Jammu and Kashmir and Ladakh High Court
Case BriefsHigh Courts

Jammu and Kashmir High Court: Ali Mohammad Magrey, J. allowed the writ petition and directed the respondents to indemnify the petitioner.

The briefly stated case of the petitioner was that, the respondents invited applications for allotment of flats and the petitioner thereafter submitted a form along with a deposit of Rs 3 lacs in July 2013. The petitioner received a notice in November, 2014 wherein 10 days’ time was given to him to deposit the first instalment which time had already elapsed and it came to the knowledge of the petitioner that the flat had been allotted to him. The petitioner immediately approached the respondents, who provided him with the copy of the letter of intent along with a copy of payment schedule and was told that same was posted to him in December, 2013.

It was submitted that the petitioner had already deposited an initial amount and wasn’t conveyed the letter of intent besides the notice. It was further submitted that the petitioner filed a representation before the respondents, wherein the petitioner prayed for extension of at least three months for making the payment of 1st instalment in the backdrop of the fact that due to the floods in the valley in the year 2014, the petitioner had suffered the huge loss and was not in a position to pay.

It was further submitted that the petitioner after waiting for the response to his representation and also an extension of time keeping in view the previous experience of issuance of notices and late dispatch of the same, approached the respondents but was not given any extension and was told to wait and to his surprise, the petitioner came across another notice in January, 2015 wherein he was asked to deposit the instalment by ending of January, 2015 or in default the petitioner’s letter of intent shall be treated as withdrawn and his initial deposit will be forfeited and flat re-advertised.

The petitioner being aggrieved of the above said notice, challenged the same by virtue of writ petition and this Court disposed of the said writ petition with a direction to the respondents to afford the reasonable time to adhere to the terms of notice in regard to deposit of instalment and in the event such notice not having been served upon him, the same be served after affording reasonable time to the petitioner. The petitioner served the said order on the respondents and filed a detailed representation before the respondents, who chose not to file an appeal against the said order and despite the service on the respondents well within time; no action was taken by the respondents.

The Court on perusal of the facts and circumstances of the case cancelled the impugned notice and letter of intent. Further, the earnest money of Rs 3 lacs deposited by the petitioner was forfeited and the Flat in question re-advertised was declared as being against the order passed by this Court.

The Court further pointed out that it had earlier too directed the respondents to consider the hardship encountered by the petitioner in not making the deposit of instalment on account of the cause projected taking a pragmatic view and bearing in mind that a mere technicality in adherence to notice should not result in defeating his legitimate interests in regard to the acquisition of flat.

Petition was allowed and stood quashed to the extent of forfeiture of Rs 3 lacs and by writ of mandamus. Respondents were directed to pay the amount deposited by the petitioner along with interest of 9% from the date of deposition of the amount to its realization, within a period of one month.[Fida Ahmad v. Srinagar Development Authority, 2020 SCC OnLine J&K 484, decided on 21-09-2020]

Case BriefsHigh Courts

Bombay High Court: A Division Bench of R.D. Dhanuka and V.G. Bisht, JJ., held that the RBI Circulars dated 27th march, 2020 and 23rd may, 2020 with regard to moratorium on repayment of term loans will not apply to Mutual Funds and Debentures.

Petitioner had made a private placement of 650 unlisted redeemable non-convertible debentures of Rs 10,00,000 in the month of March, 2015 with 10.40% XIRR payable at the time of maturity and having redemption date of 8th July, 2020.

Petitioner had made various payments to respondent 1A under the stated agreement. Since March, 2020 in view of the pandemic petitioner committed default in making payment of certain installments to respondent 1A.

Respondent 1A raised demand for making payment of the amount defaulted under the agreement.

On not being able to make the above payment, petitioner filed the present petition impugning the letter by respondent 1 dated 4th June, 2020 along with extension of redemption dated to a date 3 months after the Government allows schools to reopen, subject to the balance/outstanding debenture amount continuing to bear/accrue interest at 10.40% per annum till such extended date.

