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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

WRIT PETITION (CIVIL) NO.825 OF 2020

GAJENDRA SHARMA ...PETITIONER(S)

VERSUS

UNION OF INDIA AND ANR. ...RESPONDENT(S)

J U D G M E N T

ASHOK BHUSHAN, J.

By this writ petition filed under Article 32 of

the Constitution, the petitioner has prayed for

directions declaring the notification dated

27.03.2020 issued by Reserve Bank of India as ultra

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vires to the extent it charges interest on the loan

amount during the moratorium period.

2.The petitioner’s case and the pleadings in the

writ petition briefly noted are:-

2.1The petitioner has availed a home loan of

amount of Rs.37,48,000/- from the ICICI Bank.

After declaration of Coronavirus (COVID-19)

as a pandemic by World Health Organisation,

the National Disaster Management Authority

exercising the jurisdiction under Section 6

of the Disaster Management Act, 2005 to take

effective measures to prevent the spread of

COVID-19 across the country and for

mitigation of the threatening disastrous

situation has issued notification dated

27.03.2020 directing the Ministry,

Departments of Government of India, State

Governments and the State authorities to take

measures for ensuring social distancing so as

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to prevent the spread of COVID-19 in the

country. Necessary guidelines were also

issued under Section 10(2)(1) by the National

Executive Committee.

2.2The Reserve Bank of India on 27.03.2020

issued Statement of Development and

Regulatory Policies where inter alia certain

regulatory measures were announced to

mitigate the burden of debt servicing brought

about by disruptions on account of COVID-19

pandemic and to ensure the continuity of

viable businesses. The notification dated

27.03.2020 was issued by the Reserve Bank of

India for rescheduling of payments – Term

Loans and Working Capital Facilities.

Relevant part of the notification relevant

for the present case is as follows:-

“(i) Rescheduling of Payments –

Term Loans and Working Capital

Facilities

2. In respect of all term loans

(including agricultural term

loans, retail and crop loans), all

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commercial banks (including

regional rural banks, small

finance banks and local area

banks), co-operative banks, all-

India Financial Institutions, and

NBFCs (including housing finance

companies) (“lending

institutions”) are permitted to

grant a moratorium of three months

on payment of all

instalments1 falling due between

March 1, 2020 and May 31, 2020.

The repayment schedule for such

loans as also the residual tenor,

will be shifted across the board

by three months after the

moratorium period. Interest shall

continue to accrue on the

outstanding portion of the term

loans during the moratorium

period.”

2.3The petitioner’s case in the writ petition is

that when all the means of livelihood have

been curtailed by the Government of India by

imposition of complete lockdown pan India,

due to worldwide spread of COVID-19 pandemic,

the petitioner has no way to continue to his

work and earn livelihood. The petitioner’s

case is that imposition of interest during

the moratorium period is ultra vires and

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shall defeat the purpose of permitting the

moratorium of loans.

2.4Referring to notification dated 27.03.2020,

petitioner pleads that Reserve Bank of India

has by the notification made it clear that

interest shall continue to accrue on the

outstanding portion of the term loans during

the moratorium period. Petitioner’s case is

that the above action of imposition of

interest during the moratorium period is

completely devastating and causes hindrance

and obstruction in right to life guaranteed

by Article 21 of the Constitution.

Petitioner’s case is that the additional

interest burden for three months’ moratorium

period is also equally divided in all future

EMIs, which is to increase the monthly bill

of the customer.

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2.5The petitioner’s case is that the

notification qua payment of interest violates

the principle of natural justice as the

Government on one hand ceased the working of

the individuals and on other hand asking to

pay the loan interest during moratorium. The

petitioner’s case is that although the

initial lockdown was for a period of three

weeks but it was extended further. The

Reserve Bank of India by a subsequent

notification dated 23.05.2020 due to the

extension of the lockdown and due to

disruption on account of COVID-19 has

directed all commercial banks to extend the

moratorium by another three months, i.e.,

from 01.06.2020 to 31.08.2020 on payment of

all installments in respect of term loans.

