
the economy.

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February  Announcement of long­term repo operations
6, 2020 (LTROs) to provide durable liquidity at
policy repo rate for 1­3 years to augment
credit flows to productive sectors. The first
such LTRO was conducted on February 17,
2020.

March 12,  It was decided to undertake 6­month US
2020 Dollar sell­buy swap auctions to provide US
Dollar liquidity to the foreign exchange
market2. The first such auction was
conducted on March 16, 2020.

March 27,  Introduced targeted long­term repo
2020 operations (TLTROs) under which liquidity
availed by banks was to be deployed in
investment grade corporate bonds,
commercial paper, and non­convertible
debentures over and above the outstanding
level of their investments in these bonds.

The first such TLTRO auction was
conducted on March 27, 2020.

April 17,  CRR reduced3 by 100 bps to 3.0 per cent of
2020 NDTL effective March 28, 2020 for a period
of one year ending on March 26, 2021.

April 27,  It was decided to conduct Targeted Long­
2020 Terms Repo Operations (TLTROs) 2.0 at the
policy repo rate. Liquidity availed under the
scheme by banks is to be deployed in
investment grade corporate bonds,
commercial paper, and non­convertible
debentures with at least 50 per cent of the
total amount availed going to small and
mid­sized NBFCs and MFIs. The first such
TLTRO 2.0 auction was conducted on April
23, 2020.

2 This measure was announced as financial markets worldwide were facing
intense selling pressures on extreme risk aversion due to the spread of
COVID-19 infections.

3 This reduction in the CRR released primary liquidity of about Rs,1,37,000
crore uniformly across the banking system in proportion to liabilities of
constituents rather than in relation to holdings of excess SLR.

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April 30,  In order to ease the liquidity pressure on
2020 mutual funds, it was decided to open a
special liquidity facility for mutual funds
(SLF­MF). Liquidity availed under the
scheme by banks is to be deployed
exclusively for meeting needs of Mutual
Funds. The first such SLF­MF auction was
conducted on April 27, 2020.

 It was decided to extend regulatory benefits
announced under the SLF­MF scheme to all
banks, irrespective of whether they avail
funding from the Reserve Bank or deploy
their own resources to meet liquidity
October 9, requirements of mutual funds.

2020

 It was decided to conduct on tap TLTRO
with tenors of up to three years for a total
amount of up to Rs.1 lakh crore at a
floating rate linked to the policy repo rate.

Liquidity availed by banks under the
scheme has to be deployed in corporate
bonds, commercial papers, and non­
convertible debentures issued by entities in
specific sectors over and above the
outstanding level of their investments in
such instruments as on September 30,
2020. The liquidity availed under the
scheme can also be used to extend bank
loans to these sectors.

III. Easing Financial Stress for the
borrowers
March 27,  Announcement of regulatory measures to
2020 mitigate the burden of debt servicing and to
ensure the continuity of viable businesses.

The salient features included moratorium
on payment of instalments for term loans
and deferment of interest on working capital
facilities, easing of working capital financing
and exemption from classification of special
mention account (SMA) and NPA on
account of implementation of the above
measures.

90
April, 17,  It was decided that in respect of all
2020 accounts for which lending institutions
decide to grant moratorium or deferment,
and which were standard as on March 1,
2020, the 90­day NPA norm shall exclude
the moratorium period, i.e. there would be
an asset classification standstill for all such
account from March 1, 2020 to May 31,
2020.

 Recognising the challenges to resolution of
stressed assets in the current volatile
environment, the period for resolution plan
under the ‘Prudential Framework’ was
extended by 90 days.

May 23,  Taking forward the COVID­19 regulatory
2020 package released in March and April 2020,
the moratorium/deferment was extended by
another three months till August 31, 2020.

August 6,  Additional measures were announced to
2020 improve access to working capital by
permitting lending institutions to
recalculate the ‘drawing power’ by reducing
the margins till August 31, 2020; and to
review the sanctioned limits up to March
31, 2021.

 The period for resolution plan under the
‘Prudential Framework’ was extended by
another 90 days, i.e. a total of 180 days.

 A window was provided under the
Prudential Framework for Resolution of
Stressed Assets dated June 7, 2019 to
enable the lenders to implement a
resolution plan in respect of eligible
corporate exposure without change in
ownership, and personal loans, while
classifying such exposures as Standard,
subject to specified conditions. Only those
accounts which were classified as Standard
and were not in default for more than 30
days as on March 1, 2020 are eligible for
resolution under this window. The window
may be invoked by December 31, 2020 and

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the resolution plan has to be implemented
within 90 days from date in invocation for
personal loans, and 180 days from the date
of invocation in the case of other loans.

 The existing loans to MSMEs classified as
standard as on March 1, 2020 and where
the aggregate exposure of banks and NBFCs
did not exceed Rs.25 crores as on March 1,
2020 were permitted to be restructured
without a downgrade in asset classification
subject to conditions specified in RBI
Circular dated August 06, 2020 on ‘Micro,
Small and Medium Enterprises (MSME)
sector – Restructuring of Advances’. The
restructuring plan has to be implemented
by March 31, 2021.

September  The recommendations of the Expert
7, 2020 Committee on the required financial
parameters with sector specific benchmark
range for such parameters to be factored in
the resolution plans implemented in terms
of the Resolution Framework dated August
6, 2020 were notified. Lending institutions
are required to consider five key ratios and
the sector­specific thresholds for each while
preparing the financial assumptions in
respect of resolution plans.

IV. Facilitating and incentivising bank
credit flows
February  Cash reserve ratio (CRR) exemption to
6, 2019 scheduled commercial banks (SCBs) for a
period of 5 years (from the date of
origination of the loan or the tenure of the
loan, whichever is earlier) for the amount
equivalent to the incremental credit
extended as retail loans for automobiles,
residential housing and loans to micro,
small and medium enterprises (MSMEs)
during January 31, 2020 and July 31,
2020.

March 27,  The implementation of net stable funding
2020 ratio (NSFR) for banks was deferred by six

92
months from April 1, 2020 to October 1,
2020.

 The implementation of the last tranche of
0.625 per cent of capital conservation buffer
(CCB) for banks was deferred from March
31, 2020 to September 30, 2020.

April 1,  Based on the review and empirical analysis
2020 of counter cyclical capital buffer (CCyB)
indicators, it was decided not to activate
CCyB for a period of one year or earlier, as
may be necessary.

April 17,  With a view to conserve capital of banks to
2020 retain their capacity to support the
economy and absorb losses in an
environment of heightened uncertainty, it
was decided that, banks shall not make any
further dividend payouts from profits
pertaining to the financial year ended
March 31, 2020 until further instructions.

This restriction shall be reviewed on the
basis of the financial position of banks for
the quarter ending September 30, 2020.

 In order to ease the liquidity position at the
level of individual institutions, the LCR
requirement for SCBs was brought down
from 100 per cent to 80 per cent with
immediate effect. The requirement shall be
gradually restored back in two phases – 90
per cent by October 1, 2020 and 100 per
cent by April, 2021.

May 22,  Special refinance facilities for a total
2020 amount of Rs.50,000/­ crore were provided
to NABARD, SIDBI and NHB to enable them
to meet sectoral credit needs4.

May 23,  A line of credit of Rs.15,000/­ crore was
2020
extended to EXIM bank for a period of 90

4 This comprised Rs.25,000/- crore to NABARD for refinancing regional rural
banks (RRBs), cooperative banks and micro finance institutions (MFIs);
Rs.15,000/- crore to SIDBI for on-lending/refinancing; and Rs.10,000/- crore
to NHB for supporting housing finance companies (HFCs). Advances under
this facility were provided at the RBI’s policy repo rate.

93
days from the date of availment with
rollover up to a maximum period of one
year to enable it to avail a US dollar swap
facility to meet its foreign exchange
requirements.

June 21,
2020  With a view to facilitate greater flow of
resources to corporate that faced difficulties
in raising funds from the capital market
and predominantly dependent on bank
funding, caused by sudden market
uncertainties, a bank’s exposure under the
Large Exposure Framework, to a group of
connected counterparties was increased
from 25 per cent to 30 per cent of the
eligible base of the bank. The increased
limit will be applicable up to June 30, 2021.

