TMI Blog2020 (7) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... to ensure the continuity of a viable business, which is in the interest of the country and as such in the public interest. In the present case, it is not an Employer-employee dispute, recruitment dispute or one relating to contractual terms, but a dispute relating to the enforcement of a Circular issued by the RBI, as that in the case laws relied upon by Mr Holla, Learned Senior Counsel. The said Circular having been issued to protect and preserve the economy of the country on account of the COVID 19 pandemic. The issuance of the Circular is in the public interest, interest of the economy and the country. The enforcement thereof would also come within the purview of enforcing a public duty - a writ petition would be maintainable against the Respondents in the present facts and circumstances for the enforcement of the public duty under the Circular dated 27.03.2020. Is the Circular issued by the RBI dated 27.03.2020 mandatory, directory or discretionary? - Whether the grant of a moratorium is at the discretion of the Bank or as a corollary would it be a right to be exercised by the borrower? - HELD THAT:- All corporate, as well as SME customers, are eligible for a moratorium ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctured loan like LRD availed by the Petitioner since the appropriation of the monies of the LRD would have a negative impact on the continuity of the Petitioner itself - There is no distinction in terms of the Policy and Circular, giving a separate treatment to structured loans. Hence Circular is applicable to all loans/advances and facilities extended by a lending institution, including structured loans. Where multiple banks are involved in a loan transaction, can one Bank deny the extension of a moratorium, when another is willing to extend the benefit of a moratorium? - HELD THAT:- The Board approved Policy of Respondent No.5-HDFC apart from not having any objective criteria contained therein, it does not also deal with a situation where there are other loans apart from the structured loan in favour of HDFC Bank. The said Policy reads as if there is only one loan and there is only one lender in respect of such structured loan - The Policy relating to a consortium or multiple bank lending only contemplates that a Bank in the consortium ought to extend the moratorium on terms similar to those offered by HDFC. This would presuppose a situation where Respondent No.5-HDFC has ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e implementation of the Circular. The contentions of the RBI that the dispute is between the Petitioner and Respondents No.5 to 7 is not acceptable since the dispute arises out of the implementation or not of a Circular issued by the RBI. RBI is therefore directed to monitor the implementation of the Circular, including verification of whether there are Board-approved policies formulated by each of the lenders, direct all the banks to submit the Board-approved policies for approval to the RBI, to approve such board-approved policy, verify if such a board-approved policy contains objective criteria, set up a proper and effective grievance redressal forum for any aggrieved borrower to approach on account of the improper or non-implementation of the Policy and/or Circular etc. - WRIT PETITION NO.6775 OF 2020 (GM-RES) - - - Dated:- 8-7-2020 - THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ PETITIONER: (BY SRI. BASAVA PRABHU PATIL, SENIOR COUNSEL FOR MS. SMITHA SINGH, ADVOCATE) RESPONDENTS : (BY SRI. M.B. NARAGUND, ASG AND SRI M.N. KUMAR, CGC, ADVOCATE FOR R1 2; GOVERNMENT ADVOCATE FOR R3; SRI. R.V.S. NAIK, SENIOR COUNSEL FOR SRI. T. SURYANARAYANA, ADVOCATE FOR M/S KING AND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tel, both of which have been constructed on the land belonging to the Petitioner. 2.2. In order to service the aforesaid loan, there is an agreement arrived at between lenders i.e., the Respondent Nos.5 to 7 that the revenue from the lease rentals of the Technology Park would be credited into Escrow Account No.57500000106944 and revenue from the Petitioner s hotel business would be credited into Escrow Account No.57500000286555. Respondent Nos.5 and 6 were entitled to appropriate the Equated Monthly Installment (EMI, for short) payable on the loans due to them from the Escrow Account where the lease rentals were deposited; the excess rental was to be released from the Escrow Account to the current account of the Petitioner for utilisation by the Petitioner to meet its expenses. Similarly, the revenue arising out of the hotel business was to be deposited in the Escrow Account relating to the hotel business, from and out of which, the Petitioner was entitled to draw monies to its current account on a daily basis for use in connection with its hotel business and from the balance, make payment of the equated monthly instalment on the loan borrowed on account of the hotel business to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by improving access to the working capital by such borrowers. Realising that much of the economic establishment across the country would not be able to operate on account of social