Case Law Details
Velankani Information Systems Limited Vs Secretary, Ministry of Home Affairs Government of India (Karnataka High Court)
The issue under consideration is whether denying to grant moratorium by banks regarding payment of all term loan installments during lockdown is justified in law?
In the present case, the petitioner is the owner of a Technology Park and a five-star hotel in Bangalore. The Petitioner had availed term loan facilities from Respondent Nos. 5 to 7 viz., HDFC Bank Limited, Federal Bank and Aditya Birla Finance Limited. The business had to be closed down owing to the nation-wide lockdown. The person approached the banks for availing the moratorium in pursuance of the March 27 circular of RBI which granted a moratorium on the payment of installments of term loans taken by borrowers for a period of three months. However, such a request was denied by all the banks ans financial sector.
High Court states that, the Circular issued by the RBI dated 27.03.2020 is discretionary in so 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. The understanding of the banks by reference to their respective answers to the FAQ’s is also in line with the above. All borrowers are eligible to seek for a moratorium, if a borrower were to seek for grant of a moratorium on the ground that continuity of its business would be affected and establish the same, the borrower would as a matter of right be entitled for the grant of moratorium so that such continuity is not adversely affected. The contentions of the RBI that the dispute is between the Petitioner and Respondents is not acceptable since the dispute arises out of the implementation or not of a Circular issued by the RBI. RBI is therefore directed 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.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
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