July 1,
2020  A credit facilities to MSME borrowers,
extended under the emergency credit line
guarantee scheme of GoI guaranteed by
national credit guarantee trustee company
(NCGTC), are backed by an unconditional
and irrevocable guarantee provided by the
GoI, member lending institutions, viz.,
SCBs (including scheduled RRBs), NBFCs
(including HFCs as eligible under the
scheme) and AIFIs, were permitted to assign
zero per cent risk weight on the credit
facilities extended under the scheme to the
extent of guarantee coverage.

August 6,
2020  Banks were permitted to reckon the funds
infused by the promoters in their MSME
units through loans availed under the
Credit Guarantee Scheme for Subordinate
Debt for stressed MSMEs issued by the
Credit Guarantee Fund Trust for Micro and
Small Enterprises (CGTMSE) as
equity/quasi equity from the promoters for
debt­equity computation.

September
29, 2020
 The permissible loan to value ratio (LTV) for
loans against pledge of gold ornaments and

94
jewellery for non­agricultural purposes was
increased from 75 per cent to 90 per cent
with a view to further mitigate the economic
impact of the Covid19 pandemic on
households, entrepreneurs and small
businesses. This enhanced LTV ratio will
be applicable up to March 31, 2021 to
enable the borrowers to tide over their
temporary liquidity mismatches on account
of COVOD­19.

October 9,
2020  The implementation of net stable funding
ratio (NSFR) for banks was deferred by a
further six months from October 1, 2020 to
April 1, 2021.

 The implementation of the last tranche of
0.625 per cent of capital conservation buffer
(CCB) for banks was deferred again from
September 30, 2020 to April 1, 2021.

 The threshold of maximum aggregated retail
exposure of banks to one counterparty,
which attracts lower risk weight of 75 per
cent, has been increased to Rs.7.5 crore in
respect of all fresh as well as incremental
qualifying exposures.

 It has been decided to rationalize the risk
weights for all new housing loans
sanctioned up to March 31, 2022. Such
loans shall attract a risk weight of 35 per
cent where LTV is less than or equal to 80
per cent, and a risk weight of 50 per cent
where LTV is more than 80 per cent but
less than or equal to 90 per cent. This
measure is expected to give a fillip to bank
lending to the real estate sector.

V. Crop Loans
March 31,  Circular on short­term crop loans eligible
2020 for interest subvention scheme (ISS) and
prompt repayment incentive (PRI) extending
the timeline till June 20, 2020, for
converting all short­term crop loans into
KCC loans.

June 4,     Circular on ISS and PRI for short­term crop

                                                             95
      2020         loans during the years 2018­19 and 2019­
                   20 extending moratorium period till August
                   31, 2020.
                   VI. External Trade

April 1,  The period of realization and repatriation to
2020 India of the amount representing the full
export value of goods or software or services
exported was increased from nine months
to fifteen months from the date of export,
for the exports made up to or on July 31,
2020.

May 22,  The time period for completion of
2020 remittances against normal imports, i.e.,
excluding import of gold/diamonds and
precious stones/jewellery (except in cases
where amounts are withheld towards
guarantee of performance) was extended
from six months to twelve months from the
date of shipment for such imports made on
or before July 31, 2020.

May 13,  Interest equalization scheme for pre and
2020 post shipment rupee export credit was
extended by GoI for one more year, i.e., up
to March 31, 2021, effective from April 1,
2020 and all extant operational instructions
issued by the Reserve Bank under the
captioned scheme shall continue to remain
in force up to March 31, 2021.

May 23,  To alleviate genuine difficulties being faced
2020 by exporters in their production and
realization cycles, the maximum
permissible period of pre­shipment and
post­shipment export credit sanctioned by
banks was increased from one year to 15
months, for disbursements made up to July
31, 2020.

8.1 Now so far as the prayers for waiver of interest/interest on

interest during the moratorium period is concerned, it is
96
submitted that any waiver of interest on interest/compound

interest will entail significant economic costs which cannot be

absorbed by the banks without serious debt of their financials,

which in turn will have huge implications for the depositors and

the broader financial stability. It is submitted that, in fact, the

government has come out with the “ex­gratia scheme” and the

government has to bear the cost of the ‘interest on interest’ for

MSME loans and personal loans up to Rs. 2 crores. It is

submitted that therefore waiver of interest and/or interest on

interest/compound interest shall not be in the larger country’s

economy and the bankers.

8.2 Now so far as the prayer for extension of moratorium beyond

31.08.2020 is concerned, it is submitted that the moratorium was

permitted as a part of immediate regulatory response, aimed at

providing temporary reprieve to borrowers affected by the

pandemic, while attempting to preserve the resilience of the

financial system. It entails significant costs to the lenders and a

balance needs to be maintained in the overall consideration. A

long moratorium exceeding six months can also impact credit

behaviour of borrowers and increase the risks of delinquencies

97
post resumption of scheduled payments. It may result in vitiating

the overall credit discipline which will have a debilitating impact

on the process of credit creation in the economy. It will be the

small borrowers which may end up bearing the brunt of the

impact as their access to formal lending channels is critically

dependent on the credit culture. It is submitted that mere

continuation of temporary moratorium would not even be in the

interest of borrowers. It may not be sufficient in addressing

deeper cash flow problems of the borrowers and in fact exacerbate

the repayment pressures for the borrowers. Therefore, a more

durable solution was needed to rebalance the debt burden of

viable borrowers, both businesses as well as individuals, relative

to their cash flow generation abilities. It is submitted that with

this consideration in mind the Reserve Bank has announced the

Resolution Framework for Covid19­related Stress (“Resolution

Framework”) on August 6, 2020, which enabled the lenders to

implement a resolution plan in respect of personal loans as well

as other exposures affected due to Covid19, subject to the

prescribed conditions, without asset classification downgrade.

The framework, inter alia, permits extension of the moratorium by

a maximum of two years.

98
8.3 It is submitted that the Resolution Framework issued by the

Reserve Bank on August 6, 2020 is aimed at facilitating revival of

real sector activities and mitigating the impact on the ultimate

borrowers, which are under financial stress caused by economic

fallout on account of Covid­19 pandemic. It is submitted that in

terms of the Resolution Framework, only those borrower accounts

shall be eligible for resolution which were classified as standard,

but not in default for more than 30 days with any lending

institution as on March 1, 2020.

8.4 It is submitted that the resolution plans implemented under

framework may inter alia rescheduling of payments, conversion of

any interest accrued, or to be accrued, into another credit facility,

or, granting of moratorium, based on an assessment of income

streams of the borrower for two years. The reliefs for each

borrower can be tailored by banks to meet the specific problem

being faced by each borrower depending on need rather than have

a broad­brush approach in dealing with the issue.

8.5 It is submitted that in terms of resolution framework, the

RBI had constituted an Expert Committee under Shri K.V.

Kamath to recommend to the RBI the required financial

parameters, along with the sector specific benchmark ranges for

99
such parameters, to be factored into each resolution plan. That

terms of the reference of the Kamath Committee read as under:

“(a) To identify suitable financial parameters that should be
factored into the assumptions underlying RP finalized
by the lending institutions under the Resolution
Framework. The parameters shall cover aspects
related to leverage, liquidity, debt serviceability, etc.

(b) To recommend sector­specific ranges for such financial
parameters that will serve as boundary conditions for
the RP [Resolution Plan].

(c) To make any other recommendations relating to
financial or non­financial conditions to be considered
for the RP, within the contours of the framework
announced by the Reserve Bank of India.

(d) To undertake the process validations of RP submitted
in respect of borrowers where the aggregate exposure
of the lending institutions at the time of invocation of
the resolution process is Rs.1500 crore and above.

The process validation shall entail verification of the
RP in terms of their adherence to the conditions
prescribed in the Resolution, without interfering with
the commercial judgement exercised by the lenders.”

It is submitted that the Committee has undertaken an

exhaustive task and has given its report dated 4.9.2020. The

recommendations of the Kamath Committee have been broadly

accepted by RBI vide circular dated 7.9.2020. It is submitted

that the Kamath Committee found variable impact of the

pandemic across several sectors, with varying degrees of severity

and varying nature of problems. It is submitted that the

100
Committee found that it is neither possible nor desirable to arrive

at any one particular formula, whether sector­specific or

otherwise, to deal with the stress situation arising from the

unprecedented pandemic. It is submitted that the resolution of

such stressed accounts shall have to be made only by and

between the borrowers and the lending institutions. It is

submitted that the Kamath Committee while identifying 26

sectors, laid down parameters that are to be guidance for the

lending institutions while undertaking the process of

restructuring/resolution.

