1. Writ petitions under Article 32 seeking financial relief, interest waivers, and moratorium extensions for various sectors due to the COVID-19 pandemic. (Para 1 , 2 )
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2021 Supreme(SC) 164
SUPREME COURT OF INDIA
ASHOK BHUSHAN, R. SUBHASH REDDY, M.R. SHAH, JJ.
Small Scale Industrial Manufactures Association (Regd.) – Petitioner
Versus
Union of India and Others – Respondents
Writ Petition (C) Nos. 476, 506, 542, 568, 606, 608, 711, 785, 802, 826, 829, 937, 945, 955, 959, 964, 1006, 1024, 1025, 1029, 1132, 1157, 1178, 1190 of 2020, Writ Petition (C) Diary No. 12389 of 2020
Decided On : 23-03-2021
Advocates appeared:
For the parties :Kapil Sibal, Sr. Adv. Sidharth Luthra, Kunal Vajani, Samit Shukla, Manhar S. Saini, Kunal Mimani, Ms. Saloni Shah, Ms. Shivani Khanwilkar, Chandra Prakash, Ms. Ankita Tiwari, Ayush Kaushik, Shubhang Tandon, Ms. Rooh-e-hina Dua, M.P. Vinod, Ashish Aggarwal, Ms. Shashi Kiran, Ms. Sangeeta Bhalla, Manoj Jain, Arjun Sain, Ashish Virmani, B V Balaram Das, Ravindra Shrivastava, Sr. Adv. Anshuman Shrivastava Advocate Abhijeet Shrivastava Advocate Ms Garima Tiwari Advocate Mr Arpit Jain Advocate Mr Abhishek Sharma Advocate B. Ramana Murthy, Kumar Dushyant Singh, Devesh Chauvia, Mukul Lather, Ms. Pooja Singh, Ms. Swati Setia, Siddharth Bhatnagar, Sr. Adv. Shashank Kunwar, Ms. Sonia Dube, Shatadru Chakraborty, Ms. Kanchan Yadav, Anurag Singh, Ms. Surbhi Anand, for M/s. Legal Options. Harish Pandey, A. Karthik, Govind Manoharan, Ms. Smrithi Suresh, Sarveshwar K., S.M. Vivekanandh, Syed Jafar Alam, Shankh Sengupta, Ms. Tine Abraham, Ms. Chhavi Jain, E. C. Agrawala, Sanjay Kapur, Ms. Megha Karnwal,Adv V M Kannan, Sambit Panja, Arjun Bhatia, Gaurav Sharma, Dhawal Mohan, Prateek Bhatia, Ms. Alankrita Sinha, Keshav Mohan, R. K. Awasthi, Ms. Ritu Arora, Santosh Kumar - I, Kishor Ram Lambat, Ms. Kashmira Lambat, M/S. Lambat And Associates, M/S. D.S.K. Legal, Subhskumar Kadam, Asim Sarode, Ms. Manju Jetley, Abhinay, Manoj V. George, Vignesh Ram, Ms. Manju George, Ms. Shilpa Liza George, Petitioner-in-person Ashish Virmani, A. Karthik, M. P. Vinod, Mrs. Anil Katiyar, Sanjeev Sagar, Shekhar Raj Sharma, Ms. Nazia Parveen, Jinendra Jain, Ms. Shashi Kiran, Ms. Manjeet Kirpal, Ramesh Babu M. R., Ms. Aagam Kaur, Ms. Aadya Yadav, Ms. Bhavya Tyagi, Abhikalp Pratap Singh, Abhigya Kushwah, Vivek Sharma, Neeraj Kumar Sharma, Ms. Rachana Sharma, Manoj Tomer, Kush Chaturvedi, Aditya Shekhar, Ms. Priyashree Sharma PH, Pranav Diesh, Baibhaw Gahlaut, V. Shekhar, Sr. Adv. kumar Anurag Singh, Zain A Khan, Kanishk Khetan, Harsh Gupta, Ms. Tulika Mukherjee, Goutam Bhal, Sanjay Kumar Dubey, Karunakar Mahalikar, Manoranjan Mishra, P.l.Narayanan, G.Balaji, Advocates
