Bom HC | Duration of lockdown not to be reckoned for purpose of computing 90-day NPA declaration period

Bombay High Court: G.S. Patel, J., while fashioning a workable solution limited to the facts the instant case, ordered that subject to the conditions as set out in the order, the period of the moratorium during which there is a lockdown will not be reckoned by ICICI Bank for the purposes of computation of the 90-day NPA declaration period.

Facts & issue

The High Court was hearing a writ petition wherein the petitioners sought the exclusion of the moratorium period for the computation of the 90-day period. Notably, in the wake of the COVID-19 pandemic and the consequent lockdown, the Reserve Bank of India (“RBI”) has directed that there will be a moratorium in regard to repayments and classifications as NPAs. This moratorium period, as appears prima facie from the RBI circulars, operates with effect from 1-3-2020 and, as currently advised, goes up to 31-3-2020.

The petitioners had finance facilities with ICICI Bank which were to be repaid in instalments. The petitioners defaulted in repayment schedule due on 15-1-2020 and 15-2-2020. Notably, as per RBI’s directions, if the payment is not made and the account is not regularised within 90 days of the date of default then the borrower’s account gets classified as an NPA. In the instant case, the 90-day period in respect of 15-1-2020 default would end on 15-4-2020 and that for 15-2-2020 will end on 15-5-2020. The question before the Court was:

Now that the moratorium has started running, should there be a suspension of this countdown timer for NPA-declaration and for reckoning the 90-day period?

Contentions

Dr Birendra Saraf, Senior Advocate appearing for the petitioners submitted that the moratorium period must be excluded even for the computation of any balance days of the NPA declaration 90-day period. Otherwise, the moratorium itself would be meaningless in situations such as those of the petitioners. Per contra, Viraag Tulzapurkar, Senior Advocate representing the respondent ICICI Bank said that a broad-based declaration or finding returned by a Court could have all manner of unintended consequences in respect of other borrowers and that the Court should be slow in extending any such relief by an ad-interim order that may be construed to apply across the board. He also raised question on maintainability of the instant writ petition but the High Court left the issue open for an appropriate stage.

Order

According to the High Court, the instant case required fashioning a workable order limited to the facts of this case ensuring that it sets no precedent for ICICI Bank in other cases and yet ensuring that the petitioners have enough latitude to be able to service their debt. Having regard to the facts of this case, and recognising the need to sufficiently protect the interests of both sides, the Court made the following order:

(a) Subject to the conditions set out below, the period of the moratorium during which there is a lockdown will not be reckoned by ICICI Bank for the purposes of computation of the 90-day NPA declaration period. As currently advised, therefore, the period of 1-3-2020 until 31-5-2020 during which there is a lockdown will stand excluded from the 90-day NPA declaration computation until — and this is the condition — the lockdown is lifted. Thus, irrespective of the continuance of the moratorium until 31-5-2020, if the lockdown is lifted at an earlier date than 31-5-2020, then this protection available to the petitioners will cease on the date of lifting of the lockdown, and the computing and reckoning of the remainder of the 90-day period will start from that earlier lifting of the lockdown-ending date.

(b) In that scenario, should the lockdown be lifted before 31-5-2020, the petitioners will have 15 days after the ending of the lockdown in which to regularise the payment under the first instalment due on 15-1-2020 and a further three weeks thereafter to regularise the payment under the second instalment due on 15-2-2020.

(c) If the lockdown extends beyond 31-5-2020, then these days will be deferred accordingly, irrespective of whether the moratorium itself is extended beyond 31-5-2020.

(d) The whole of the moratorium period is, evidently, excluded for all amounts that fall due during that moratorium period.

Clarifications

By way of abundant caution, the High Court made certain clarifications:

  1. This order is not a backward extension of the moratorium to January 2020. It is predicated on, and only on, the current lockdown period which makes normal functioning impossible. The relief to the petitioners is co-terminus with the lockdown period, not the declared end of the moratorium.
  2. This may result in additional days (less than 90) being allowed to be reckoned in the countdown or timer because the lockdown came into effect after 1-3-2020. But that is a consequence the petitioners must accept in regard to the prior defaults.
  3. As to whether the petitioners are entitled to the benefit of the entire moratorium period in respect of the prior defaults of January and February 2020, the rival contentions are expressly kept open.
  4. These directions consciously do not take into account any partial or staggered lifting of the lockdown, but only a complete lifting. The reason is self-evident. It may be well nigh impossible for any court ever to decide whether or not a ‘partial lifting’ of the lockdown enables the petitioners to resume their normal operations and, if so, to what extent. The exclusion from the 90-day NPA declaration timer and countdown can only therefore operate during the lockdown period, full or partial, and will end upon the complete lifting of the lockdown.
  5. ICICI Bank is not to be held accountable or liable for these extensions.
  6. This order will not serve as a precedent for any other case in regard to any other borrower who is in default or any other bank. Each of these cases will have to be assessed on their own merits.
  7. These are only prima facie and tentative views. Nothing in this order is to be construed as a final determination of any issues or competing rights. [Transcon Skycity (P) Ltd. v. ICICI Bank, 2020 SCC OnLine Bom 626 , dated 11-4-2020]

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