8.5.1 It is submitted that Kamath Committee based

resolution plans are applicable only to big borrowers having big

and specific problems requiring resolution/restructuring, and

such resolution can be done only after evaluating projections of

cash flows and viability, which requires banking expertise and

knowledge of the finance sector and which can be done only by

the lending institutions on a case­by­case basis.

8.5.2 It is submitted that so far as the borrowers which are

not big borrowers, their accounts are eligible to be restructured

by the respective lending institutions as per RBI circular dated

6.8.2020. It is submitted that the banks are fully empowered to

101
resolve Covid­19 related stress and customize reliefs to individual

borrowers through grant of various concessions/reliefs, inter alia,

in terms of

i) alteration in the rate of interest and haircut on amount payable
as interest;

(ii) extension of the residual tenor of the loan, with or without
moratorium, by up to two years;

(iii) waiving penal interest and charges;

(iv) rescheduling repayment;

(v) converting accumulated interest into a fresh loan with a
deferred payment schedule; and

(vi) sanction of additional loan.

8.5.3 It is submitted that those accounts which are not

covered by Kamath Committee recommendations were not

supposed to wait for their restructuring for Kamath Committee

Report to come out as the said restructuring is not linked to the

parameters to be fixed by the said report. It is submitted that, as

such, the RBI resolution framework offers significant and

appropriate higher relief to borrowers in the 26 sectors identified

as Covid­19 impacted.

9. It is further submitted that the circulars issued by the RBI

are policy decisions taken by the RBI in exercise of the statutory

powers conferred on the bank under the provisions of the BR Act

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and RBI Act. It is submitted that the policy decisions taken by

the RBI and as expressed in various circulars issued by the RBI

in the wake of Covid­19 pandemic, being economic policy matters,

are not amenable to judicial review except when a constitutional

infraction or violation of fundamental rights are made out.

9.1 It is submitted that the concessions that have been offered

across the board by the RBI are offered with the objective to offset

the pervasive impact that the Covid­19 pandemic has had on the

country. The circulars granting moratorium for a period of six

months on repayment of instalments on all term loans and

deferment of interest on working capital facilities; facility for

resolution of Covid­19 related stressed assets are all measures

taken with the objective of enabling sustainable recovery and

facilitating credit flow to the economy, while ensuring financial

stability.

9.2 It is further submitted that as the circulars issued by the

RBI are under Covid­19 package and the resolution framework

issued by the RBI on 6.8.2020 are the policy decisions, the

judicial interference by this Court is not warranted. It is

submitted that every regulatory forbearance has its trade­offs in

terms of adverse incentives and unintended consequences. It is

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submitted that the RBI has exercised its expert wisdom in issuing

binding guidelines to lending institutions on how to differentiate

the risks arising from borrowers with pre­existing financial

difficulties from those which were performing well but had been

impacted by the pandemic. RBI has taken a balanced view,

taking into account the interest of the depositors, borrowers, real

sector entities and banks. Financial stability and economic

growth of the country were also kept in mind while arriving at its

policy decisions by the RBI.

9.3 It is submitted that this Court in a number of decisions have

held that the courts are not to interfere with the economic policy

which is the function of experts. It is not the function of the

courts to sit in judgment over matters of economic policy and it

must necessarily be left to the expert bodies. It is submitted that

even in such matters even experts can seriously and doubtlessly

differ. Courts cannot be expected to decide them without even

the aid of experts. In support of his submission, Shri V. Giri,

learned Senior Advocate has relied upon the following decisions,

Peerless General Finance and Investment Co. Ltd. (supra); Shri

Sitaram Sugar Co. Ltd. V. Union of India (1990) 3 SCC 223; Prag

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Ice & Oil Mills v. Union of India
AIR 1978 SC 1296; and P.T.R.

Exports (Madras) P. Ltd. V. Union of India (1996) 5 SCC 268.

9.4 Making the above submissions and relying upon the above

decisions, it is vehemently submitted by Shri V. Giri, learned

Senior Advocate appearing on behalf of the RBI that the reliefs

sought by the respective petitioners, namely, waiver of interest on

interest/compound interest and waiver of interest during the

moratorium period; moratorium to be permitted for all accounts

instead of being at the discretion of the lenders; extension of

moratorium beyond 31.08.2020; packages/reliefs shall be sector­

wise’ discretion to come under the resolution framework of

6.8.2020 circulars should lie with the borrowers and not with the

lenders, the respective petitioners are not entitled to the said

reliefs.

9.5 Now so far as the prayer in one of the petitions sought in

Writ Petition (Civil) No. 955 of 2020 directing the RBI to apply

circular dated 27.3.2020 to all banks, non­banking financial

companies, housing finance companies and other financial

institutions compulsorily and mandatorily, it is submitted that

the circular dated 27.3.2020 shall be applicable to all loan

accounts of all banks, non­banking financial companies, housing

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finance companies and other financial institutions, subject to

fulfilling the eligibility criteria.

Submissions made by Shri Harish Salve, learned Senior
Advocate

10. Shri Harish Salve, learned Senior Advocate appearing on

behalf of the Indian Banks Association, while opposing the

present petitions, has vehemently submitted that the judicial

review of the policy decisions, more particularly in the field of

economy, would be on very narrow grounds. It is submitted that

the government packages cannot be set aside on the ground of

violation of Article 14 of the Constitution of India. It is true that

it is the duty of the government to bring back the economy on

track. It is submitted that however therefore when a conscious

decision has been taken by the NDMA/UOI through various

ministries, RBI and the lenders, there may be various

options/reliefs which may be available, however ultimately, it is

for the policy maker to take appropriate decisions/frame

appropriate policies after having the expert opinion. It is

submitted that once a conscious decision of various reliefs has

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been taken, unless it is arbitrary and merely because some

sectors are not agreeable, it cannot be set aside. It is submitted

that while announcing various packages/reliefs, each and every

aspect has been considered from all angle.

10.1 It is submitted that the resolution regarding restructuring of

debts is to be considered by the lenders and not by the borrowers.

He has also relied upon catena of decisions of this Court on

judicial review of the policy decisions, relied upon by Shri Tushar

Mehta, learned Solicitor General, referred to hereinabove.

10.2 It is submitted that, as such, various reliefs/measures have

been announced by the RBI. The RBI announced a moratorium

on the repayment of term loans, initially for a period of three

months and further extended by another three months, which

came to an end on 31.08.2020. The avowed object of allowing

such a moratorium was to ease the financial stress that was

being faced by borrowers “by relaxing repayment pressures and

improving access to working capital”. Such measures would

benefit those whose business was otherwise sound but became

victims of the economic meltdown caused by the pandemic. In

the case of individual borrowers having personal accounts, an

entirely different approach was called for and this was finally

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addressed by the government in the package announced by it. It

is submitted that on 6.8.2020 the RBI announced “Resolution

Framework for Covid­19 related stress” thereby permitting banks

to restructure loans of eligible borrowers. This was meticulously

complied with by the banks by putting in place Board approved

policies to grant relief to the borrowers.

10.3 It is submitted that the RBI constituted a Committee, known

as Kamath Committee and Kamath Committee made its

recommendations. It is submitted that Kamath Committee

recommendations were the next step on addressing the economic

problems being faced by businesses in India. It is submitted that

in a number of cases the accounts had become irregular although

not declared as NPA during this period and therefore it has

become necessary to restructure these loans. It is submitted that

there cannot be a single formula applied to all loans and to

different sectors. The Kamath Committee therefore evolved

norms which relaxed the existing norms on which restructuring

of loans were to be affected.

It is submitted that for the purposes of restructuring alone,

the fundamental premise was that the business is viable and

capable of servicing its debt obligations upon restructuring. It is

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for this purpose that different norms were prescribed for

assessing the inherent financial strength of a business.

It is submitted that all the directions of the RBI have been

fully complied with by the banks in letter and spirit and relief has

been granted to the borrowers.

10.4 It is further submitted that the Central Government has

announced various schemes/packages and the same have been

implemented by the banks and have duly granted relief to all the

eligible borrowers in terms of the said schemes/packages.

10.5 Now so far as the reliance placed upon Section 13 of the

DMA 2005 is concerned, it is vehemently submitted by Shri Salve,

learned Senior Advocate that in section 13 the word used is

“may”. It is submitted that the Government has to balance each

sector and Section 13 of the Act uses the words “persons

affected”. It is submitted that different persons/sectors have

impact differently and therefore keeping in mind the different

impact on different persons/sectors, the Central Government

through its various ministries, RBI and the banks have provided

different packages/reliefs.