For the parties :Kapil Sibal, Sr. Adv. Sidharth Luthra, Kunal Vajani, Samit Shukla, Manhar S. Saini, Kunal Mimani, Ms. Saloni Shah, Ms. Shivani Khanwilkar, Chandra Prakash, Ms. Ankita Tiwari, Ayush Kaushik, Shubhang Tandon, Ms. Rooh-e-hina Dua, M.P. Vinod, Ashish Aggarwal, Ms. Shashi Kiran, Ms. Sangeeta Bhalla, Manoj Jain, Arjun Sain, Ashish Virmani, B V Balaram Das, Ravindra Shrivastava, Sr. Adv. Anshuman Shrivastava Advocate Abhijeet Shrivastava Advocate Ms Garima Tiwari Advocate Mr Arpit Jain Advocate Mr Abhishek Sharma Advocate B. Ramana Murthy, Kumar Dushyant Singh, Devesh Chauvia, Mukul Lather, Ms. Pooja Singh, Ms. Swati Setia, Siddharth Bhatnagar, Sr. Adv. Shashank Kunwar, Ms. Sonia Dube, Shatadru Chakraborty, Ms. Kanchan Yadav, Anurag Singh, Ms. Surbhi Anand, for M/s. Legal Options. Harish Pandey, A. Karthik, Govind Manoharan, Ms. Smrithi Suresh, Sarveshwar K., S.M. Vivekanandh, Syed Jafar Alam, Shankh Sengupta, Ms. Tine Abraham, Ms. Chhavi Jain, E. C. Agrawala, Sanjay Kapur, Ms. Megha Karnwal,Adv V M Kannan, Sambit Panja, Arjun Bhatia, Gaurav Sharma, Dhawal Mohan, Prateek Bhatia, Ms. Alankrita Sinha, Keshav Mohan, R. K. Awasthi, Ms. Ritu Arora, Santosh Kumar - I, Kishor Ram Lambat, Ms. Kashmira Lambat, M/S. Lambat And Associates, M/S. D.S.K. Legal, Subhskumar Kadam, Asim Sarode, Ms. Manju Jetley, Abhinay, Manoj V. George, Vignesh Ram, Ms. Manju George, Ms. Shilpa Liza George, Petitioner-in-person Ashish Virmani, A. Karthik, M. P. Vinod, Mrs. Anil Katiyar, Sanjeev Sagar, Shekhar Raj Sharma, Ms. Nazia Parveen, Jinendra Jain, Ms. Shashi Kiran, Ms. Manjeet Kirpal, Ramesh Babu M. R., Ms. Aagam Kaur, Ms. Aadya Yadav, Ms. Bhavya Tyagi, Abhikalp Pratap Singh, Abhigya Kushwah, Vivek Sharma, Neeraj Kumar Sharma, Ms. Rachana Sharma, Manoj Tomer, Kush Chaturvedi, Aditya Shekhar, Ms. Priyashree Sharma PH, Pranav Diesh, Baibhaw Gahlaut, V. Shekhar, Sr. Adv. kumar Anurag Singh, Zain A Khan, Kanishk Khetan, Harsh Gupta, Ms. Tulika Mukherjee, Goutam Bhal, Sanjay Kumar Dubey, Karunakar Mahalikar, Manoranjan Mishra, P.l.Narayanan, G.Balaji, Advocates
Economic policy decisions are generally not subject to judicial review. However, the Court ruled that charging compound or penal interest during a government-mandated moratorium is unjustified as non-payment is not a willful default, directing a waiver of such interest for all borrowers regardless of loan size.