distancing, lockdown, the prohibition of transportation, etc., as also realising that there would not be many economic activities and/or revenue generated therefrom, RBI had also proposed a moratorium for a period of three months on the repayment of all loans by way of instalments in respect of loans outstanding as on March 1st, 2020 to be provided by all commercial Banks (including regional rural Banks, small finance Banks, local area Banks), Co-operative Banks, All India Financial Institutions and NBFCs (including Housing Finance Companies and Micro Finance Institutions) for brevity referred to as lending institution/s. 2.9. On the very same day, the RBI issued a Circular dated 27.03.2020 which contains detailed instructions as regards the above Regulatory Package permitting the aforesaid lending institutions to grant a moratorium of three months on payment of all term loan instalments falling due between March 1st 2020 and May 31st 2020. Para 2 relating to rescheduling of payments for term loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter according to the Petitioner are question Nos.1, 2, 3 and 14 which are extracted hereinbelow: QUESTION 1: When/what was the RBI announcement? ANSWER : Last week, the Reserve Bank of India announced a three-month moratorium on all term loans outstanding as on March 1st, 2020, as well as on working capital facilities. QUESTION 2 Why has RBI announced the relief package? ANSWER : Reserve Bank of India has announced certain regulatory measures to mitigate the burden of debt servicing brought about by disruptions on account of COVID-19 pandemic and to ensure the continuity of viable businesses. It was felt that there may be a temporary disruption in the cash flows, and in some cases loss of income, for the businesses/individuals and the present measures work to bring relief to those businesses/individuals. QUESTION 3: Which are the facilities eligible for availing the benefits under the RBI COVID-19 regulatory package and whether the facility is extended across the Board to all borrowers? ANSWER : All term loans (including agricultural term loans, retail, crop loans and loans under Pool Purchase) and cash credit / overdraft are elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bank s Sustainable Livelihood Initiative are also eligible. All Corporate as well as SME customers are also eligible. Our Relationship Managers will get in touch with you or you can contact them to get further details. 2.15. Federal Bank 6 th Respondent FAQs - COVID 19 RELIEF PACKAGE PRADHAN MANTRI GARIB KALYAN PACKAGE : The Reserve Bank of India has announced a regulatory package on March 27th, 2020, permitting Bank s to allow a onetime rescheduling of payments in terms loans and deferment of interest in working Capital facilities, to mitigate the burden of debt servicing on account of the fall-out of COVID-19 pandemic and to ensure the continuity of viable businesses. Federal Bank is pleased to extend the benefits of moratorium to our customers in line with the RBI guidelines. The details are given below. Term Loans a) Term Loans coming under Business Loans, Retail Loans Agricultural Loans outstanding as on 01st March 2020 with repayment either in installments / bullet are eligible (The processes for each segment of customers is provided separately) b) Moratorium shall be extended to term loans is standard status as at the end of February 29t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to know that ABFL has extended its moratorium benefit by default to all of its personal and Business Loan customers, who have applied through Digital Non digital channels. However, if our Personal Business loan customers have: Paid their EMIs for March 2020, moratorium will be applicable for April 2020 2020. 2.17. In view of the above lockdown and other measures announced by the Union of India and the State Government, the Petitioner was constrained to shut down its hotel business since the same could not be carried out adhering to the social distancing. However, the Tech Park was being functioned by the tenants of the Tech Park by following the applicable laws. In view of the shut down of the hotel business, the revenues of the Petitioner was adversely effected and as such, the Petitioner applied to RespondentNo.5 seeking for grant of moratorium on March 27th 2020 itself followed with a request on April 1st 2020. However, Respondent No.5-HDFC Bank vide its letter dated April 6th 2020 had informed the Petitioner that there were rentals which were being received by the Petitioner from the Tech Park, hence the moratorium could not be extended to the Petitioner and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner once again approached the Respondent No.5 by submitting a representation to consider the request of a moratorium favourably, which was not so considered. 2.24. It is in the above background and aggrieved by said actions on the part of the Respondent Nos.5, 6 and 7 that the Petitioner is before this Court seeking for the reliefs as aforestated. 