10.6 It is submitted that, as such, as pointed out by Shri Mehta,

learned Solicitor General, a conscious decision has been taken by

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the NDMA. It is submitted that under the DMA, prevention and

mitigation shall be within the statutory framework.

It is submitted that the architecture of the DMA 2005 is

clearly a structure of enabling powers to be exercised

concurrently with the executive powers of the Government and

other statutory powers available to the Governments at the

Union, State and District levels. It is submitted that therefore

there is no question of there being a power coupled with a duty –

overall duties of each of the statutory functionaries are set out in

the various provisions and enabling provisions are made to give

relief as may become necessary.

It is submitted that there may be a pandemic or a natural

disaster which may not have that degree of economic fallout. It is

submitted that to suggest that the moment there is a disaster,

there is a duty cast upon the NDMA to afford relief from payment

of interest would lead to absurd consequences.

It is submitted that there is no power conferred under the

Act by which the amount due by a private entity to another

private entity can be written off or restructured. The relief under

Section 13 can be granted where interest is payable to the

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Government or by reimbursing the interest payable to a private

entity.

10.7 Now so far as the relief sought of waiver of interest, it is

submitted that IBA has 203 member banks including public

sector banks, private sector banks, foreign banks and other

banks including co­operative banks and regional rural banks. It

is submitted that even on the occurrence of other calamities like

cyclone, earthquake, drought or flood, banks do not waive

interest but provide necessary relief packages to the borrowers. A

waiver can only be granted by the Government out of the

exchequer. It cannot come out of a system from banks, where

credit created out of the depositor’s funds alone. Any waiver will

create a shortfall and a mismatch between the Bank’s assets and

liabilities.

It is submitted that the banks have to keep up with their

interest payment obligations to the depositors who are paid

compound interest with quarterly rests on FDRs. The waiver of

interest obligations would impair the financial structure of the

banks and unleash a greater economic danger than what has

been caused by the pandemic.

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It is submitted that the resolution framework put in place by

the RBI on 6.8.2020 sets out sectoral parameters and thereby

recognizes the difference between the different sectors for

restructuring of loans.

10.8 It is submitted therefore that the policy decisions taken by

the respective banks/lenders considering the recommendations

made by the Kamath Committee and as per the policies/packages

offered by the government may take care of the interest of the

different sectors for restructuring of loans and the same are in

the larger interest of the economy of the country. It is therefore

prayed to dismiss all these petitions.

11. Shri Mukul Rohatgi, learned Senior Advocate appearing on

behalf of the State Bank of India has pointed out the

resolution/policy dated 1.9.2020 approved by the Board of

Directors of the State Bank of India has been framed after

considering the recommendations of the Kamath Committee. He

has also reiterated on judicial review of the economic policy

decisions; adverse effect on the banking system if the prayer of

waiver of interest/penal interest is accepted and on interpretation

of various provisions of DMA 2005.

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12. Having heard learned counsel appearing on behalf of the

respective petitioners and the reliefs sought in the respective

petitions, the reliefs/submissions on behalf of the petitioners can

be summarized as under:

i) a complete waiver of interest or interest on interest during

the moratorium period;

ii) there shall be sector­wise relief packages to be offered by the

Union of India and/or the RBI and/or the Lenders;

iii) moratorium to be permitted for all accounts instead of being

at the discretion of the Lenders;

iv) extension of moratorium beyond 31.08.2020;

v) whatever the relief packages are offered by the Central

Government and/or the RBI and/or the Lenders are not sufficient

looking to the impact due to Covid­19 Pandemic and during the

lockdown period due to Covid­19 Pandemic;

vi) the last date for invocation of the resolution mechanism,

namely, 31.12.2020 provided under the 6.8.2020 circular should

be extended.

13. While considering the aforesaid submissions/reliefs sought,

the scope of judicial review on the policy decisions in the field of

economy and/or economic policy decisions and/or the policy

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decisions having financial implications which affects the economy

of the country are required to be considered.

14. In catena of decisions and time and again this Court has

considered the limited scope of judicial review in economic policy

matters. From various decisions of this Court, this Court has

consistently observed and held as under:

i) The Court will not debate academic matters or concern itself

with intricacies of trade and commerce;

ii) It is neither within the domain of the courts nor the scope of

judicial review to embark upon an enquiry as to whether a

particular public policy is wise or whether better public policy can

be evolved. Nor are the courts inclined to strike down a policy at

the behest of a petitioner merely because it has been urged that a

different policy would have been fairer or wiser or more scientific

or more logical. Wisdom and advisability of economic policy are

ordinarily not amenable to judicial review;

iii) Economic and fiscal regulatory measures are a field where

Judges should encroach upon very warily as Judges are not

experts in these matters.

14.1 In R.K. Garg (supra), it has been observed and held that laws

relating to economic activities should be viewed with greater

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latitude than laws touching civil rights such as freedom of

speech, religion etc. It is further observed that the legislature

should be allowed some play in the joints, because it has to deal

with complex problems which do not admit of solution through

any doctrinaire or strait­jacket formula and this particularly true

in case of legislation dealing with economic matters.

14.2 In the case of Arun Kumar Agrawal (supra), this Court had

an occasion to consider the following observations made the

Supreme Court of the United States in the case of Metropolis

Theatre Co. v. Chicago, 57 L Ed 730: 228 US 61 (1913):

“…The problems of Government are practical ones and
may justify, if they do not require, rough accommodation,
illogical, if may be, and unscientific. But even such
criticism should not be hastily expressed. What is the
best is not always discernible; the wisdom of any choice
may be disputed or condemned. Mere errors of
Government are not subject to our judicial review. It is
only its palpably arbitrary exercises which can be
declared void…”

14.3 This Court in the case of Nandlal Jaiswal (supra) has

observed that the Government, as laid down in Permian Basin

Area Rate Cases, 20 L Ed (2d) 312, is entitled to make pragmatic

adjustments which may be called for by particular

circumstances. The court cannot strike down a policy decision

taken by the State Government merely because it feels that
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another policy decision would have been fairer or wiser or more

scientific or logical. The court can interfere only if the policy

decision is patently arbitrary, discriminatory or mala fide.

14.4 In the case of BALCO Employees’ Union (Regd.) (supra), this

Court has observed that Wisdom and advisability of economic

policies are ordinarily not amenable to judicial review unless it

can be demonstrated that the policy is contrary to any statutory

provision or the Constitution. In other words, it is not for the

courts to consider relative merits of different economic policies

and consider whether a wiser or better one can be evolved.

It is further observed that in the case of a policy decision

on economic matters, the courts should be very circumspect in

conducting an enquiry or investigation and must be more

reluctant to impugn the judgment of the experts who may have

arrived at a conclusion unless the court is satisfied that there is

illegality in the decision itself.

14.5 In the case of Peerless General Finance and Investment

Co. Ltd. (supra), it is observed and held by this Court that the

function of the Court is to see that lawful authority is not

abused but not to appropriate to itself the task entrusted to that

authority. It is further observed that a public body invested with

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statutory powers must take care not to exceed or abuse its

power. It must keep within the limits of the authority committed

to it. It must act in good faith and it must act reasonably.

Courts are not to interfere with economic policy which is the

function of experts. It is not the function of the courts to sit in

judgment over matters of economic policy and it must

necessarily be left to the expert bodies. In such matters even

experts can seriously and doubtlessly differ. Courts cannot be

expected to decide them without even the aid of experts.

It is further observed that it is not the function of the Court

to amend and lay down some other directions. The function of

the court is not to advise in matters relating to financial and

economic policies for which bodies like RBI are fully competent.

The court can only strike down some or entire directions issued

by the RBI in case the court is satisfied that the directions were

wholly unreasonable or in violative of any provisions of the

Constitution or any statute. It would be hazardous and risky for

the courts to tread an unknown path and should leave such task

to the expert bodies. This Court has repeatedly said that

matters of economic policy ought to be left to the government.

