Tag: apex court

Will not haul up RBI for declaring loans as NPAs, says Apex Court

Banking & Finance

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“Economy is booming in the country after the second Covid wave,” said the Supreme Court on Friday as it refused to entertain a batch of pleas seeking contempt action against the Governor of Reserve Bank of India and senior officials of other banks for declaring loan accounts as Non-Performing Assets (NPA).

The top court said that contempt is between court and contemnor and it is not inclined to initiate contempt action against senior officials of banks.

“In our considered view, we are not inclined to exercise our contempt jurisdiction, since it is not in the interest of justice,” said a bench of Justices DY Chandrachud, Vikram Nath and Hima Kohli.

The bench said that petitioners are at liberty to seek remedy under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi Act), 2002.

Advocate Vishal Tiwari, appearing in a batch of petitions said that despite the top court’s order of September 3, 2020 that the accounts which were not declared NPA till August 31, 2020 shall not be declared NPA till further orders, banks unilaterally declared the accounts as NPA under the Act.

‘Not going to haul up RBI’

At the outset, the bench said, “Economy is booming in the country after the second Covid wave. That’s what we have read in newspapers. Since the second wave, when these orders were passed, a lot of development has taken place. We are not going to haul up the RBI for this. Contempt is between court and the contemnor”.

Tiwari said that RBI has itself issued a notice in March, last year after the nationwide lockdown granting moratorium from paying the instalment for loan.

‘Several petitions’

Several traders have moved the top court against declaration of their account as NPA by the banks and seeking contempt action against the senior officials of the banks. One of the pleas, filed by Ajay Hotel and Restaurants through its proprietor has contended that it was availing various credit facilities by way of financial assistance against various assets creating security interest in favour of the State Bank of India and timely payment of the instalments of the loan were made and its Account was not turned NPA till August 31, 2020.

“That on May 18, 2021 the State Bank of India (R-3) issued a demand notice under section 13 (2) of the Sarfaesi Act, 2002 to the petitioner demanding the Amount…as on May 18, 2021 inclusive of interest”, the plea said.

It added that the bank had unilaterally classified the petitioner as NPA on November 30, 2020 and no show cause notice was given. The plea said that despite the express order of the top court on September 3, 2020, the banks continued to proceed under provisions of the Act.

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IBA reaches out to govt for refund of compound interest waiver by banks, BFSI News, ET BFSI

Banking & Finance

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The Indian Banks‘ Association (IBA) on behalf of lenders has approached the finance ministry to refund the burden fallen on their shoulders due to a recent Supreme Court judgment on the waiver of compound interest on all loan accounts which opted for moratorium during March-August 2020.

The March judgment of the apex court directed the banks to waive off compound interest on loans above Rs 2 crore availing moratorium as loans below this got blanket interest on interest waiver in November last year.

Compound interest support scheme for loan moratorium cost the government Rs 5,500 crore during 2020-21, and the scheme covered all borrowers including the prompt one who did not avail moratorium.

Various banks are at the different stages of executing the order.

Punjab & Sind Bank Managing Director S Krishnan said the burden on the bank due to waiver works out to be around Rs 30 crore.

The issue of reimbursement of the waiver amount by the government is being pursued by IBA on behalf of the banks, he said.

Asked if the finance ministry has responded to their request, he said, “So far, we have not heard anything positive on this.”

The apex court order this time is only limited to those who availed moratorium. So, the liability of the public sector bank should be less than Rs 2,000 crore as per rough calculations, sources had said.

The RBI on March 27 last year announced a loan moratorium on payment of instalments of term loans falling due between March 1 and May 31, 2020, due to the pandemic, later the same was extended to August 31.

The Supreme Court on March 23, 2021, directed that no compound or penal interest shall be charged from borrowers for the six-month loan moratorium period, which was announced last year amid the COVID-19 pandemic, and the amount already charged shall be refunded, credited or adjusted.

The apex court refused to interfere with the Centre and the Reserve Bank of India‘s (RBI) decision to not extend the loan moratorium beyond August 31 last year, saying it is a policy decision.

Rejecting pleas for a complete waiver on interest the court opined that such a move would have consequences on the economy. The bench also said that interest waiver would affect depositors. Along with this, the court also rejected pleas for further relief in the matter.

Soon after the order, the RBI asked banks and NBFCs to immediately put in place a board-approved policy to refund/ adjust the “interest on interest” charged to the borrowers during the six-month moratorium, in conformity with the Supreme Court judgment.

The central bank also asked lending institutions to disclose the aggregate amount to be refunded/ adjusted in respect of their borrowers based on the reliefs in their financial statements for the year ending March 31, 2021.



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SC rejects banks’ pleas for recall of 2015 verdict asking RBI to disclose info about them under RTI, BFSI News, ET BFSI

Banking & Finance

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In a major blow to banks, the Supreme Court on Wednesday refused to recall its 2015 judgment, which had held that the RBI will have to provide information about the banks and financial institutions (FIs) regulated by it under transparency law.

Several FIs and banks, including the Canara Bank, the Bank of Baroda, the UCO Bank and the Kotak Mahindra Bank had filed applications in the top court seeking a recall of the 2015 judgment in the Jayantilal N Mistry case, saying the verdict had far-reaching consequences and moreover, they were directly and substantially affected by it.

The banks had contended that the pleas for a recall of the judgment, instead of a review, is “maintainable” as there was a violation of the principles of natural justice in view of the fact that they were neither parties to the matter nor heard.

“A close scrutiny of the applications for a recall makes it clear that in substance, the applicants are seeking a review of the judgment in Jayantilal N Mistry. Therefore, we are of the considered opinion that these applications are not maintainable,” a bench of justices L Nageswara Rao and Vineet Saran said.

The order, written by Justice Rao, said in the instant case, the dispute relates to information to be provided by the Reserve Bank of India (RBI) under the Right to Information Act (RTI) and though the information pertained to banks, it was the decision of the RBI that was in challenge and decided by this court.

“No effort was made by any of the applicants (banks) in the miscellaneous applications to get themselves impleaded when the transferred cases were being heard by this court. The applications styled as recall are essentially applications for review. The nomenclature given to an application is of absolutely no consequence, what is of importance is the substance of the application…,” the top court said.

While dismissing the pleas, the bench, however, made it clear that it was not dealing with any of the submissions made by the banks on the correctness of the 2015 judgment in the Jayantilal N Mistry case.

“The dismissal of these applications shall not prevent the applicants (banks) to pursue other remedies available to them in law,” it said.

Earlier, the apex court had heard several matters pertaining to the orders of the Central Information Commission asking the RBI to provide information about banks to RTI applicants.

Several pleas were transferred to the top court at the request of the RBI and the judgment came to be pronounced in 2015.

In the judgment, the apex court had refused to accept the RBI’s contention that the information sought under the RTI Act could not be disclosed in view of its fiduciary relationship with the banks.

The court had observed that the RBI is not in any fiduciary relationship with the banks and that it has a statutory duty to uphold the interest of the public at large, the depositors, the country’s economy and the banking sector.

The top court was of the opinion that the RBI has to act with transparency and not hide information that might embarrass the banks and that it is duty-bound to comply with the provisions of the RTI Act and disclose the information sought.

Several banks sought a recall of the judgment by filing miscellaneous applications in the main petition filed by the State Bank of India (SBI) and the HDFC bank.

The top court de-tagged the main pleas of the SBI and the HDFC bank and dismissed the miscellaneous applications of the banks.



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