3. Subsequent to the filing of the petition, the Petitioner has also filed an application for amendment in I.A.No.4/2020 and an application for production of additional documents in I.A.No.3/2020 which came to be allowed by this Court vide its order dated 22.06.2020.Though the Respondents were provided with an opportunity to file their additional statement of objections to the amendment, no such objections have been filed. 4. By way of the amendment, the Petitioner has sought to bring on record, some the subsequent events viz., another press note issued by the RBI dated 22.05.2020 extending the period of moratorium by another three months. The further representation made by the Petitioner to Respondent Nos.5 to 7 seeking for extension of moratorium facilitates to the Petitioner as also the communication exchanged between the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled a detailed objection contending that: 8.1. The Petitioner has suppressed the material facts in that the Petitioner is receiving rentals from the Technology Park, merely because income/revenue is not being received from the hotel, the Petitioner would not be eligible for any moratorium. 8.2. The Petitioner is receiving huge amounts towards rental, maintenance, fit-out income, all of which have been appropriated by the Petitioner, there are unutilised amounts lying in the Bank account of the Petitioner, therefore, there was no requirement for the extension of a moratorium facility to the Petitioner. 8.3. The Circular issued by the RBI is not mandatory in nature, is only directory. The discretion to extend a moratorium or not is solely that of the lending institution like the Respondent No.5. 8.4. On the facts of the matter, it is contended that the Petitioner has sufficient and more income to make payments of the loan installments to Respondent No.5 more so when the same is secured by Lease Rental Discounting facility (LRD) which is a separate and distinct facility and cannot be equated to a term loan or a retail loan. 9. Respondent No.6 in its objections has more ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and earned a revenue out of which payments could have been made to Respondent Nos.5 to 7. 11.2. RBI has permitted the grant of a moratorium realising the effect on the economy as a direct consequence of the implementation of the policies of the Government of India and the State Government by virtue of which much of the economy across the country came to a standstill. It is in order to facilitate borrowers like the Petitioner to continue their business without the fear of being declared as a nonperforming asset (NPA) that the moratorium facilities were promoted by the RBI. 11.3. One other aspect of the moratorium Policy is that RBI facilitated the Banks to extend moratorium by coming up regulatory policies relating to Liquidity Management by Targeted Long Term Repos Operations (TLTRO's), Reduction in Cash Reserve Ratio (CRR), increasing the Marginal Standing Facility, Widening of the Monetary Policy Rate Corridor, Permitting banks to deal in Offshore Non-Deliverable Rupee Derivative market etc.,by virtue of which, the Banks benefited by being made available with more cash than what was available so that the same could offset any moratorium facilities extended to any borro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiate action against the Petitioner as a whole, since the Tech Park and hotel are only the businesses of the Petitioner and not separate business entities. On that basis, he submits that in the event of Respondent No.7 declaring the loan account of the Petitioner as NPA, the entire business of the Petitioner would come to a halt and Respondent No.7 would initiate proceedings against the Petitioner exercising the right of a pari-passu charge that the Respondent No.7 possesses in respect of the entire assets of the Petitioner including all cash flows, more particularly, the cash flowing from the rentals being received from the Tech Park also. 11.7. There is a complete incongruity in the implementation of the Policy of the RBI resorted to by Respondent Nos.5 to 7, such an incongruity was not expected of by the RBI, and that is the reason why there cannot be any discretion vested with Respondent Nos.5 to 7 in implementation of Circular dated 27.03.2020. 12. Sri. M B Nargund, Learned Senior Counsel and Additional Solicitor General of India appearing for Sri N Kumar, learned Counsel for Respondent No.1 and 2 submitted that: 12.1. any dispute is between the Petitioner and Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e distinct and unique footing not comparable to a term loan or a working capital loan. In that, the Petitioner had received the then present value of the lease rentals to be received by the Petitioner in future towards which the lease rental being paid from time to time by the concerned lessees is to be appropriated by Respondent No.5.A term loan being taken towards the creation of an asset in future or a working capital loan facility being extended for the working capital requirement are different from an LRD. Therefore, the Circularper se does not apply to the present transaction. 