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14.6 In the case of Narmada Bachao Andolan (supra), in paras

229 & 233, it is observed and held as under:

“229. It is now well settled that the courts, in the
exercise of their jurisdiction, will not transgress into the
field of policy decision. Whether to have an
infrastructural project or not and what is the type of
project to be undertaken and how it has to be executed,
are part of policy­making process and the courts are ill­
equipped to adjudicate on a policy decision so
undertaken. The court, no doubt, has a duty to see that
in the undertaking of a decision, no law is violated and
people’s fundamental rights are not transgressed upon
except to the extent permissible under the Constitution.

233. At the same time, in exercise of its enormous
power the court should not be called upon to or
undertake governmental duties or functions. The courts
cannot run the Government nor can the administration
indulge in abuse or non­use of power and get away with
it. The essence of judicial review is a constitutional
fundamental. The role of the higher judiciary under the
Constitution casts on it a great obligation as the sentinel
to defend the values of the Constitution and the rights of
Indians. The courts must, therefore, act within their
judicial permissible limitations to uphold the rule of law
and harness their power in public interest. It is precisely
for this reason that it has been consistently held by this
Court that in matters of policy the court will not interfere.

When there is a valid law requiring the Government to act
in a particular manner the court ought not to, without
striking down the law, give any direction which is not in
accordance with law. In other words, the court itself is
not above the law.”

14.7 In Prag Ice & Oil Mills (supra), this Court observed as under:

“We do not think that it is the function of the Court to
set in judgment over such matters of economic policy as
must necessarily be left to the government of the day to

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decide. Many of them are matters of prediction of
ultimate results on which even experts can seriously err
and doubtlessly differ. Courts can certainly not be
expected to decide them without even the aid of
experts.”

14.8 In P.T.R Exports (Madras) P. Ltd. (supra), this Court

observed as under:

“In matters of economic policy, it is settled law that the
Court gives a large leeway to the executive and the
legislature­Government would take diverse factors for
formulating the policy in the overall larger interest of the
economy of the country­The Court therefore would prefer
to allow free play to the Government to evolve fiscal policy
in the public interest and to act upon the same.”

15. What is best in the national economy and in what manner

and to what extent the financial reliefs/packages be formulated,

offered and implemented is ultimately to be decided by the

Government and RBI on the aid and advise of the experts. The

same is a matter for decision exclusively within the province of

the Central Government. Such matters do not ordinarily attract

the power of judicial review. Merely because some class/sector

may not be agreeable and/or satisfied with such

packages/policy decisions, the courts, in exercise of the power of

judicial review, do not ordinarily interfere with the policy

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decisions, unless such policy could be faulted on the ground of

mala fide, arbitrariness, unfairness etc.

16. There are matters regarding which Judges and the Lawyers

of the courts can hardly be expected to have much knowledge by

reasons of their training and expertise. Economic and fiscal

regulatory measures are a field where Judges should encroach

upon very warily as Judges are not experts in these matters.

17. The correctness of the reasons which prompted the

government in decision taking one course of action instead of

another is not a matter of concern in judicial review and the

court is not the appropriate forum for such investigation. The

policy decision must be left to the government as it alone can

adopt which policy should be adopted after considering of the

points from different angles. In assessing the propriety of the

decision of the Government the court cannot interfere even if a

second view is possible from that of the government.

18. Legality of the policy, and not the wisdom or soundness of

the policy, is the subject of judicial review. The scope of judicial

review of the governmental policy is now well defined. The

courts do not and cannot act as an appellate authority

examining the correctness, stability and appropriateness of a

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policy, nor are the courts advisers to the executives on matters

of policy which the executives are entitled to formulate.

19. Government has to decide its own priorities and relief to

the different sectors. It cannot be disputed that pandemic

affected the entire country and barring few of the sectors.

However, at the same time, the Government is required to take

various measures in different fields/sectors like public health,

employment, providing food and shelter to the common

people/migrants, transportation of migrants etc. and therefore,

as such, the government has announced various financial

packages/reliefs. Even the government also suffered due to

lockdown, due to unprecedented covid­19 pandemic and also

even lost the revenue in the form of GST. Still, the Government

seems to have come out with various reliefs/packages.

Government has its own financial constraints. Therefore, as

such, no writ of mandamus can be issued directing the

Government/RBI to announce/declare particular relief packages

and/or to declare a particular policy, more particularly when

many complex issues will arise in the field of economy and what

will be the overall effect on the economy of the country for which

the courts do not have any expertise and which shall be left to

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the Government and the RBI to announce the relief

packages/economic policy in the form of reliefs on the basis of

the advice of the experts. Therefore, no writ of mandamus can

be issued.

20. No State or country can have unlimited resources to spend

on any of its projects. That is why it only announces the

financial reliefs/packages to the extent it is feasible. The court

would not interfere with any opinion formed by the Government

if it is based on the relevant facts and circumstances or based on

expert advice. It is not normally within the domain of any court

to weigh the pros and cons of the policy or to scrutinize it and

test the degree of its beneficial or equitable disposition for the

purpose of varying, modifying or annulling it, based on

howsoever sound and good reasoning, only where it is arbitrary

and violative of any Constitutional, statutory or any other

provisions of law. When Government forms its policy, it is based

on a number of circumstances on facts, law including

constraints based on its resources. It is also based on expert

opinion. It would be dangerous if court is asked to test the

utility, beneficial effect of the policy or its appraisal based on

facts set out on affidavits.

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21. No right could be absolute in a welfare State. Man is a

social animal. He cannot live without the cooperation of a large

number of persons. Every article one uses is the contribution of

many. Hence every individual right has to give way to the right of

the public at large. Not every fundamental right under Part III of

the Constitution is absolute and it is to be within permissible

reasonable restriction. This principal equally applies when there

is any constraint on the health budget on account of financial

stringencies.

It is the cardinal principle that it is not within the legitimate

domain of the court to determine whether a particular policy

decision can be served better by adopting any policy different

from what has been laid down and to strike down as

unreasonable merely on the ground that the policy enunciated

does not meet with the approval of the court in regard to its

efficaciousness for implementation of the object and purpose of

such policy decision.

22. With the limited scope of judicial review on the policy

decisions affecting the economy and/or it might have financial

implications on the economy of the country, the reliefs and

submissions stated hereinabove are required to be considered.

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Whether there shall be a waiver of interest during the moratorium

period or whether there shall be sector­wise relief packages

and/or RBI should have issued directions which are sector

specific and addressing such sector specific issues and/or

whether the moratorium period should be extended beyond

31.08.2020 or the last date for invocation of the resolution

mechanism, namely, 31.12.2020 provided in the 6.8.2020

circular should be extended are all in the realm of the policy

decisions. Not only that, if such reliefs are granted, it would

seriously affect the banking sectors and it would have far

reaching financial implications on the economy of the country.

23. Now so far as the relief sought of waiver of interest during

the moratorium period is concerned, it is required to be noted

that the bankers/lenders have to pay the interest to the

depositors and their liability to pay the interest on the deposits

continue even during the moratorium period. There shall be

administrative expenses also required to be borne by the

bankers/lenders. Continue payment of interest to depositors is

not only one of the most essential banking activities but it shall

be a huge responsibility owed by the banks to crores and crores

of small depositors, pensioners etc. surviving on the interest from

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their deposits. There may be several welfare funds schemes,

category specific and sector specific which might be surviving and

are implemented on the strength of the interest generated from

their deposits. All such welfare funds would depend on the

income generated from their deposits for the survival of their

members. Therefore, to grant such a relief of total waiver of

interest during the moratorium period would have a far­reaching

financial implication in the economy of the country as well as the

lenders/banks. Therefore, when a conscious decision has been

taken not to waive the interest during the moratorium period and

a policy decision has been taken to give relief to the borrowers by

deferring the payment of installments and so many other reliefs

are offered by the RBI and thereafter by the bankers

independently considering the Report submitted by Kamath

Committee consisting of experts, the interference of the court is

not called for.

24. Now so far as the submission on behalf of the petitioners

that the RBI should have issued directions which are sector

specific and addressing such sector specific issues is concerned,

at the outset, it is required to be noted that as such the

Committee headed by Shri K.V. Kamath had gone into such

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sector specific issues and gave its recommendations. The

recommendations of the Kamath Committee have been

substantially accepted by the RBI in its circular dated 7.9.2020

which provides for separate threshold for 26 sectors including

power, real estate and construction. Even otherwise, it is

required to be noted that every sector might have suffered

differently and therefore it will not be possible to provide sector

specific/sector­wise reliefs. The petitioners cannot pray for sector

specific relief by either waiver of interest or restructuring by way

of present proceedings under Article 32 of the Constitution of

India and the question of such financial stress management

measures requires examination and consideration of several

financial parameters and its impact.