The notification dated 23.05.2020 directed

for repayment schedule for term loans as also

the residual tenor will be shifted across the

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board. Notification further stated that

“interest shall continue to accrue on the

outstanding portion of the term loans during

the moratorium period”.

2.6The petitioner in the writ petition has

prayed for following reliefs:-

a)Issue an appropriate Writ,

Order or Direction in the

nature of mandamus or any

other appropriate writ or

Direction declaring the

portion of impugned

Notification dated 27.03.2020

issued by Respondent No.2 as

ultra vires to the extent it

charges interest on the loan

amount during the moratorium

period, which create hardship

to the Petitioner being

borrower and creates hindrance

and obstruction in “right to

life” guaranteed by Article 21

of the Constitution of India;

and

b)Issue a Writ, Order or

Direction in the nature of

Mandamus thereby directing the

Respondents to provide relief

in repayment of loan by not

charging interest during the

moratorium period declared by

Notification dated 27.03.2020;

and/or

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c)Pass any other order or orders

which may be deemed fit and

proper in the facts and

circumstances of the case and

in the interest of justice.”

2.7Notices were issued in the writ petition.

While hearing the matter on 17.06.2020 the

submission of the learned counsel for the

petitioner have been noted to the following

effect:-

“We have heard learned counsel

for the petitioner(s).

Learned counsel for the

petitioner(s) submits that under

the Disaster Management Act, 2005,

the Central Government has ample

power and jurisdiction to grant

relief with regard to loan which

is specifically provided for. It

is submitted that the circular of

the Reserve Bank of India dated

27.03.2020 although grant

moratorium but substantially no

relief is given to the borrowers.

The two-fold submissions have been

made by learned counsel for the

petitioner(s). It is submitted

that if moratorium is being

granted for a period of three

months, the entire amount payable

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including principal and interest

should not be charged during

moratorium 3 period. Secondly, at

least the demand of interest on

interest should not be made and

these reliefs can be extended by

the Central Government and the

Reserve Bank of India.”

2.8In the writ petition, affidavits have been

filed both by the Union of India as well as

the Reserve Bank of India. In the affidavits

filed on behalf of the Union of India, it was

pleaded that the Central Government is fully

conscious of the difficulties faced by the

various sectors and the stakeholders of

various sectors within the purview of the

Ministry of Finance and other Ministries. It

is further pleaded that Finance Ministry,

after the outbreak of the COVID-19 pandemic

globally, has taken several measures of

relief dealing with the potential problems

faced by several sectors and in several

spheres of all financial worlds. In the

affidavit filed dated 31.08.2020, details of

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number of measures to mitigate financial

suffering have been enumerated. It has been

further pleaded that Finance Ministry took

the initiative and interacted with Reserve

Bank of India requesting the Reserve Bank of

India to provide for various measures of

relief to the borrowers. The affidavit also

enumerates different reliefs and measures

taken by Reserve Bank of India with regard to

moratorium. Reference has been made to two

circulars dated 06.08.2020 issued by Reserve

Bank of India facilitating revival of real

sector activities and mitigating the impact

on the ultimate borrowers by enabling lenders

to grant concessions to borrowers for COVID-

19-related stress in personal, MSME and

corporate loans. The Union of India has

filed further affidavits dated 09.10.2020,

23.10.2020 and 17.11.2020.

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2.9The Reserve Bank of India has also filed a

counter affidavit, a consolidated counter

affidavit dated 09.10.2020, additional

affidavit dated 09.10.2020 and further

additional affidavit dated 01.11.2020.

Indian Bank Association has also filed

affidavits bringing on record various

circulars issued by Reserve Bank of India,

State Bank of India etc.

3.We have heard Shri Rajiv Dutta, learned senior

counsel for the petitioner. Shri Tushar Mehta,

learned Solicitor General, Shri V. Giri, learned

senior counsel and Shri Ramesh Babu M.R., learned

counsel appearing for the Reserve Bank of India and

some of the counsels, who had appeared for

intervenors.