15.2. Be that as it may, he submits that HDFC Bank has made a Policy which has been approved by the Board and it is the guidelines prescribed under that board-approved Policy which has been considered while rejecting the application for extension of a moratorium submitted by the Petitioner. In that, as per the Board approved Policy, the Petitioner is not entitled to the benefit of a moratorium in the event of the Petitioner receiving cash flows from regulatory authorities, Government bodies or any other uninterrupted flows so as to enable the repayment of a structured loan. In the present case, as ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a private Bank like Respondent Nos.5, 6 and 7 and in this connection, he relies upon the following decisions: 1. Federal Bank Ltd vs. Sagar Thomas and others reported in (2003) 10 SCC 73, (Paras 1, 18, 26, 27, 29, 32 and 34) 1.Respondent 1 Sagar Thomas was working as a Branch Manager in Karunagappally Branch of the appellant Bank, namely, the Federal Bank, having its registered office at Alwaye, Kerala. He was, however, suspended on 29.5.1982, since a disciplinary enquiry was ordered into some charges against him for having exceeded his authority in grant of loans and advances to different parties. The inquiry officer found him guilty of the charges and ultimately punishment of dismissal was awarded to the Respondent. 18. From the decisions referred to above, the position that emerges is that a writ petition under Article 226 of the Constitution of India may be maintainable against (i) the State (Government); (ii) an Authority; (iii) a statutory body; (iv) an instrumentality or agency of the State; (v) a company which is financed and owned by the State; (vi) a private body run substantially on State funding; (vii) a private body discharging public duty or positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t may not be in conflict with or against the fiscal policies of the State and for such purpose, guidelines are provided by Reserve Bank so that a proper fiscal discipline, to conduct its affairs in carrying on its business, is maintained. So as to ensure adherence to such fiscal discipline, if need be, at times even the management of the company can be taken over. Nonetheless, as observed earlier, these are all regulatory measure to keep a check and provide guidelines and not a participatory dominance or control over the affairs of the company. For other companies in general carrying on other business activities, maybe manufacturing, other industries or any business, such checks are provided under the provisions of the Companies Act, as indicated earlier. There also, the main consideration is that the company itself may not sink because of its own mismanagement or the interest of the shareholders or people generally may not be jeopardised for that reason. Besides taking care of such interest as indicated above, there is no other interest of the State,, to control the affairs and management of the private companies. Care is take in regard to the industries (Development and Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay Hasia. Again we find that the activity which is carried on by the appellant is not one which may have been earlier carried on by the Government and transferred to the appellant company. For the sake of argument, even if it may be assumed that one or the other test as provided in the case of Ajay Hasia may be attracted, that by itself would not be sufficient to hold that it is an agency of the State or a company carrying on the functions of public nature. In this connection, observations made in the case of Pradeep Kumar Biswas quoted earlier would also be relevant. 32. Merely because the Reserve Bank of India lays the banking Policy in the interest of the banking system or in the interest of monetary stability or sound economic growth having due regard to the interests of the depositors etc. as provided under Section 5(c)(a) of the Banking Regulation Act does not mean that the private companies carrying on the business of or commercial activity of banking, discharge any public function or public duty. These are all regulatory measures applicable to those carrying on commercial activity in banking and these companies are to act according to these provisions failing which ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clerical cadre, amount to discharges any public duty or public function and therefore can be subjected to challenge under Article 226 of the Constitution. (2) Whether a Private Sector Bank carrying on Banking activity can be said discharge public duties. (3) Having held that there was no irregularity in the selection process, whether the learned Single Jude was justified in issuing the above directions. 11. A Public duty is one in the discharge of which the public i.e. the community at large is interested, as affecting their legal rights and liabilities. Of course, public or community does not necessarily or always mean all the citizens of the Country or the State, but may also refer to a defined class of citizens. A duty will not be a public duty if it is to be performed to the benefit of a specified person or persons. On the other hand, a public function is a function traditionally reserved for the State. A private person is said to discharge a public function, if the private person performs a function that is so traditionally reserved for the State. Carrying on trade or business or business or profession or employing persons or doing acts in connection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a sum of ₹ 628 Crores remitted by Petitioner No.1 in cash credit account maintained by Respondent No.1 towards full repayment of all outstanding loans including the interest and charges till 6.6.2013. The Petitioner also seeks a writ of mandamus directing the Respondent No.1 and 2 to release the pledged security including 34, 59, 090 equity shares of the Petitioner No.1 pledged by USL benefit Trust under the agreement of pledge of shares dated 17.06.2010. The Petitioners also seek a writ of mandamus directing Respondent No.1 to issue No Due Certificate. 