25. Now so far as the submission on behalf of the petitioners

that as per the notifications/circulars/reliefs offered by the RBI

and/or Finance Department of the Union of India ultimately it is

left to the bankers and it should not have been left to the bankers

and the Government/RBI must intervene and provide further

reliefs is concerned, at the outset, it is required to be noted that

as such the bankers are commercial entities and since the

customer profile, organizational structure and spread of each

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lending institution is widely different from others, each lending

institution is best placed to assess the requirements of its

customers and therefore, the discretion was left to the lending

institutions concerned. Any borrowing arrangement is a

commercial contract between the lender and the borrower. RBI

and/or the Union of India can provide for broad guidelines while

recommending to give the reliefs.

26. Now so far as the submission on behalf of the petitioners

that the relief packages which are offered by the

UOI/RBI/Bankers/Lenders are not sufficient and some better

and/or more reliefs should be offered is concerned, it is not

within the judicial scope of the courts to issue such directions.

No     mandamus         can   be     issued   to   grant   some      more

reliefs/packages.       As observed hereinabove, the court cannot

interfere with the economic policy decisions on the ground that

either they are not sufficient or efficacious and/or some more

reliefs should have been granted. The Government might have

their own priorities and the Government has to spend in various

fields and in the present case like health, medicine, providing

food etc. Even as per the case of the Union of India and so stated

in the counter filed on behalf of the Union of India and the RBI,

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so many policies have been announced to mitigate the impact of

Covid­19 pandemic, which are referred to hereinabove.

As can be seen that as such the Central Government has

already given various reliefs and by providing various reliefs, they

have already expanded huge financial burden. It is required to be

noted that pandemic has caused stress to large and small

businesses and the individuals who have lost jobs and

livelihoods. By and large, everybody has suffered due to

lockdown due to Covid­19 pandemic. Even the Government has

also suffered due to non­recovery of GST. From the counter filed

on behalf of the Central Government, it appears that the

Government has announced and offered ‘Garib Kalyan Package’

and ‘Aatma Nirbhar Package’. The ‘Garib Kalyan Package’ was for

Rs.1.70 lakh crores, involving free food grains, pulses, gas

cylinders and cash payment to women, poor senior citizens and

farmers. It is reported that more than 42 crore poor people

received financial assistance of Rs. 65,454 crores under the said

package. The Government has also come out with ‘Aatma

Nirbhar Package’ which was for Rs. 20 lakh crores, involving

support to MSMEs, Non­Banking Finance Companies,

agriculture, sectors allied to agriculture, contractors, street

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vendors, State Governments, relief in provident fund

contribution, extension of subsidy on home loans etc. Therefore,

it cannot be said that the Central Government and/or the RBI

have not done anything and/or have not offered any reliefs

whatsoever. While offering the financial relief packages, the

financial constraint and/or financial burden on the government is

also required to be considered and borne in mind, which can be

considered by the experts and the government and the courts

have not expertise to assess the financial burden.

From the various steps/measures/policy

decisions/packages declared by the Union of India/RBI and the

bankers, it cannot be said that the UOI and/or the RBI have not

at all addressed the issues related to the impact of Covid­19 on

the borrowers. As such, none of the petitioners have specifically

challenged the various circulars/policy decisions taken by the

UOI/RBI. From the submissions made by the learned counsel

appearing for the respective parties, it appears that the borrowers

want something more than the reliefs announced. Merely, since

the reliefs announced by the UOI/RBI ither may not be suiting

the desires of the borrowers, the reliefs/policy decisions related to

Covid­19 cannot be said to be arbitrary and/or violative of Article

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14
of the Constitution of India. It cannot be said that any of the

fundamental rights guaranteed under the Constitution are

infringed and/or violated. Economic decisions are required to be

taken keeping the larger economic scenario in mind.

27. Similarly, the relief sought that the moratorium period

should be extended and/or the last date for invocation of the

resolution mechanism namely 31.12.2020 provided under the

06.08.2020 circular should be extended are all in the realm of

policy decisions. Even otherwise, almost five months were

available to eligible borrowers when circular dated 6.8.2020 was

notified providing for a separate resolution mechanism for Covid­

19 related stressed assets. Therefore, sufficient time was given to

invoke the resolution mechanism.

Therefore, the petitioners shall not be entitled to any reliefs,

namely,

(i) total waiver of interest during the moratorium period;

(ii) to extend the period of moratorium;

(iii) to extend the period for invocation of the resolution

mechanism, namely 31.12.2020 provided under the 6.8.2020

circular;

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(iv) that there shall be sector­wise reliefs provided by the RBI;

and

(v) that the Central Government/RBI must provide for some

further reliefs over and above the relief packages already offered

which, as observed hereinabove, can be said to be in the realm of

the economic policy decisions and for the reasons stated

hereinabove and as observed hereinabove granting of any such

reliefs would have a far­reaching financial implication on the

economy of the country. It appears, whatever best can be offered

has been offered for the different fields and to the common people

as well as those persons who are affected due to Covid­10

pandemic. However, the relief/prayer not to charge the penal

interest/interest on interest/compound interest during the

moratorium period is concerned, it stands on different footing

which shall be dealt with hereinbelow.

28. Now so far as the submission of Shri Sibbal, learned Senior

Advocate that there is no “National Plan” drawn up for the

disaster management due to Covid­19 pandemic and that NDMA

has not performed its duty under the DMA 2005 is concerned, to

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appreciate the above, the relevant provisions of DMA 2005 are

required to be referred to and considered.

Section 3 of the Act provides for establishment of National

Disaster Management Authority which shall consist of the Prime

Minister of India, who shall be the Chairperson of the National

Disaster Management Authority and other members not

exceeding nine, to be nominated by the Chairperson of the

National Authority. Powers and functions of the National

Authority are provided under Section 6, which reads as under:

“6. Powers and functions of National Authority.—(1) Subject to the
provisions of this Act, the National Authority shall have the
responsibility for laying down the policies, plans and guidelines for
disaster management for ensuring timely and effective response to
disaster.

(2) Without prejudice to generality of the provisions contained in
sub­section (1), the National Authority may —

(a) lay down policies on disaster management;

(b) approve the National Plan;

(c) approve plans prepared by the Ministries or Departments of the
Government of India in accordance with the National Plan;

(d) lay down guidelines to be followed by the State Authorities in
drawing up the State Plan;

(e) lay down guidelines to be followed by the different Ministries or
Departments of the Government of India for the purpose of
integrating the measures for prevention of disaster or the
mitigation of its effects in their development plans and projects;

(f) coordinate the enforcement and implementation of the policy
and plan for disaster management;

(g) recommend provision of funds for the purpose of mitigation;

(h) provide such support to other countries affected by major
disasters as may be determined by the Central Government;

(i) take such other measures for the prevention of disaster, or the
mitigation, or preparedness and capacity building for dealing with
the threatening disaster situation or disaster as it may consider
necessary;

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(j) lay down broad policies and guidelines for the functioning of the
National Institute of Disaster Management.

(3) The Chairperson of the National Authority shall, in the case of
emergency, have power to exercise all or any of the powers of the
National Authority but exercise of such powers shall be subject to
ex post facto ratification by the National Authority.”

Section 7 provides for constitution of Advisory Committee by

National Authority, which shall consist of experts in the field of

disaster management and having practical experience of disaster

management at the national, State or district level to make

recommendations on different aspects of disaster management.