4.Hearing of this writ petition took place

alongwith other writ petitions on different dates.

When the matter was heard on 19.11.2020, learned

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counsel on behalf of the petitioner, Shri Rajiv Dutta

submitted that in view of the affidavits, which have

been filed in the present writ petition by the

respondent No.1, this writ petition be disposed of.

We, thus, proceed to decide the Writ Petition (C) No.

825 of 2020.

5.In course of hearing of these petitions, learned

senior counsel for the petitioner, Shri Rajiv Duta

has expressed satisfaction on the measures taken by

the Government of India with respect to borrowers in

which category the petitioner belongs. Learned senior

counsel for the petitioner submits that the decision

of the Central Government to forego interest on eight

specified categories of loans paid upto Rs.2 Crores

has come as a great relief.

6.Shri Tushar Mehta, learned Solicitor General

submits that the Central Government is fully

conscious of the difficulties faced by the various

sectors and the stakeholders of various sectors and

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the Finance Ministry, after the outbreak of COVID-19,

has taken several measures of reliefs dealing with

the potential problems faced by several sectors and

in several spheres of all financial worlds. Shri

Mehta has referred to number of measures taken by the

Central Government to mitigate the financial

suffering as detailed in its affidavits as noted

above. In its affidavit dated 23.10.2020, it is

stated that the decision taken by the Central

Government for granting various reliefs for the

COVID-19 pandemic for benefit of waiver of interest

upto Rs.2 Crores in eight categories has been

approved by the Union Cabinet in its meeting dated

21.10.2020 and Ministry of Finance has issued

directions dated 23.10.2020 on the subject, which has

been brought on record alongwith the affidavit. Shri

Mehta submits that in pursuance of circular dated

23.10.2020, as a follow-up towards the implementation

of the aforesaid decision, the State Bank of India

has informed that as on 13.11.2020, as per

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provisional, unaudited information received so far

from various lending institutions, such lending

institutions have released ex-gratia amount of an

aggregate exceeding Rs.4,300 Crores in over 13.12

Crore accounts of borrowers covered under the Scheme.

7.Shri Giri also submits that Reserve Bank of India

has also taken follow-up action in pursuance of the

policy decision taken by the Finance Ministry. He

submits that the Reserve Bank of India has issued

Circular dated 26.10.2020 to all commercial banks,

all primary co-operative banks and all All India

Financial Institutions and all non-banking financial

companies and were advised to be guided by the Scheme

announced by the Government of India dated

23.10.2020.

8.We have considered the submissions of the learned

counsel for the parties and have perused the records.

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9.The pandemic COVID-19 has not only caused serious

threat to the health of the people but has also cast

its shadow on the economic growth of the country as

well as other countries in the entire world. Due to

lockdown imposed by the Government of India in

exercise of powers under the Disaster Management Act,

2005, there can be no denial that most of the

businesses including private sector as well as public

sector has been adversely affected. For several

months, large number of industries were not allowed

to function and exemptions were granted only to few

of the industries to run and carry on its activities,

which were found essential and necessary in the fact

situation. Although, gradually, due to Unlock- 1, 2

and 3, the industries and other business activities

have been restored and the economy of the country is

on track although at a slow pace. The moratorium

period as granted by the Reserve Bank of India vide

orders dated 27.03.2020 and 23.05.2020 have continued

from 01.03.2020 to 31.08.2020, i.e., for the period

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of six months. As submitted by the learned Solicitor

General and reflected by the affidavits filed on

behalf of the Union of India, it is clear that

Central Government was fully conscious of the

difficulties faced by the various sectors and the

stakeholders of various sectors and different

measures by Finance Ministry have been taken in the

above reference, which has been detailed in the

affidavits dated 31.08.2020, 09.10.2020 and

23.10.2020.

