SC reprieve for borrowers in loan moratorium case

In a relief to the borrowers from the banks faced with financial crunch in the wake of Covid- 19 pandemic, the Supreme Court on Wednesday ordered that bank loan accounts not declared as nonperforming assets ( NPA) till August 31, 2020, will not be declared NPA till further order.

The top court passed the interim order while adjourning till September 10 the hearing on a batch of petitions — both by the individual borrowers and different sectors of industry — challenging the charging of interest and compound interest on the EMI, whose payment was deferred during the sixmonth moratorium period that ended on August 31.

Taking on record a statement by senior counsel Harsh Salve appearing for Indian Banks Association that no account shall become NPA atleast for a period of two months, Justice Ashok Bhushan, heading a threejudge bench also comprising Justice R. Subhash Reddy and Justice M. R. Shah in an interim order said: “In view of the above, the accounts which were not declared NPA till 31.08.2020 shall not be declared NPA till further orders.”

As Solicitor General Tushar Mehta told the court to include word “eligible” meaning those who came within the category of defaulters during the six- month moratorium period from March 1 to August 31, the court said that a commercial entity that had defaulted in the month of January gets into worst situation during the Covid lockdown could be excluded from Covid relief package.

The hearing that was spread over for nearly two hours in the post lunch sitting of the court saw bench questioning the Solicitor General on different counts including how could there be compound interest for the six- month moratorium period and how could moratorium period could be treated as a default period.