Then comes constitution of National Executive Committee as per

section 8 of the Act, to assist the National Authority in the

performance of its functions under the Act. The National

Executive Committee shall consist of the Secretary to the

Government of India, in charge of the Ministry or Department of

the Central Government having administrative control of the

disaster management, who shall be the Chairperson, ex officio,

and the Secretaries to the Government of India in the Ministries

or Departments having administrative control of the agriculture,

atomic etc., as mentioned in Section 8(2)(b) of the Act. As per

Section 9 of the Act, the National Executive Committee, as and

when it considers necessary, constitute one or more sub­

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committees for the efficient discharge of its functions. The

powers and functions of the National Executive Committee are

as per Section 10 of the Act, and more particularly (a) to act as

the coordinating and monitoring body for disaster

management…. (b) coordinate and monitor the implementation

of the National policy; (c) monitor the implementation of the

National Plan and the plans prepared by the Ministries or

Departments of the Government of India; (d) monitor the

implementation of the guidelines laid down by the National

Authority for integrating of measures for prevention of disasters

and mitigation by the Ministries or Departments in their

development plans and projects; (e) monitor, coordinate and give

directions regarding the mitigation and preparedness measures

to be taken by different Ministries or Departments and agencies

of the Government; (f) lay down guidelines for, or give directions

to, the concerned Ministries or Departments of the Government

of India, the State Governments and the State Authorities

regarding measures to be taken by them in response to any

threatening disaster situation or disaster; (g) advise, assist and

coordinate the activities of the Ministries or

Departments….engaged in disaster management. Section 11 of

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the Act provides for preparation/drawing up a Plan called the

“National Plan” for disaster management for the whole of the

country. The National Plan shall include­

(a) measures to be taken for the prevention of disasters, or the
mitigation of their effects;

(b) measures to be taken for the integration of mitigation measures
in the development plans;

(c) measures to be taken for preparedness and capacity building to
effectively respond to any threatening disaster situations or
disaster; (d) roles and responsibilities of different Ministries or
Departments of the Government of India in respect of measures
specified in clauses (a), (b) and (c).

Section 12 of the Act provides for issuance of guidelines by

the National Authority for minimum standards of relief. Section

13 of the Act provides for relief in repayment of loan etc., which

shall be dealt with hereinbelow at an appropriate stage. Section

14 of the Act provides for establishment of State Disaster

Management Authority. Similar provisions like National

Disaster Management Authority are made with respect to State

Disaster Management Authority. Section 33 provides for State

Disaster Management Plan. Similar provisions are made with

respect to District Disaster Management Authority and the

District Plan. Section 35 of the Act provides for measures to be

taken by the Central Government for disaster management.

Section 35 reads as under:

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“35. Central Government to take measures.—(1) Subject to the
provisions of this Act, the Central Government shall take all such
measures as it deems necessary or expedient for the purpose of
disaster management.

(2) In particular and without prejudice to the generality of the
provisions of sub­section (1), the measures which the Central
Government may take under that sub­section include measures
with respect to all or any of the following matters, namely:—

(a) coordination of actions of the Ministries or Departments of the
Government of India, State Governments, National Authority, State
Authorities, governmental and non­governmental organizations in
relation to disaster management;

(b) ensure the integration of measures for prevention of disasters
and mitigation by Ministries or Departments of the Government of
India into their development plans and projects;

(c) ensure appropriate allocation of funds for prevention of disaster,
mitigation, capacity­building and preparedness by the Ministries or
Departments of the Government of India;

(d) ensure that the Ministries or Departments of the Government of
India take necessary measures for preparedness to promptly and
effectively respond to any threatening disaster situation or disaster;

(e) cooperation and assistance to State Governments, as requested
by them or otherwise deemed appropriate by it;

(f) deployment of naval, military and air forces, other armed forces
of the Union or any other civilian personnel as may be required for
the purposes of this Act;

(g) coordination with the United Nations agencies, international
organizations and governments of foreign countries for the
purposes of this Act;

(h) establish institutions for research, training, and developmental
programmes in the field of disaster management;

(i) such other matters as it deems necessary or expedient for the
purpose of securing effective implementation of the provisions of
this Act.

(3) The Central Government may extend such support to other
countries affected by major disaster as it may deem appropriate.”

Section 36 of the Act provides for responsibilities of the

Ministries or Departments of the Government of India, which

reads as under:

“36. Responsibilities of Ministries or Departments of Government of
India.—It shall be the responsibility of every Ministry or
Department of the Government of India to—

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(a) take measures necessary for prevention of disasters, mitigation,
preparedness and capacity­building in accordance with the
guidelines laid down by the National Authority;

(b) integrate into its development plans and projects, the measures
for prevention or mitigation of disasters in accordance with the
guidelines laid down by the National Authority;

(c) respond effectively and promptly to any threatening disaster
situation or disaster in accordance with the guidelines of the
National Authority or the directions of the National Executive
Committee in this behalf;

(d) review the enactments administered by it, its policies, rules
and regulations, with a view to incorporate therein the provisions
necessary for prevention of disasters, mitigation or preparedness;

(e) allocate funds for measures for prevention of disaster,
mitigation, capacity­building and preparedness;

(f) provide assistance to the National Authority and State
Governments for—

(i) drawing up mitigation, preparedness and response plans,
capacity­building, data collection and identification and training
of personnel in relation to disaster management;

(ii) carrying out rescue and relief operations in the affected area;

(iii)assessing the damage from any disaster;

(iv) carrying out rehabilitation and reconstruction;

(g) make available its resources to the National Executive
Committee or a State Executive Committee for the purposes of
responding promptly and effectively to any threatening disaster
situation or disaster, including measures for—

(i) providing emergency communication in a vulnerable or
affected area;

(ii) transporting personnel and relief goods to and from the
affected area;

(iii)providing evacuation, rescue, temporary shelter or other
immediate relief;

(iv) setting up temporary bridges, jetties and landing places;

(v) providing, drinking water, essential provisions, healthcare,
and services in an affected area;

(h) take such other actions as it may consider necessary for
disaster management.”

Section 37 of the Act provides for preparation of the Disaster

Management Plans of Ministries or Departments of Government

of India. Section 38 provides for measures to be taken by the

State Government.

137

29. From the aforesaid, it can be said that the DMA 2005 is a

complete code in itself and different functions and responsibilities

by different authorities to be performed at different levels are

provided. As per Sections 35 and 36 of the Act, it shall be the

responsibility of the Ministry or the Department of the

Government of India to take measures necessary for prevention of

disaster, mitigation, preparedness and capacity­building which

shall include to allocate funds for measures for preparation of

disaster, mitigation, capacity­building and preparedness.

Therefore, on conjoint reading of the relevant provisions of

the DMA 2005, which are referred to hereinabove, it cannot be

said that the functions of all the Ministries are to be discharged

by the NDMA which should take decision qua the area in each

Ministry. It also cannot be said that the functions of the

Ministries will stand transferred to the NDMA and will have to be

discharged by the NDMA either directly or indirectly for the

purpose of disaster management. Various Ministries under the

Central Government have to take various relief measures within

their respective spheres for remedying the effects of the disaster.

From the pleadings, it is borne out that in fact there is already a

National Disaster Management Plan prepared even prior to the

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Covid­19 pandemic. Under the National Plan, there is a National

Disaster Management Institutional Mechanism, which is

reproduced hereinabove. The said plan also envisages nodal

ministries for management of different disasters. For example, if

the disaster is due to drought, Ministry of Agriculture and

Farmers Welfare would be the nodal agency; if the disaster is due

to floods, Ministry of Housing and Urban Affairs would be the

nodal agency and if the disaster is due to “biological

emergencies”, the Ministry of Health and Welfare would be the

nodal agency. The disaster due to Covid­19 pandemic would fall

under disaster due to “biological emergencies”. However, it

appears that Covid­19 pandemic disaster is of such a nature that

it could not be confined to one nodal ministry and whatever

measures/reliefs are required to be taken/given are provided by

every Ministry in each and every day needed. Therefore, various

reliefs/packages are provided by different Ministries, such as,

Ministry of Railways, Ministry of Finance, Ministry of Health and

Family Welfare etc. It also appears that even considering the very

nature of the pandemic which would have PAN­India impact,

empowered groups were constituted by the National Disaster

Management Authority. Therefore, when there is already in

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existence a National Plan, which might have been prepared even

prior to the Covid­19 pandemic, it cannot be said that there is no

National Plan by the NDMA at all. National Plan would be for a

long term and even with respect to disaster to happen in future.

For every disaster, there shall not be a new National Plan.

National Plan would be comprehensive in nature which is already

there in existence. Therefore, the submission of Shri Sibbal,

learned Senior Advocate that there is no National Plan at all and

therefore the NDMA has failed to perform its duty cannot be

accepted.

30. Now so far as the submission on behalf of the learned

counsel for the respective petitioners that the NDMA has failed to

perform its duty cast under Section 13 of the Act is concerned, at

the outset, it is required to be noted that the word used in Section

13 is “may” and not “shall”. As per the settled proposition of law,

while interpreting a particular provision, the language used is to

be read as it is. On a fair reading of Section 13, it appears that

the legislature has deliberately used the word “may”. This “may”

is used after considering the object and purpose of the Act as a

whole as well as the role to be placed by the Central Government

through different ministries, role to be placed by the State
140
Government, role to be played by the District Authority at the

district level. In the present case, the Ministry of Finance and the

RBI have already come out with different packages/reliefs in

repayment of loans or grant of fresh loans to the persons affected

by disaster.

