The Supreme Court on Tuesday rejected the pleas from various trade associations and corporate bodies to extend the six-month loan moratorium period offered by the Reserve Bank of India (RBI), adding that a complete waiver of interest during the moratorium could not be granted, either. On the other hand it ruled that there shall be waiver of interest on interest (compound interest) with respect to EMIs which were not paid by borrowers after availing the loan moratorium scheme extended by Reserve Bank of India (RBI) during March 1 to August 31.
The SC said no direction could be issued to the govt or the RBI to announce any particular financial package or relief, and held that it could not issue directions to provide relief to particular sectors over and above others.
Further, all borrowers will be eligible for such waiver irrespective of the amount of loan availed, the Court said.
“There shall not be any charge of interest on interest/compound interest/penal interest for the period during the moratorium from any of the borrowers and whatever the amount is recovered by way of interest on interest/compound interest/penal interest for the period during the moratorium, the same shall be refunded and to be adjusted in the next instalment of the loan account,” the Court ordered.
The Hon’ble Supreme Court effectively set aside the direction to restrict waiver of interest on interest to certain categories of borrowers who had availed loans of less than Rs. 2 crores.
“There is no justification shown to restrict the relief of not charging interest on interest with respect to the loans up to Rs. 2 crores only and that too restricted to the aforesaid categories. What are the basis to restrict it to Rs. 2 crores are not forthcoming Therefore, as such, there is no rational to restrict such relief with respect to loans up to Rs. 2 crores only,” the Court said.
The following prayers made by borrowers were, however, rejected by the top court.
– total waiver of interest during the moratorium period;
– to extend the period of moratorium;
– further reliefs over and above the packages already offered.
It also mentioned in its judgement that it will ordinarily not engage in exercising judicial review over matters of economic and fiscal policies.
“The Court will not embark upon inquiry whether public policy is wise or better policy can be evolved. Economic and fiscal policies are not amenable to judicial review and merely because a sector is not satisfied with a policy decision, cannot be reason for interference unless there are malafides and arbitrariness in the said policy decision,” the judgment said.”
The apex court directed that there should be no interest on interest or penal interest on any amount during the loan moratorium from any borrower.
The Judgement is a quite balanced judgement as agreeing to all the demand of the petitioner could lead to injustice to many who have already paid their interest and as the economy is again coming back on track extending loan moratorium won’t make sense and it will increase loss of Banks which are the backbone of economy.