10.For the purposes of the present case, it is

relevant to notice paragraphs 3 and 4 of the

affidavit dated 23.10.2020 filed on behalf of the

Union of India in which following has been stated:-

“3. I state and submit that as submitted

in the previous affidavits, the Central

Government took many Policy decisions for

granting various reliefs for the Covid

pandemic which is a 'disaster' within the

meaning of the Disaster Management Act,

including a policy decision whereby the

following borrowers were declared eligible

for the benefit of waiver of 'interest on

interest':

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(i) MSME loans up to Rs. 2 crore

(ii)Education loans up to Rs. 2 crore

(iii)Housing loans up to Rs. 2 crore

(iv)Consumer durable loans up to Rs. 2

crore

(v) Credit card dues up to Rs. 2 crore

(vi)Automobile loans up to Rs. 2 crore

(vii)Personal loans to professionals up

to Rs. 2 crore

(viii)Consumption loans up to Rs. 2 crore

It is submitted that the preparation of

the Scheme in this behalf was under

contemplation and it was also necessary to

formalise the said policy decision by

following certain mandatory procedure

required by law.

4. I state and submit that the aforesaid

decision taken by the Ministry of Finance

Government of India, has been approved by

the Union Cabinet in its meeting held on

21.10.2020. Pursuant to approval by the

Union Cabinet, the Ministry of Finance has

issued Scheme providing for, broadly, the

following mechanism,

(a)The eligible borrowers mentioned in

the previous Affidavit [and described

in detail in clause 4 of the Scheme

annexed herewith and marked as

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Annexure R-1] will be "eligible

beneficiaries" under the Scheme.

Under the Scheme, all lending

institutions [as defined under clause

3 of the Scheme] shall credit the

difference between compound interest

and simple interest in the respective

accounts of eligible borrowers for the

period between 1.3.2020 to 31.8.2020.

This amount shall be credited by

each of the lending institutions

referred to in clause 3 of the Scheme,

irrespective of whether such eligible

borrowers have fully availed or

partially availed or have not availed

of the moratorium viz. deferment in

payment of instalments as per the

Circulars dated 27.3.2020 and

23.5.2020 issued by RBI.

(b)After crediting the said amount in the

respective accounts of eligible

borrowers, the lending institutions

would claim reimbursement from the

Central Government through the nodal

agency of State Bank of India as

stipulated under the Scheme.

It is submitted that the aforesaid

decision is taken after careful

consideration, keeping in mind the

overall economic scenario, the nature

of borrowers, impact on the economy

and such other factors as a policy

decision earmarking the above referred

class of borrowers for grant of

benefits.”

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11.The case of the present petitioner, who has taken

housing loan is fully covered by the decisions of the

Union of India as noted above, since the benefit has

been extended to the housing loan upto Rs.2 Crores,

i.e., in pursuance of the aforesaid decisions of the

Government of India, the Ministry of Finance had

issued order dated 23.10.2020 – Operational

Guidelines with regard to COVID-19 Reliefs, details

of order dated 23.10.2020 contains a heading “COVID-

19 Relief”, relevant portion of the Scheme is to the

following effect:-

“COVID-19 Relief

Scheme for grant of ex-gratia payment of

difference between compound interest and

simple interest for six months to

borrowers in specified loan accounts

(1.3.2020 to 31.8.2020)

Operational Guidelines

1. Name of the scheme

This scheme shall be called "Scheme for

grant of ex-gratia payment of difference

between compound interest and simple

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interest for six months to borrowers in

specified loan accounts (1.3.2020 to

31.8.2020)".

2. Object of the scheme

In view of the unprecedented and extreme

COVID-19 situation, the object of the

Scheme is to provide ex-gratia payment of

difference between compound interest and

simple interest by ways of relief for the

period from 1

st

March 2020 to 31

st

August

2020 to borrowers in specified loan

accounts. Such payment does not constitute

a contractual, legal or equitable

liability of the Central Government and is

only an ex-gratia payment to the following

designated class of borrowers in view of

the COVID-19 pandemic.

