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Amit Khaneja And Ors vs. IL & FS Financial Services Ltd. - (High Court of Delhi) (18 Dec 2020)

RBI’s Circular issued to extend relief to borrowers during the COVID-19 pandemic is not applicable to defaults prior to the outbreak of the pandemic

MANU/DE/2270/2020

Commercial

The present writ petition has been filed challenging the impugned letter sent by Respondent No.1/IL&FS Financial Services Ltd. ('IL&FS'), by which it has revoked the in-principle agreement for one-time settlement ('OTS') with the Petitioners in relation to repayment of debt. The Petitioner prayed for issuance of writ of mandamus for setting aside Respondent's letter dated 26th May, 2020 and grant all consequential reliefs. Further, to pass any appropriate writ directing the Respondent to extend the time by 3 months for repayment under the terms of Respondent's in principle agreement for one-time settlement dated 3rd March, 2020/17th March, 2020.

A perusal of the RBI circulars on 'COVID-19 Regulatory Package' bearing no. DOR.No.BP.BC.47/21.04.048/2019-20 dated 27th March 2020, DOR.No.BP.BC.63/21.04.048/2019-20 dated 17th April, 2020 and DOR.No.BP.BC.71/21.04.048/2019-20 dated 23rd May 2020 and the RBI Policy Guidelines titled "Statement on Developmental and Regulatory Policies" shows that, these are meant for mitigating the burden of debt which may have been brought about due to the COVID-19 pandemic. This Court does not consider the present case as one wherein any disruption took place due to the COVID-19 pandemic. Even prior to the OTS proposal being given by the Petitioners, the Petitioners were already in default. The response by IL&FS in March, 2020 may not have given sufficient time to the Petitioners to make the payment in terms of the OTS. However, the revocation of the OTS did not take place in March, 2020 but in May, 2020. Even, thereafter, since June, 2020 to November, 2020, the Petitioner had sufficient time to raise the money and pay IL&FS. However, no payment has been forthcoming from the Petitioner. Despite the lapse of more than six months, no concrete step was taken by the Petitioners to honour the OTS.

The circulars of the RBI and the guidelines thereunder relate to reliefs to be granted for payments of interest and declaration of accounts as NPAs etc., during the COVID-19 pandemic. These circulars and policy guidelines cannot lend any support to the Petitioners' case where the defaults are prior to the outbreak of the pandemic itself. The legality of the revocation of the OTS in May, 2020 cannot be tested on the benchmark of the recent RBI circulars and the policy guidelines as these settlements are independent of the said circulars and guidelines. Moreover, the RBI circular itself make it clear that, the same is for "continuity of viable businesses" and not for accounts which are already declared as NPA, as is in the present case.

Despite the Petitioners having sought three months' time in the writ petition for finalizing the OTS proposal and raising of Rs.100 crores, even the grants of six months' time has proved to be insufficient. The present case does not relate to postponement of payment of instalments of loans or where any accounts would be classified as NPAs, for defaults made during the COVID-19 pandemic.

While there is no doubt that, the pandemic did cause disruption to normal business operations and genuine borrowers ought to be given the benefit of the RBI circulars and policy guidelines, the Petitioners do not fall in that category. The defaults by the Petitioners date back to 2018. The defaults continued over a period of two years prior to the outbreak of the pandemic itself. Such cases cannot be those which would be entitled to benefits under the policies of the RBI which are meant to give some relief during the pandemic.

Moreover, in the present case, despite repeated opportunities having been given by the Division Bench at the stage when the DRT proceedings were going on and even after the filing of the present writ petition, the same have been of no avail. No further relief can be granted. The Respondent is permitted to proceed against the Petitioners, in accordance with law. Petition dismissed.

Tags : BURROWERS   RBI CIRCULARS   APPLICABILITY  

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