8.xxxx SARDAR ASSOCIATES AND ORS. VS. PUNJAB AND SIND BANK AND ORS. , (2009) 8 SCC 257 . xxxx It is also urged that guidelines framed by the Reserve Bank of India are binding on Respondent No.1 and a person cannot be compelled to remain a borrower or under adebtbya Bank. In this connection, reliance has been placed on decision of Delhi High Court in DLF LIMITED VS. PUNJAB NATIONAL BANK , 180 (2011) DELHI LAW TIMES 435. 23. The right of the parties are founded in contract and writ of mandamus in the fact situation of the case is not available to the Petitioners as the duty of the Respondents to close the loan acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there are no payments which have been received by Respondent No.7 for the last three months and if no payment is received for the next month, the said account would get automatically classified as a nonperforming asset without any discretion vested with Respondent No.7, on account of the applicable and prevalent policies and guidelines issued by the RBI. 17.5. In cases where there are structured loans and/or in cases where there are multiple Banks which have extended the security to the borrower all the lenders have to be treated on the same footing, there should be no discrimination between them and if a moratorium were to be granted, it has to be granted by all of them or by none of them so that no lender suffers in such circumstances. 17.6. Respondent No.7 is aggrieved by not receiving any monies over the last three months and all the monies being appropriated by Respondent Nos.5 and 6. 17.7. Sri.DhyanChinnappa, learned Senior Counsel however on instructions submits that Respondent No.7 still has no objections for grant of a moratorium to the Petitioner so long as Respondent Nos.5 and 6 extend a moratorium and Respondent No.7 also receives a proportionate amount from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as under: 12. We have considered the submissions made by the learned counsel for the parties. In our opinion, in view of the judgment rendered by this Court in Andi Mukta Sadguru Shree Muktajee Vandas Swami Suvarna Jayanti Mahotsav Smarak Trust, there can be no doubt that even a purely private body, where the State has no control over its internal affairs, would be amenable to the jurisdiction of the High Court under Article 226 of the Constitution, for issuance of a writ of mandamus. Provided, of course, the private body is performing public functions which are normally expected to be performed by the State Authorities. 13. In the aforesaid case, this Court was also considering a situation where the services of a Lecturer had been terminated who was working in the college run by the Andi Mukta Sadguru Shree MuktajeeVandas Swami Suvarna Jayanti Mahotsav Smarak Trust. In those circumstances, this Court has clearly observed as under (V.R.Rudani case. SCC pp.700-701. Paras 20 22): 20. The term authority used in Article 226, in the context, must receive a liberal meaning unlike the term in Article 12. Article 12 is relevant only for the purpose of enforcement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a nor the RBI would take a hands off approach and leave the Petitioner at the mercy of Respondent Nos.5 who is acting as the infamous Shylock in the famous play Merchant of Venice authored by Sir William Shakespeare. 19.5. What is sought to be done by Respondent Nos.5 and 6 at the cost of Respondent No.7 is not only restricted to taking of a pound of flesh, but such taking of the flesh would kill the Petitioner inasmuch as non-payment of dues to Respondent No.7 would automatically result in the Petitioner s account being treated as an NPA. 19.6. The Circular issued by the RBI has to be implemented in its true letter and spirit. No technical defences or objections could be raised by the Banks which would come in the way of achieving the objectives of the Circular dated 27.03.2020 issued by the RBI inasmuch as the aim and objects of the Circular being to keep the economy and businesses running. The actions of Respondents 5 to 7 would have the effect of closing down the business of the Petitioner, which in today s economic condition would affect not only the Petitioner but also the economy as a whole. 19.7. The Policy is applicable even to the LRD loan and the loan amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 1 2, the Union of India to enforce the Circular dated 27.03.2020 issued by the RBI? 20.7. What Order? 21. Whether a Writ of mandamus can be issued against a private bank to implement the Circular issued by the RBI dated 27.03.2020? 