In a move that provides clarity on what could have potentially become a sticky point in the interpretation of the regulatory guidelines issued by the RBI, the
The case was filed by a company namely
The Court, while refuting the contentions of the Bank, was of the view that a "Standard Account" cannot be immediately classified as NPA, without first being included in SMA-1 and SMA-2 categories. Accordingly, the Court held that it can be inferred by the guidelines issued by RBI , that the RBI intended for the extension of benefit even to accounts that were included in SMA-1 and SMA-2 categories as on
The Hon'ble Single Judge, therefore, passed the interim order directing the bank to restore status quo vis-ŕ-vis the further classification of the Company's account. However, the Court also made it clear that interest and penalty will continue to accrue and the company will be in default if the dues are not cleared after the expiration of the moratorium period.
This order is significant because it will bring relief to even those people who may have missed paying one or two loan installments and honours the true intent of the RBI guidelines, which is to ease the immediate financial burden that so many borrowers are facing due to COVID-19.
The interim relief granted by the Hon'ble Court, while on one hand is a welcome clarification, however, on the other hand, does not address the issue that the relaxation granted by the RBI read with the relief passed by the Court, would only apply in cases where the borrower has availed of the moratorium benefit and the same has been granted by the bank.
It is important to remember that the implementation & execution of the RBI guidelines has been left at the discretion of the bank and automatic applicability of the moratorium is not the rule but rather differs from bank to bank. In light of this fact, the present case (since the Petitioner took shelter of the moratorium before the Court) and those cases where borrowers have applied to be covered by the moratorium, the order passed by the Ld. Single Judge can be relied upon. However, we believe that, in cases where borrowers have not availed the benefit of the moratorium extended by the RBI, the abovementioned order cannot be relied upon. Therefore, since the Hon'ble Court, in its order, has not acknowledged this aspect, it may have to deal with it in a more detailed manner, should another similar matter come for adjudication before it.
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