RBI Moratorium- What the Courts have held

RBI Moratorium- What the Courts have held

In a wave of litigation at the back of the RBI announcing a 3 month moratorium from payments to be made against loans taken by borrowers, the Indian courts have attempted to provide relief to both parties and to balance the interests of both the lender and the borrower.

Most recently, the Single Judge of the Delhi High Court restrained the Punjab & Sindh Bank from declaring an account as Non-Performing Asset (NPA), keeping in view the circular passed by the RBI. The Petitioner in this case was a charitable society involved in educational initiatives which had yet to repay two out of the six loan installments. It was the contention of the Petitioner that since the State of Uttar Pradesh and the State Government had issued a specific directive prohibiting it from coercing the students to pay the due fees; it was unable to pay the installments due. The default had occurred on 31.12.2019 and it was the contention of the Respondent that since the default occurred prior to 01.03.2020, therefore the RBI circular would not be applicable in this case. The Court, however, held in favour of the Petitioner and restrained the bank from taking any coercive action against the borrower and directed the bank to not declare the account as NPA for the time being.

Similarly, the Bombay High Court in the case of Transcon Skycity Pvt. Ltd vs. ICICI Bank & Ors.[2] also passed an interim order wherein it stated unambiguously that the lockdown period will be excluded from the 90 day period required to declare a defaulting account as NPA. In a loan spanning 18 installments, the Petitioner had failed to repay the ones that fell due on 15.01.2020 and 15.02.2020. The issue before the Court was whether moratorium period would be excluded while calculating the 90 day period for declaring an account as NPA where the default had occurred prior to 01.03.2020.

In passing the order that it has, the Bombay High Court acknowledged that the moratorium period is applicable to defaults in order to calculate the 90 day period and that the clock for such computation shall pause on 01.03.2020. However, it has gone a step further and also held that for defaults that have occurred prior to 01.03.2020, the national lockdown period shall serve as the relevant ‘moratorium’ period while calculating the 90 day period. This implies that once the lockdown is lifted, the borrower will have to make good the defaults that have occurred prior to 01.03.2020 and such benefit of non-payment of outstanding dues that were due before 01.03.2020, will not extend till the moratorium period ends i.e. 31.05.2020. This order, on a plain reading, comes across as confusing and ambiguous because on one hand the court is invoking the moratorium period but in the same breath, is also saying that the entire moratorium period will not be applicable for defaults that have occurred prior to 01.03.2020.

Pertinently, the Hon’ble Bombay High Court made a categorical mention that the relief granted in this particular case will not be applicable across the board. Therefore, each case dealing with the issue of defaulting accounts and their fate will have to be assessed on its own merits and contentions.

Both the Single Judge at the Delhi High Court as well as the Bombay High Court heavily relied upon the order passed by the Delhi High Court in the case of Ananth Raj Limited vs. YES Bank[3].


  • While the RBI has left the implementation and execution of the moratorium at the discretion of individual banks, the banks are bound to extend the benefit to the borrower, if the borrower chooses to take shelter of the moratorium.
  • The Bombay High Court in the case of Transcon Skycity (supra) has curtailed the ‘moratorium period’ to mean just the national lockdown period while calculating the 90 day NPA declaration period for defaults that have occurred prior to 01.03.2020.
  • While on one hand Courts have attempted to not pass any order that would be prejudicial to either party, it is apparent that the Court is providing relief to the borrower at the first instance.
  • All of the above orders stand as interim relief granted to the affected parties and therefore, can’t be relied upon as precedence.

All of the abovementioned cases have been listed for further hearing before the respective courts and since, the situation is constantly developing, one cannot predict which way the Court will ultimately swing.

Shakuntla Educational& Welfare Society vs. Punjab & Sind Bank;


Writ Petition LD-VC No. 30 of 2020

W.P.(C) URGENT 5/2020

Comments (1)

  1. Ayesha karim says on 21 Apr 2020

    Thanks. Very informative

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