The Bombay High Court has ‘prima facie’ observed that the period of moratorium under the lockdown in the wake of the COVID-19 pandemic, will not be taken into account by the bank while it calculates the 90-day period to declare Non-Performing Assets (NPA). Observing this, the court said that if lockdown is lifted before May 31, the real estate firms that have defaulted on installments to ICICI Bank will have to regularise payment for the January installment within 15 days after 'complete' lifting of lockdown and its February installment three weeks thereafter. Justice Gautam S Patel, through a video-conference hearing on Saturday, however, clarified that the ruling consists of prima facie and tentative views and will not serve as a precedent for other borrowers in default or any other bank. The borrower real estate firms Transcon Skycity Pvt Ltd and Transcon Iconica Pvt Ltd had financial arrangements with the ICICI Bank and were to repay amounts in installments. The Court noted that until December 2019, there was no significant default to trigger the declaration of their accounts with ICICI Bank as non-performing assets (NPAs). However, the amounts due on January 15 and February 15 have not yet paid. Senior Counsel Birendra Saraf and advocates Munaf Virjee, Samit Shukla for the petitioner firms argued that non-exclusion of moratorium period during the lockdown to calculate NPA declaration 90-day period would be meaningless. However, senior counsel Virag Tulzapurkar and advocate Bindi Dave for ICICI Bank opposed the plea and submitted that such a declaration could have unintended consequences on other borrowers and the bench should not extend the relief to the petitioners. As per Reserve Bank of India (RBI) regulations, if the payment is not made and accounts are not regularised within 90 days of the date of default then borrower’s account gets classified as Non-Performing Asset (NPA). In the present case, the 90-day period from January 15 default was until April 15 and that for February 15 the default would have been calculated until May 15. However, Justice Patel observed that the nationwide lockdown was declared and it is not known when the restrictions imposed during the lockdown period are going to be extended or lifted. The Court further referred to an RBI circular of March 27 which allowed lending institutions to offer a moratorium to borrowers on repayment of term loans. The moratorium declared was for payment of installments falling due between March 1 and May 31. However, the bench said that while there is no dispute about installments due after March 1, it requires to be decided whether the 90-day countdown stopped on March 1 and would resume after the end of lockdown. After hearing submissions, Justice Patel prima facie held that in present case the period of moratorium during which there is a lockdown will not be considered by the ICICI Bank to calculate 90-day NPA declaration period. Stating that this was the only way to “harmonise the present requirements of both sides”, Justice Patel wrote that his order was “not a backward extension of the moratorium to January 2020. It is predicated on, and only on, the current lockdown period which makes normal functioning impossible. The moratorium period of March 1, 2020 to May 31, 2020 does not per se give the petitioners any additional benefits in regard to the prior default i.e. those that occurred before March 1, 2020. Thus, the relief to the petitioners in co-terminus with the lockdown period, not the declared end of the moratorium.” Justice Patel further clarified in his 30-page order that views expressed were ‘prima facie’ and ‘tentative’ and could not be considered as precedent. He also noted that exclusion from the 90-day NPA declaration countdown will end only in case of complete lifting of lockdown and not based on partial or staggered vacation of restrictions.
