The Delhi high court hearing a writ petition denied extending the benefits of RBI guidelines to the petitioner which were meant to mitigate the burden of debt payments during the pandemic period after finding that the petitioner’s default was before the COVID-19 outbreak and was not covered under the RBI guidelines.
Facts
The petitioner took multiple debts from IL&FS between 2006 and 2018. Due to default in repayment, the petitioner’s account was classified as an NPA (non-performing asset) and the respondent firm began proceeding under the SARFAESI Act by taking possession of the petitioner’s properties which were mortgaged with them by the petitioner. Upon multiple proceedings in the DRT (Debt recovery tribunal), final proposal s were exchanged between the parties. The petitioner finally offered an OTS (one-time settlement) of Rs.100 crores for their outstanding loan of Rs. 93 crores, the IL&FS gave their in-principle acceptance to the offer if the petitioner repaid the whole amount before or on 27 March 2020. The petitioner failed to pay the OTS amount in the period prescribed by the IL&FS and in response to it, IL&FS revoked the settlement on 26 May, 2020. The petitioner challenged the revocation in the high court through a writ petition.
Petitioner’s Contention
The counsel for the petitioner submitted that the payment for the OTS has not been processed due to the covid-19 lockdown. The counsel further added that the RBI circulars which were issued to provide relief to the borrowers in the lockdown period cover their payment of OST since the amount was due and the proposal was revoked during the lockdown period. The counsel also argued that the respondents have failed to dispose of the mortgaged property which was in their possession since 2018 due to which now the properties were being put on sale at deflated prices. The petitioner side requested for further time to be considered before auctioning the mortgaged property and showed their willingness to pay the OTS amount.
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Respondent’s Submissions
The respondent’s counsel argued that the issue was a contractual dispute between the parties and the petitioner’s only remedy was in terms of the SARFAESI Act and not under the writ jurisdiction of the high court. The counsel further contended that they only gave a counter-offer with conditions such as payment of the OTS amount by 27 march, 2020, since the petitioner failed to fulfill the condition or respond to the counteroffer, the respondent rightfully revoked the settlement. The respondent side further added that the RBI guidelines would not cover the petitioners since their loan repayment was due before the outbreak of the pandemic and such defaults were not covered by any RBI circular. The respondent submitted that since the DRT also upheld the petitioner’s liability in June 2019, the RBI moratorium and relief to the borrowers would not apply to the petitioner’s case and added that IL&FS is well within its rights to take any steps to recover any amounts payable to it by the petitioners.
Court’s Decision
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The single-judge bench of Justice Pratibha M. Singh observed that the petitioner has been in default since 2018 and has failed to adhere to multiple orders of the DRT and the court itself. The court further found that the petitioner had been given enough time to act on the payment of the OTS till November 2020, but the petitioner had failed to make any payments to the respondent. Regarding the implementation of the RBI circulars in the present case, the court remarked “The circulars of the RBI and the guidelines thereunder relate to reliefs to be granted for payments of interest and declaration of accounts as NPAs, etc., during the COVID-19 pandemic. These circulars and policy guidelines cannot lend any support to the Petitioners’ case where the defaults are prior to the outbreak of the pandemic itself. The legality of the revocation of the OTS in May 2020 cannot be tested on the benchmark of the recent RBI circulars and the policy guidelines inasmuch as these settlements are independent of the said circulars and guidelines. Moreover, the RBI circular itself makes it clear that the same is for “continuity of viable businesses” and not for accounts which are already declared as NPA, as is in the present case.” The court further added that the pandemic has not caused any additional financial stress to the petitioner since the loan was already due before the outbreak. The court held that no relief can be granted to the petitioner and dismissed the petition after permitting the respondent to take action against the petitioner in accordance with the law.
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