30.1 Even the Central Government through Ministry of Finance

and the RBI has taken various steps for granting reliefs to the

disaster affected borrowers. The Central Government has

announced the ‘Garib Kalyan Package’ for Rs.2.00 lakh crores,

involving free food grains, pulses, gas cylinders and cash payment

to women, poor senior citizens and farmers; ‘Aatma Nirbhar

Package’ for various sectors like power sector, real estate sector,

MSME sector. The Central Government also promulgated

Emergency Credit­Linked Guarantee Scheme of Rs. 3 lakh crores

providing additional credit at lower rate of interest, with 100%

Government Guarantee and no fresh collateral. The scheme has

been extended with higher financial limits to 27 Covid­19

impacted sectors including restaurant and hotel sectors. The

Central Government has also granted Rs. 20,000 crores

Subordinate Debt with partial credit guarantee for over two lakhs

stressed MSME units including from hospitality sector. The

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Central Government has also granted Rs. 50,000 crores Fund of

Funds for providing growth equity to MSMEs. The Central

Government has also come out with a new definition of MSMEs

for improving turnover caps for better access of

schemes/benefits. There are other reliefs also announced by the

Central Government. The Central Government has also declared

the moratorium from March to August, 2020. The proceedings

under the IBC are also suspended during the moratorium period.

30.2 As per the provisions of the DMA 2005, the responsibilities

and functions of the discharge of functions by the NDMA would

be confined to Section 6 of the Act. However, on­ground disaster

management and relief measures shall have to be undertaken by

the Central Ministries and the State Government Ministries

depending upon the need of the disaster and only in a case where

the NDMA is satisfied that the reliefs which are already

announced are not sufficient and/or no steps are taken at all

with respect to the reliefs mentioned in Section 13, the National

Authority may recommend the reliefs in repayment of loans etc.

Therefore, it cannot be said that the National Authority has failed

to perform its duty as cast under Section 13 of the Act.

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30.3 At this stage, it is required to be noted and so stated in the

affidavit dated 31.08.2020 filed on behalf of the Union of India

that NDMA also took cognizance of the issues being dealt with by

the RBI and sent its “views and recommendations” given by O.M.

dated 28.08.2020 and the NDMA also opined that RBI may

consider granting further reliefs, as deemed appropriate, after

considering and taking into account the financial relief packages

issued by the Ministry of Finance, as well as, other relief

measures that have already been issued/declared by the RBI

itself. The “views and recommendations” of the NDMA were

communicated to the RBI vide letter dated 31.08.2020.

Therefore, it cannot be said that the NDMA has not stepped into

at all. It is to be noted that even as per Section 13 of the Act, the

National Authority “may” and “recommend” relief in repayment

of loans or grant of fresh loans to the persons affected by disaster

on such concessional terms as may be appropriate. Thereafter, as

per the “views and recommendations” of the NDMA, RBI has come

out with Resolution framework and on the basis of the same the

lenders/bankers after getting the approval of their Board of

Directors have come out with the policies. Thus, from the above,

it cannot be said that NDMA has failed to perform its duty cast

143
under Section 13 of the Act. From the above, it also cannot be

said that there is no National Plan in existence at all.

31. Now so far as the charging of penal interest/interest on

interest/compound interest during the moratorium period is

concerned, it stands absolutely on a different footing. At this

stage, it is required to be noted that in fact the Central

Government has come out with a policy decision subsequently by

which it is decided not to charge the interest on interest on the

loans up to Rs. 2 crores. However, such relief is restricted to the

following categories:

  (i)       MSME loans up to Rs.2 crore

  (ii)      Education loans up to Rs.2 crore

  (iii)     Housing loans up to Rs.2 crore

  (iv)      Consumer durable loans up to Rs.2 crore

  (v)       Credit card dues up to Rs.2 crore

  (vi)      Auto loans up to Rs.2 crore

  (vii)     Personal loans to professionals up to Rs. 2 crore

  (viii) Consumption loans up to Rs.2 crore



There is no justification shown to restrict the relief of not

charging interest on interest with respect to the loans up to Rs. 2

crores only and that too restricted to the aforesaid categories.

What are the basis to restrict it to Rs. 2 crores are not

144
forthcoming. Therefore, as such, there is no rational to restrict

such relief with respect to loans up to Rs. 2 crores only. Even

otherwise, it is required to be noted that the scheme dated

23.10.2020 granting relief/benefit of waiver of compound

interest/interest on interest contains eligibility criteria and it

provides that any borrower whose aggregate of all facilities with

lending institution is more than Rs. 2 crores (sanctioned limit or

outstanding amount) will not be eligible for ex­gratia payment

under the said scheme. Therefore, if the total exposure of the

loan at the grant of the sanction is more than Rs. 2 crores, the

borrower will be ineligible irrespective of the actual outstanding.

For Example, if the borrower has been sanctioned a loan of Rs. 5

crores and has availed of the same, even though he might have

repaid substantially bringing down the principal amount of less

than Rs. 2 crores as on 29.02.2020, but because of the sanction

of the loan amount of more than Rs. 2 crores, he will be ineligible.

It also further provides that the outstanding amount should not

be exceeded to Rs. 2 crores and for this purpose aggregate of all

facilities with the lending institution will be reckoned. Therefore,

if a borrower, for example, MSME Category has availed and has

outstanding of business loan of Rs. 1.99 crores and also has dues

145
of its credit card of Rs. 1.10 lakhs, thereby making the aggregate

to Rs. 2.10 crores, it stands ineligible. Therefore, the aforesaid

conditions would be arbitrary and discriminatory.

31.1 Even otherwise, it is required to be noted that compound

interest/interest on interest shall be chargeable on

deliberate/willful default by the borrower to pay the installments

due and payable. Therefore, it is in the nature of a penal interest.

By notification dated 27.03.2020, the Government has provided

the deferment of the installments due and payable during the

moratorium period. Once the payment of installment is deferred

as per circular dated 27.03.2020, non­payment of the installment

during the moratorium period cannot be said to be willful and

therefore there is no justification to charge the interest on

interest/compound interest/penal interest for the period during

the moratorium. Therefore, we are of the opinion that there shall

not be any charge of interest on interest/compound

interest/penal interest for the period during the moratorium from

any of the borrowers and whatever the amount is recovered by

way of interest on interest/compound interest/penal interest for

the period during the moratorium, the same shall be refunded

146
and to be adjusted/given credit in the next instalment of the loan

account.

32. In view of the above and for the reasons stated hereinabove,

the present petitions seeking reliefs, namely, (i) total waiver of

interest during the moratorium period; (ii)to extend the period of

moratorium; (iii) to extend the period for invocation of the

resolution mechanism, namely 31.12.2020 provided under the

6.8.2020 circular; (iv)that there shall be sector­wise reliefs

provided by the RBI; and (v)that the Central Government/RBI

must provide for some further reliefs over and above the relief

packages already offered stand dismissed. Connected IAs stand

disposed of.

However, it is directed that there shall not be any charge of

interest on interest/compound interest/penal interest for the

period during the moratorium and any amount already recovered

under the same head, namely, interest on interest/penal

interest/compound interest shall be refunded to the concerned

borrowers and to be given credit/adjusted in the next instalment

of the loan account. All these petitions are partly allowed to the

aforesaid extent only and as observed for the reliefs, the petitions

147
are dismissed. Interim relief granted earlier not to declare the

accounts of respective borrowers as NPA stands vacated.

However, there shall be no order as to costs.

Writ Petition (Civil) No. 955 of 2020

Writ Petition (Civil) No. 955 of 2020 stands disposed of in

terms of the statement made by Shri V. Giri, learned Senior

Advocate appearing on behalf of the RBI that Circular dated

27.03.2020 shall be applicable to all banks, non­banking

financial companies, housing finance companies and other

financial institutions compulsorily and mandatorily.

…………………………………J.

[ASHOK BHUSHAN]

…………………………………J.

                                        [R. SUBHASH REDDY]


NEW DELHI;                              …………………………………J.
MARCH 23, 2021.                         [M.R. SHAH]




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