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Supreme Court protects accounts defaulted in moratorium from being declared as NPAs

Last Updated 03 September 2020, 12:09 IST

The Supreme Court on Thursday decided to protect those accounts from being declared as non performing assets which have defaulted in repaying their loans till August 31 during the period of moratorium provided as a relief measure due to Covid-19 pandemic.

A bench presided over by Justice Ashok Bhushan, however, said the court won't get into whether measures by the government were correct or not, or how to give relief to various sectors.

The court said it would consider only whether certain more measures like waiver of interest on deferred interest can be considered under the Disaster Management Act. It, however, stressed a need for sector wise relief, while the government maintained moratorium was not meant to waive off interest on loans.

"It is the RBI which has issued moratorium circular. The Centre hasn't taken any action under Disaster Management Act. Petitions have claimed the Centre didn't exercise powers to mitigate the sufferings. We aren't an expert body to change decisions by financial bodies," the bench said.

The court, however, said it was to be seen whether something can be done under the Disaster Management Act to mitigate sector wise sufferings.

"There have to be studies to ascertain sector wise effect of Covid-19 as pharma and IT cos may have done well, but many sectors suffered. Nobody has applied mind and come to mitigating method sector-wise," the bench said.

The government led by Solicitor General Tushar Mehta, for its part, assured the accounts would not be declared as NPA on September 1. He also said experts panel would decide sector wise relief to ease the stress caused by pandemic. He said the RBI's August 6 circular on resolution plan and restructuring of loans was not under challenge. It would take care of grievances by various sectors.

The court put it on record the government's submission that any account, which has not been termed as NPA, would be declared so after August 31, untill further orders. It put the matter, arising out of a batch of PILs filed by Gajendra Sharma and others, for consideration on September 10.

During the hearing, Mehta said experts committee would not come in way of individual borrowers. It would see implementation of resolution plans under this window. The RBI continued to have a supervisory role, and the sufferings of individual borrowers remained a priority. Relaxation and moratorium were announced to prevent classification of companies as NPAs.

"Idea of moratorium was to defer payments in wake of burden by the Covid-lockdown so that businesses can manage working capital better. Idea was not to waive off interest," he said.

Senior advocate Harish Salve, appearing for banks, said committee was being set up for various sectors. Power sector and discoms are in trouble, loans need to be given to them. Banks can't take full burden for power sector, he said.

"People who lost their jobs risk losing house and car. The problem faced by individual homebuyer was different from DLF or another big company," he said.

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(Published 03 September 2020, 12:05 IST)

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