21.1. Sri. Udaya Holla, learned Senior Counsel contended that writ petition is not maintainable since no writ could be issued to private banks like Respondents No.5 to 7 relying on the following decisions, the relevant paragraphs having been extracted hereinabove. 21.1.1. Federal Bank Ltd vs. Sagar Thomas and others reported in (2003) 10 SCC 73, (Paras 1, 18, 26, 27, 29, 32 and 34) 21.1.2. Karnataka Bank Limited vs. Smt. Rekha Rao in Writ Appeal No. 8541 of 1996 (Paras 7, 11, 12, 14) 21.1.3. The Prestige Monte Carlo Apartment Owners Association and others Vs. The Reserve Bank of India, Mumbai and Others reported in ILR 2015 KAR 3333 (Paras 10 and 13) 21.1.4. United Spirits Limited and Another vs. IDBI Bank Limited and Another in Writ Petition No.49864-865/2013 DD: 27/6/2016 (Paras 1, 8, 23, 24, 25) 21.2. Per contra, Sri.Basavaprabhu Patil by relying on the following decisions has contended that a writ petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. A duty will not be a public duty if it is to be performed to the benefit of a specified person or persons. On the other hand, a public function is a function traditionally reserved for the State. A private person is said to discharge a public function, if the private person performs a function that is so traditionally reserved for the state. Carrying on trade or business or business or profession or employing persons or doing acts in connection with or incidental to any trade or business or profession, is not performance of a public duty or a public function. 21.6. In both the above matters after considering the above, the courts came to a conclusion that the dispute involved was a private one, that is a dispute between the Petitioner in his/her individual capacity on the one hand and the Bank on the other, there being no public element involved, as such the courts held that a Writ petition was not maintainable, in those circumstances. 21.7. The Apex court, in Punjab National Bank and Another Vs. Astamija Dash reported in (2008) 14 SCC 370, held Punjab National Bank to be covered within the ambit of Article 12 of the constitution and issued a writ, when the disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome recognition, accounting standards, making of proper provision for bad and doubtful debts, capital adequacy based on risk weights for assets and credit conversion factors for off-balance sheet items and also relating to deployment of funds by a non-banking financial company or a class of non-banking financial companies or nonbanking financial companies generally, as the case may be, and such nonbanking financial companies shall be bound to follow the Policy so determined and the directions so issued. (2) Without prejudice to the generality of the powers vested under subsection (1), the Bank may give directions to non-banking financial companies generally or to a class of non-banking financial companies or to any nonbanking financial company in particular as to , (a) the purpose for which advances or other fund based or non-fund based accommodation may not be made; and (b) the maximum amount of advances or other financial accommodation or investment in shares and other securities which, having regard to the paid-up capital, reserves and deposits of the nonbanking financial company and other relevant considerations, may be made by that nonbanking financial company t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erse impact thereof on the economy of the country, the RBI with alacrity had issued the Circular dated 27.03.2020, in order to discharge its above obligation and duty. The aim, object and intention of the said Circular being to mitigate the burden of debt servicing brought about by disruptions on account of Covid-19 pandemic and to ensure the continuity of a viable business, which is in the interest of the country and as such in the public interest. 21.16. The RBI vide its Circular has permitted the grant of a moratorium to all borrowers so as to keep the viable borrowers/businesses running, it is therefore clear that the Circular is issued in the public interest and any aspect relating thereto would attract a public law element. 21.17. In the present case, it is not an Employer-employee dispute, recruitment dispute or one relating to contractual terms, but a dispute relating to the enforcement of a Circular issued by the RBI, as that in the case laws relied upon by Mr Holla, Learned Senior Counsel. The said Circular having been issued to protect and preserve the economy of the country on account of the COVID 19 pandemic. The issuance of the Circular is in the public interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; and (iv) improving the functioning of markets in view of the high volatility experienced with the onset and spread of the pandemic. The Policy initiatives in this section should be read in conjunction with the MPC s decision on monetary Policy actions and stance in its resolution emphasis supplied by me 23.4. It is in pursuance of the said Policy that rescheduling of payments like term loans and Working Capital Facilities as also Easing of Working Capital Financing as contained in Paras 2 and 4 of the said Circular was formulated and sought to be implemented as stated in para 8 thereof which are reproduced hereinbelow. 