Decision

Bench observed that the entire petition is based on the reliance placed on the moratoriums dated 27th March, 2020 and 23rd May, 2020 issued by Reserve bank of India.

What does the said circular indicates?

“..it applies to all Commercial Banks, all Primary (Urban) Co-operative Banks, States Co-operative Banks, District Central Co- operative Banks, All India Financial Institutions, All Non-Banking Financial Companies and also deals with terms loans and working capital facilities provided by those entities.”

Thus, in view of the above, it is very clear that the said Circulars will not apply to mutual funds and debentures.

Zee Entertainment Enterprises Limited is a profit making company and is liable to face the consequence of default committed by the petitioner. It is for the petitioner to make an arrangement for the balance amount on the due date which the petitioner has failed.

Hence, present petition is devoid of merits and accordingly disposed of. [Zee Learn Ltd. v. UTI Asset Management Co. Ltd., 2020 SCC OnLine Bom 806 , decided on 13-07-2020]

Case BriefsCOVID 19High Courts

Karnataka High Court: Suraj Govindaraj, J., dealt with a petition which was filed in order to enforce the regulatory package announced by the RBI by issuing directions to the RBI 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.

The Petitioner had availed term loan facilities from respondents namely HDFC Bank Limited, Federal Bank and Aditya Birla Finance Limited. The Petitioner has been in the business of running an Information Technology Park, a 5 star Hotel, both of which have been constructed on the land belonging to the Petitioner. In order to service the aforesaid loan, there was an agreement arrived at between lenders that the revenue from the lease rentals of the Technology Park would be credited into Escrow Account and revenue from the  Petitioner’s hotel business would be credited into another Escrow Account. Respondents were entitled to appropriate the Equated Monthly Installment 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 utilization 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 installment on the loan borrowed on account of the hotel business to respondent on the due date that was 13th of every month. The RBI had set out the various development and regulatory policies to address the stress in the financial condition caused by COVID-19 so as to ease the financial stress which included relaxing  the repayment pressures on the borrowers and by improving access to the working capital by such borrowers. On the basis of which the petitioners had filed the present petition. The Respondents had filed objections contending that the Petitioner had suppressed the material facts in that the Petitioner was receiving rentals from the Technology Park, merely because income/revenue was not being received from the hotel, the Petitioner would not be eligible for any moratorium and the circular issued by the RBI was not mandatory in nature, only directory.

The Court while answering if the writ of Mandamus could be issued against a private bank to implement the circular issued by RBI, held that the writ would be maintainable for the enforcement of public duty. Answering next two questions of whether the circular was mandatory, directory or discretionary and whether grant of moratorium was at the discretion of the bank the Court said that the circular was no doubt discretionary but as far as the power to grant or not a moratorium by a bank, it is mandatory for the Bank to ensure the continuity of viable businesses, in that, the non-grant of a moratorium should not result in adversely affecting the survival and continuity of a viable business and because of the nature of the circular being discretionary any directions cannot be issued to the respondents 1 & 2 to for implementation of the circular.

The Court while disposing of the petition directed the respondents to grant the petitioner with the moratorium period and restrained them from either jointly or severally recovering the loan repayment installments/EMI due in respect of loan accounts of the petitioner during the period of moratorium. It further directed to reverse the recovery of loan repayment installments/EMI already affected and transfer the same to the Current Account of the Petitioner. [Velankani Information Systems Ltd. v. Union of India, 2020 SCC OnLine Kar 835 , decided on 08-07-2020]

Case BriefsCOVID 19High Courts

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]
Kerala High Court
Case BriefsHigh Courts

Kerala High Court: N. Nagaresh, J. disposed of a writ petition seeking to recover the amount due to be received from the properties auctioned.

