The main legal point established in the judgment is that the reliefs provided in the RBI circulars for Covid-19 related stress are intended for borrowers facing stress due to the economic fallout of Covid-19 and cannot be extended to borrowers under severe stress before the pandemic.

JUDGMENT :

Anil K. Narendran, J.

This appeal is one filed by the 1st respondent in W.P.(C)No.174 of 2021, invoking the provisions under Section 5 of the Kerala High Court, Act, 1958 challenging the judgment of the learned Single Judge dated 27.01.2021 in that writ petition, which was filed by the 1st respondent herein - Parthas Textiles (borrower), invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India seeking a writ of mandamus commanding the appellant - South Indian Bank Ltd., to consider Exts.P12 and P13 representations 11.12.2020 and 21.12.2020 made by the 1st respondent borrower for One-Time Restructuring and Two Years of Moratorium. The further relief sought for was a declaration that in the light of Ext.P3 circular No.RBI/2020-21/16 dated 06.08.2020 and Ext.P4 circular No.RBI/2020-21/34 dated 07.09.2020 on Resolution Framework for Covid-19 related Stress - Financial Parameters issued by the 2nd respondent - Reserve Bank of India, the 1st respondent borrower is entitled to a resolution framework for Covid-19 related stress and for implementation of a resolution plan, by one-time restructuring and providing two years moratorium, in respect of the various financial facilities enjoyed by it with the appellant Bank.

1.1. On behalf of the appellant Bank, a statement has been filed by the learned Standing Counsel, reiterating the stand taken in Ext.P14 communication dated 01.01.2021, whereby the request made by the 1st respondent borrower in Exts.P12 and P13 representations stands rejected. In Ext.P14, the appellant informed the 1st respondent borrower that considering the facts stated therein the account cannot be included under the restructuring framework related to Covid-19 stress. In Ext.P14, it was pointed out that, as on that date, there is an overdue of Rs.1,26,02,430.80 in the accounts of the 1st respondent, which is to be cleared before 12.01.2020 to avoid slipping of the accounts to NPA. Even prior to the issuance of Ext.P14, based on Exts.P5 and P6 representations dated 12.10.2020 and 22.10.2020 made by the 1st respondent, which was followed by Ext.P7 representation dated 23.10.2020, the appellant, vide Ext.P8 communication dated 04.11.2020, informed the 1st respondent that, considering the facts the accounts cannot be included under the restructuring policy framework related to Covid-19 stress since the two criteria mentioned therein are not satisfied. Thereafter, the 1st respondent submitted Ext.P9 representation dated 12.11.2020 to which the appellant sent Ext.P11 communication dated 18.11.2020 pointing out that stress in the account has been identified during the credit reviews in the account during the previous three years and hence the same cannot be included in the provisions of the restructuring package. Moreover, the achievement of the other key ratios (ISCR, Total debt to EBDITA ratio) projected by the firm is also not justified.

1.2. Before the learned Single Judge, the appellant Bank reiterated the stand taken in Ext.P14 communication. According to the appellant, Exts.P1 to P4 circulars are issued only towards the resolution framework of Covid-19. Ext.P4 circular lays down the financial parameters with sector-specific benchmark ranges. Such parameters are to be factored in the resolution plans with respect to the borrowers eligible under Part B of the Annexure to the resolution framework. Annexure to Ext.P3 provides that the lending institutions are to ensure that such facility is provided only to the borrowers having stress on account of Covid-19. As per para.3 of Ext.P4 circular, it is mandatory for lending institutions to consider the key ratios detailed therein while finalising the resolution plans. In the case of the 1st respondent borrower, there was an inherent stress in its account since the financial year 2017-18 and the stress was not on account of Covid-19. Further, the 1st respondent has already been granted a facility of Emergency Credit Line Guarantee Scheme