2. In respect of all term loans (including agricultural term loans, retail and crop loans), all commercial Banks (including regional rural Banks, small finance Banks and local area Banks), co-operative Banks, all-India Financial Institutions, and NBFCs (including housing finance companies) ( lending institutions ) are permitted to grant a moratorium of three months on payment of all instalments falling due between March 1st, 2020 and May 31st, 2020. The repayment schedule for such loans as also the residual tenor will be shifted across the Boa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 27.03.2020, which inter alia addresses the stress in the financial condition or rather distress caused to the economy by Covid-19 inter alia to ensure the continuity of viable businesses. Thus, the exercise of discretionary power by the Bank or lending institution is predicated on ensuring the continuity of the business of a borrower. The decision of the Bank or lending institution if, were to, fall foul of this intention, then that decision would be contrary to the Policy as also the Circular. 23.9. In the above background, it has to be seen as to, what the banks made of the Circular, their understanding of the same and how they sought to implement it. 23.10. Answers to the frequently asked questions which have been extracted hereinabove would indicate that all borrowers are eligible to avail the benefits of the package as stated in answers to question Nos.3 and 4 by the Indian Bank Association. 23.11. Respondent No.5 in its FAQ has also categorically stated that in line with the RBI guidelines and to show our solidarity in standing with you, HDFC Bank is offering its customers EMI moratorium and credit card outstanding moratorium as a relief measure . Thus, the offe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a moratorium and it is for the customer to choose whether to avail a moratorium that is to say that the offer for a moratorium having been made by the Bank, it is for the customer to accept the moratorium by choosing to do so and making an application in that regard. Once such a choice is made and an application was submitted, the rest of the process is automatic. 23.15. Similar is the answer to the FAQs by Respondent No. 6, Federal Bank. COVID-19 RELIEF PACKAGE FAQs - COVID 19 RELIEF PACKAGE PRADHAN MANTRI GARIB KALYAN PACKAGE: The Reserve Bank of India has announced a regulatory package on March 27th 2020, permitting Bank s to allow a onetime rescheduling of payments in terms loans and deferment of interest in working Capital facilitates, to mitigate the burden of debt servicing on account of the fall-out of COVID19 pandemic and to ensure the continuity of viable businesses. Federal Bank is pleased to extend the benefits of moratorium to our customers in line with the RBI guidelines. The details are given below. Term Loans a) Term Loans coming under Business Loans, Retail Loans Agricultural Loans outstanding as on March 1st 2020 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible for moratorium for the instalments payable in April and May 2020. 4. How do I avail the Moratorium benefit? All ABFL customers may send SMS ABFLOPT to 567679 from their registered mobile numbers and avail moratorium for the applicable months. It is also pertinent to know that ABFL has extended its moratorium benefit by default to all of its personal and Business Loan customers, who have applied through Digital Non digital channels. However, if our Personal Business loan customers have: Paid their EMI s for March 2020, moratorium will be applicable for April 2020 May 2020. emphasis supplied by me 23.17. Once the banks have in the public domain on their respective websites expressed their solidarity with all their customers and stated that all the customers are eligible for grant of a moratorium, in accordance with RBI guidelines, it is not permissible for such banks to nit-pick and later on, refuse the grant of a moratorium, to the Petitioner, who is otherwise eligible. That is to say the Banks cannot take one stand in the public domain and a contradictory stand while implementing what they have stated in the public domain. Both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Customers wishing to switch - opt in / Opt out during the 3 months period will be examined case-by-case. Structured loans where loan servicing is form cash flows released by regulatory authority, government bodies, or any other uninterrupted flows, etc., will not fall under the ambit of moratorium unless such cash flows are deferred by the payer. For borrowers where legal security related deferrals are pending for closure as on April 1st, moratorium will not be extended beyond April 1st 2020, unless it is regularised or specifically approved by officials authorised by the Covid Committees of the Board. Sole banking clients with OBCA will not be eligible for moratorium/deferment unless OBCA is closed or are approved by credit to be retained with proper justifications. For consortium or multiple banking cases, moratorium request will be implemented only if all other banks in the consortium or multiple banking arrangement extend moratorium on terms similar to those offered by us. On debt management side, the Bank will continue to closely engage with the borrowers to the best possible extent, given the extraordinary situation. During this perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 is or is not in accordance with the board approved policy. 