In the present case, the petitioners 1 and 2 were subscribers to a Chitty and in order to invest in their business, they participated in various auctions. Properties were purchased in installments, however, repayment of the installments defaulted. The 2nd Respondent initiated action against the petitioners under the Revenue Recovery Act.

The counsel representing the petitioners, Sakir K.H had submitted that the amount sought to be recovered from the properties would fetch more than the amount due to the 1st respondent and if auction of the entire properties are conducted in pursuance of revenue recovery proceedings, it would put the petitioners in a position of irrecoverable loss and injury. The counsel expressed the petitioner’s willingness to discharge their liabilities provided the installment facilities are given to them for remitting their dues.

The standing counsel for the respondents, Anil Kumar submitted the amount that would cover the arrears.

High Court upon perusal of the facts and circumstances disposed the writ petition and permitted to remit the arrears towards the chitties and the loan in twenty equal monthly installments. The Court also directed that upon two payment defaults the respondents will be at liberty to proceed against the petitioners.[Prakasan C.K v. Kerala State Financial Enterprises Ltd., 2019 SCC OnLine Ker 2931, decided on 17-09-2019]

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: Devan Ramachandran, J. granted peremptory order for the payment of the recovery amount in installments.

A writ petition was filed in order to question proceedings initiated and being pursued by the respondent Bank under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002.

The petitioner had to pay the overdue amount demanded by the Bank through the orders made under the SARFAESI Act, 2002. The Court proceeded with the writ application and stated that “I am conscious that I am jurisdictionally proscribed from entering into any enquiry or consideration of the legality or otherwise of the orders impugned in this writ petition on account of the imperative statutory provisions and the binding judicial pronouncements and therefore, cannot and do not propose to consider any of the legal contentions raised by the petitioner on its merits.”

But the court after enquiring with the authorized officer for the respondent allowed the request of the petitioner and granted leniency in the payment to pay overdue amount in the installments with the strict instructions, “that directions in this judgment are peremptory in nature and that the petitioner will have to comply with the same meticulously. I caution the petitioner that no further requests for extension or modification of this judgment, save in exceptional circumstances, will be permitted and that if the petitioner fails to comply with the directions herein, she will lose the benefit of this judgment and she will also be foreclosed from challenging the measures/proceedings taken by the Bank under the SARFAESI Act and impugned in this writ petition before any other alternative Forum or Court”.[Sreeja v. Trissur District Co-Operative Bank Ltd., 2019 SCC OnLine Ker 1602, decided on 20-05-2019]

Kerala High Court
Case BriefsHigh Courts

Kerala High Court: A Single Judge Bench comprising of Devan Ramachandran, J. was seized of a civil writ petition filed by a defaulter challenging proceedings initiated by the respondent bank against him under Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act).

The Court took note of the financial constraints and burden pleaded by the petitioner and in the interest of saving time, disposed of the petition granting petitioner an opportunity to repay the loan in installments.

At the outset, the Court opined that it was jurisdictionally proscribed from considering the legality impugned proceedings in view of binding judicial pronouncements of the Apex Court in United Bank of India v. Satyawati Tondon, (2010) 8 SCC 110. Therefore, it refused to consider any of the contentions raised by the petitioner on merits. However, counsels for the petitioner Sri Saiju S. and Smt Rubeena Hilal prayed that notwithstanding jurisdictional limitations, the petitioner may be granted leniency to enable him to pay off respondent’s loan in installments.

It was noted that banks are only interested in recovering and not in pursuing pending litigations for recovery; and on respondent bank’s submission to that effect, petitioner was granted an opportunity to pay the entire outstanding amount to respondent in installments.

The Court clarified that in case of any default by the petitioner, a benefit granted to him under its judgment would stand vacated and the bank would be at liberty to recover entire amount from him by continuing proceedings under SARFAESI Act from the stage as it was on the date of this judgment.[Wills I v. Kerala State Co-operative Bank Ltd., 2018 SCC OnLine Ker 5227, decided on 10-12-2018]