Headnote:
Constitution of India,1950 - Article 32 - RBI - Loans - Challenged - According to petitioner, Covid-19 Regulatory Package notified by RBI vide notification dated insofar as terms loans, working capital facilities and restructuring of Stressed Account is inadequate, ineffective and does not offer any substantial relief, aid or assistance to industries particularly MSMEs - According to petitioner, abovementioned Regulatory Package will not in any manner salvage MSMEs and help them recover from financial losses that have been caused due to unforeseen circumstances - Writ Petition (Civil) No. under Article 32 of Constitution of India has been preferred by petitioners - CREDAI - Maharashtra Chambers of Housing Industry and another which has been filed for and on behalf of real estate sector challenging notification dated issued by RBI with a prayer that same may be declared as ultra-vires to extent it charges interest on loan amount during moratorium period - Main grievance in this writ petition is to continue not to charge interest on outstanding portion of term loans during moratorium period - Whether borrower in sub-clause (1) has fully availed or partially availed or not availed of moratorium on repayment announced by RBI vide its circular – Held, it is in nature of a penal interest - By notification datedGovernment has provided deferment of installments due and payable during moratorium period - Court are of opinion that there shall not be any charge of interest on interest/compound interest/penal interest for period during moratorium from any of borrowers and whatever amount is recovered by way of interest on interest/compound interest/penal interest for period during the moratorium, same shall be refunded and to be adjusted/given credit in next installment of loan account - It is directed that there shall not be any charge of interest on interest/compound interest/penal interest for period during moratorium and any amount already recovered under same head, namely, interest on interest/penal interest/compound interest shall be refunded to concerned borrowers and to be given credit/adjusted in next installment of loan account - Writ Petition (Civil) No. 955 of 2020 stands disposed of.
Judgement Key Points
Key Points: - (!) (!) (!) - (!) (!) (!) - (!) (!) (!) - (!) (!) (!) - (!) (!) (!) - (!) (!) - (!)
What is the scope of judicial review of RBI/NDMA/Economic policy decisions under DMA 2005 in the context of Covid-19 relief packages?
What is the validity and scope of waivers or extensions (including waiver of interest, interest on interest, moratorium extension, and sector-specific relief) granted by RBI, the Union, or banks in response to the Covid-19 pandemic?
What is the role and obligation of the National Authority under DMA 2005 (Sections 12-13) in recommending relief measures for disaster-affected borrowers and the extent to which NDMA/RBI/Ministries may coordinate or override these provisions?
Legal Category Hierarchy
- constitutional law
- administrative law
- banking law
- statutory law
Table of Contents
2. Petitioners allege failure of statutory duties under Disaster Management Act, 2005; Respondents argue economic policy is a non-justiciable expert domain. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 )
3. Judicial review of economic policy is limited; the Disaster Management Act's relief provisions are discretionary; charging compound interest during a mandated moratorium is arbitrary. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23 , 24 , 25 , 26 , 28 , 29 , 30 , 31 )
4. Economic policy decisions are generally not amenable to judicial review unless patently arbitrary; compound interest during a mandated moratorium constitutes an unjustified penalty. (Para 14 , 15 , 31 )
5. Petitions for total interest waiver and moratorium extension dismissed; direction issued to waive and refund compound interest/penal interest for the moratorium period. (Para 32 )
6. To what extent can courts judicially review government economic and fiscal policy decisions?
Judicial review is very limited. Courts will not interfere with the wisdom or advisability of economic policies unless they are patently arbitrary, discriminatory, mala fide, or violate statutory or constitutional provisions, as judges are not experts in these matters. (Para 13 , 14 , 15 , 18 , 19 )
7. Is the National Authority mandated to recommend loan repayment relief under Section 13 of the Disaster Management Act, 2005?
No. The use of the word may in Section 13 indicates that the provision is enabling and discretionary, not mandatory. The Authority may recommend relief based on the circumstances without being legally compelled to do so in every instance. (Para 30 )
8. Can lending institutions charge compound or penal interest during a government-mandated moratorium period?
No. Since the government deferred installments during the moratorium, non-payment cannot be considered a willful default. Therefore, charging interest on interest or penal interest is unjustified and arbitrary. (Para 31 )
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 Covid-19 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 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.
1(a) 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 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.
1(b) 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.
1(c) 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 to extend the period of moratorium by another six months, without any interest b