24.6. Hence, there being no alternative efficacious remedy for the Petitioner, this Court would have to be guided by the aims and objectives of the Policy and Circular in order to ascertain whether the actions on the part of Respondent No.5 is in accordance with or militates against the aims and objectives of the Circular and Policy, Respondent No 6 and 7, for now only following the lead of Respondent No.5, and they having submitted that they would have no objection to extend a moratorium to the Petitioner if Respondent No.5 were to do so. 24.7. It is not in dispute that the business of the Petitioner is viable. It is also not in dispute that the loan account of the Petitioner was standard account as on 1.03.2020, there were no defaults committed by the Petitioner. Till March 1st 2020, the Petitioner had made payments of all dues towards the said loan accounts. It is only on account of the closure of the hotel business that the Petitioner is facing distress and this distress would impact the finances of the Petitioner as a whole. The business of the Tech Park and the hotel cannot be separated out for the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceiving any money. More importantly once the Petitioner s account is declared NPA, Petitioner would have to repay the entire amount due, which it is admittedly not in a position to do do, the entire business of the Petitioner is more than likely to come to a stand-still which would militate against the prime objective of the Policy and Circular viz., ensuring the continuity of a viable business. 24.10. In the above background it cannot be accepted that the Circular dated 27.03.2020 is not applicable to a structured loan like LRD availed by the Petitioner since the appropriation of the monies of the LRD would have a negative impact on the continuity of the Petitioner itself. There is no distinction in terms of the Policy and Circular, giving a separate treatment to structured loans. Hence I hold that Circular is applicable to all loans/advances and facilities extended by a lending institution, including structured loans. 25. Where multiple banks are involved in a loan transaction, can one Bank deny the extension of a moratorium, when another is willing to extend the benefit of a moratorium? 25.1. The Board approved Policy of Respondent No.5-HDFC apart from not having an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osest to the heart of Antonio, it was never contemplated that by doing so, the life of Antonio would be lost. 25.6. In the present case, though Respondent No.5 would be entitled to enforce the LRD agreement and appropriate the amounts due from the ESCROW Account, the same would end up in classification of the loan account of the Petitioner with Respondent No. 7 as an NPA thus in effect destroying the Petitioner, which is contrary to the aim and object of the Circular dated 27.03.2020. 25.7. The spirit of the Circular is required to be given due importance, it is to be seen to it that the Petitioner continues to be in business, thus helping the economy. Needless to say that the business of the Petitioner provides employment to various people, taxes are paid to the respective authorities, facilities and services are provided to various other companies who depend on the Petitioner. If the business of the Petitioner is disrupted, it is bound to have a cascading effect on all the above and thereby have an adverse impact on the economy. 25.8. The other contention of Sri.Basavaprabhu Patil, learned Senior Counsel that Respondent No.5 is seeking to kill the golden goose to get all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner by itself till 1.3.2020. The RBI cannot in the circumstances contend that the discretion is left to the lender to either grant or refuse the grant of a moratorium and in the same breath contend that it is for the Bank to establish as to why the Petitioner did not qualify for the benefit of Moratorium without stating as to before whom such establishment is to be made. Admittedly, there is no mechanism which is created for redressal of grievance on account of improper implementation or non-implementation of the recovery package or the Circular, there is no forum which has been created for the Petitioner to complain of as regards any of the actions of the Bank or a forum created for the Bank to establish as to how the Petitioner s request has been property rejected. Pending creation of such a forum, this court would have to intervene to provide for a remedy to the aggrieved Petitioner, to give effect to the principle, Ubi jus ibiremedium. 26.4. In view of the above, it is held that no directions could be issued to Respondent 1 and 2 Union of India or Respondent No. 3 State of Karnataka, to inturn issue directions to Respondent No.4 - RBI for the implementation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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