3. Applicability of the scheme

This scheme shall apply to all lending

institutions, which must be either a

banking company, or a Public Sector Bank,

or a Co-operative Bank [i.e., an Urban Co-

operative Bank or a State Co-operative

Bank or a District Central Co-operative

Bank], or a Regional Rural Bank, or an All

India Financial Institution, or a Non-

Banking Financial Company or a Housing

Finance Company registered with Reserve

Bank of India (RBI) or National Housing

Bank as the case may be. A Non-Banking

Financial Company—Micro Finance

Institution should be a member of a Self-

Regulatory Organisation (SRO) recognised

by RBI.

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4. Eligibility criteria under the scheme

(1) Borrowers in the following

segments/classes of loans, who have loan

accounts having sanctioned limits and

outstanding amount of not exceeding Rs. 2

crores [aggregate of all facilities with

lending institutions] as on 29.2.2020,

shall be eligible under the Scheme:

(i) MSME loans

(ii) Education loans

(iii) Housing loans

(iv) Consumer durable loans

(v) Credit card dues

(vi) Automobile loans

(vii) Personal loans to professionals

(viii) Consumption loans

Any borrower whose aggregate of all

facilities with lending institutions is

more than Rs. 2 crores (sanctioned limits

or outstanding amount) will not be

eligible for ex-gratia payment under this

scheme.

xxxxxxxxxxxxxxx”

12.The decision of the Government of India dated

23.10.2020 has also been communicated to all the

banks and other financial institutions. The Reserve

Bank of India has also issued necessary instructions

in the above regard. In the affidavit filed on

17.11.2020 on behalf of the Union of India, in

paragraphs 3 and 4 following has been stated:-

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“3. It is submitted that as a follow-up

towards the implementation of the

aforesaid Scheme, the nodal agency, i.e.

State Bank of India, has informed that as

on 13.11.2020, as per provisional,

unaudited information received so far from

various lending institutions, such lending

institutions have released ex-gratia

amount of an aggregate exceeding Rs. 4,300

crore in over 13.12 crore accounts of

borrowers covered under the said Scheme.

The data received is subject to final

reconciliation and audit. Information from

some remaining lenders are still being

received.

4. It is further submitted that various

lending institutions have put in place

Board-approved policies for restructuring

of accounts as per RBI circular dated

6.08.2020. Restructuring/resolution of

eligible accounts are being undertaken by

lending institutions on case-by-case

basis. Resolution plans in respect of

eligible personal, MSME and corporate

loans are to be invoked by 31.12.2020, and

time is still available to the account

holders for such invocation.”

13.Learned Solicitor General referring to above

measures taken by the Union of India submits that

above measures have been taken by the Government of

India in exercise of jurisdiction under the Disaster

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Management Act, 2005 to mitigate the hardships and

miseries of few sectors. Shri Mehta submits that

with regard to other specified sectors, different

other measures have been taken, which we need not

note for the purposes of this case and which shall be

separately considered while considering writ

petitions raising such issues.

14.As noted above, Shri Rajiv Dutta, learned senior

counsel for the petitioner has expressed its

satisfaction on the measures taken by the Government

of India redressing grievances of the petitioner to

the extent as noted above. The Union of India having

taken specific measures vide its circular dated

23.10.2020, which has been brought on the record and

follow-up measures have also been taken in

consequence thereof, we dispose of the present writ

petition with directions to the respondents to ensure

that all steps be taken to implement the decision

dated 23.10.2020 of the Government of India, Ministry

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of Finance so that benefit as contemplated by the

Government of India percolates to those for whom the

financial benefits have been envisaged and extended.

All IAs, impleadment applications stand disposed of.

......................J.

( ASHOK BHUSHAN )

......................J.

( R. SUBHASH REDDY )

......................J.

( M.R. SHAH )

New Delhi,

November 27, 2020.