Shakuntala Educational & Welfare Society vs. Punjab & Sind Bank (Delhi High Court); W.P. (C) 2959/2020; 13/04/2020
Recently, in case of “Shakuntala Educational & Welfare Society vs. Punjab & Sind Bank W.P. (C) 2959/2020” dated 13th April 2020, before the Hon’ble High Court of Delhi, the judgement of Transcon Skycity Private Limited (Writ Petition LD-VC No. 28 of 2020) and Transcon Iconica Private Limited (Writ Petition LD-VC No. 30 of 2020) (together referred to as “Transcon Cases”) was relied on by petitioner institution, along with the citing of Anant Raj Limited vs Yes Bank Limited (“Anant Raj Case”) in order to support their contentions. The facts of the present case were somewhat on similar grounds. Akin to the mentioned cases, the petitioner in this case too had sought a direction from the court for the grant of moratorium of three months and not to declare their pending loan accounts as Non-Performing Asset (NPA).
The petitioner institution, being a charitable society, was engaged in the business of technical and higher education. It had availed six loans from the respondent bank out of which four had been fully satisfied. However, due to sudden eruption of pandemic, the management failed to pay the March 2020 instalment. Further, they also submitted that educational institutes of petitioner in the state of Uttar Pradesh were prohibited by the State Government from coercing the students to pay due fees via issuance of a special directive. Resultantly, the petitioner institution was unable to repay the March instalment on time. However, the petitioner assured the court that it would pay the instalments within a week from the date of withdrawal of such prohibitive directive, showcasing every intention of honouring its commitment.
The bank on the other hand denied the petition stating that the instalment had already fallen due on 31st December 2019 and 31st March 2020 was actually the deadline to classify its pending loan account as NPA. Hence, the petitioner should not be given undue advantage of the moratorium provided by RBI under the Press Release dated 27th March 2020 (Statement on Developmental and Regulatory Policies) and other relevant circulars. The bank further submitted that the regulatory policy rolled out by RBI nowhere provided for any deferment of a pending loan account being classified as NPA on account of the pandemic of Covid-19.
After considering the arguments of both the parties, the Hon’ble Court opined that irrespective of the question, as to whether the moratorium as envisaged by RBI would be applicable to the petitioner qua the instalments, any classification of the petitioner’s accounts as NPA in present situation would certainly cause a grave and irreparable loss to the Petitioner. The court, accordingly, directed that till the next due date, the bank would stand restrained from declaring the petitioner’s accounts as NPA. However, the court clarified that as soon as the directive issued by the State of Uttar Pradesh is lifted, the petitioner would be liable to forthwith pay the instalments within one week from the date of the such withdrawal. This way court granted a conditional stay on the bank from classifying the borrower’s account as NPA.
This consistently marks third such instance after Anant Raj Case and Transcon Cases, where a similar relief was provided by court on the topic of declaration of NPA, even though dues of the defaulting parties were outstanding beyond the RBI prescribed limit of 1st March 2020 to 31st May 2020. This bird’s eye view of court is considered to be taken due to the economic impact of Covid-19, which is quite justifiable.