Thread by @barandbench

(RBI CIRCULAR ON LOAN MORATORIUM)

#SupremeCourt will resume its hearing on the batch of petitions seeking relief in the form of extension of moratorium period beyond six months or waiver of interest on interest.

@RBI #LoanMoratorium

Senior Adv VV Giri resumes submissions for @RBI

Giri: There is a writ petition smwhich challenges the August 6 circular. That too not the circular but only a clause. We have already dealt with the eligibility clause to say who can be a borrower.

Giri: not a single instance where the lender has been completely apathetic.
@RBI

Senior Adv Harish Salve argues for Indian Banks Association: I am addressing on construction of Disaster Management Act. DM Act creates architecture for governmental action in matters of disastets, both prevention and mitigation. It is inclusive and exclusive

Salve: fundamental duty of good governance is not encapsulated by this law. This law does not create a architecture for readjustment for private rights.

Salve: If there has to be restructuring then it has to be through restitution. If you argue frustration be ready for the logical consequence.

Salve: What is resolution by banks? It started with a concern expressed outside court when NPAs of banks reached threatening proportions. At that point bankruptcy code was brought in. Whether within that law or outside, banks would always take steps to rectify NPA loans

Salve: Resolution has to be a restructuring of a debt. Normally for a private bank norms are laid by them. SBI has a majority share holding from government but its a listed company.

Salve: This Court has an application from CREDAI. Have they placed any materials on which one can identify how wobbly was their house before the pandemic. Nothing

Salve on CREDAI application: This is some thing which goes way beyond seeking relief in a disaster. There is an economic sentiment which is created by such an event. How far can DM act be stretched because of a pandemic?

Salve: people are spending less money and it can be for many reason. Disaster relief cannot lie here but when roads are broken or house is swept away.

Justice Reddy: what should government do in case of a disaster like this?

Salve: Govt has to appeal to each sector. Not the ones here. Laborers have lost jobs, social security needs to be given. As a govt of a welfare state ones have to be attended who lost their earning members

Salve: for loss of business, it should be seen how businesses should be revived. Like here in England, furlough has been granted. Govt has to address each sector, tenants and landlords have suffered. Who will balance it?

Salve: When PM @narendramodi declared the overall package, what did he mean.. when its said a few trillion will be spent as package then its on sectors. Its a tricky situation for every government.

Justice MR Shah: when there is a specific provision under Section 13 then what? That's okay sector's have to be considered.

Salve: I will deal with it.. kind of submissions made realize that Section 13 does not get them off the hook

SG Tushar Mehta: Govt has states for good reasons its not possible for us under Section 13

Salve: There are three elements of Sec 13. It says measures on repayment of loans or grant of fresh loans to the one affected by disaster

Salve: there are terrible earthquake in Gujarat..it was a disaster of severe magnitude. There must have been people transacting with businesses in Gujarat. Now people in Gujarat were affected and lost business and homes. There are employees to take care and others dependent on

Salve: There is a serious allegation of violating Article 14. It was stated govt package should be struck down as it was some sectors. Purity of economic law cannot be a ground to strike down such packages.

Salve: People are not paying taxes as they don't have income or money to pay for taxes. So government revenue shrink. When you speak of people affected by disaster it must be ones directly affected by disaster and not those who are Tier 2 and tier 3.

Justice Shah: Please see Section 23 again. What can be the reliefs contemplated under Section 13? There are various reliefs which are contemplated

Salve: You may give relief by elevating burden of interest or say don't charge interest or waive off interest. There can be moratorium for repayments. Then there can be restructuring..each of this falls within the rubric of relief. They have considered each of this.

Salve: Despite moratorium large number of borrowers did not a avail of it. Moratorium helps borrowers but affects the banks adversely.

Salve: There will be bankruptcy all over. But where is the misdirection in the steps followed by us.

Salve: there is nothing in the Disaster Management Act which informs the court or the system that there can be an adjustment by executive will. Home delivery business has done better than ever. Netflix has become a 10 billion dollar company. Home decor has done well

Salve: However you win some and lose some. By executive fiat you cannot make the winning one pay to the one who is losing.

Salve: It is undeniable that because of number of times SC has heard the matter things have progressed. But how far can we go?

Salve: I submit this matter must now be closed. Your directions have been followed. People who have no hope of restructuring are benefitting from your don't declare NPA order.

Senior Adv Mukul Rohatgi appears for SBI: small depositors are faceless in these proceedings. It is not a case of borrowers vs bank. They are the backbone of this financial system.

Rohatgi: there was waiver and only deferment of installment.
@TheOfficialSBI

Rohatgi: banks have to give interest to these depositors. How can we leave them?

Rohatgi: we are at the end of pandemic. Patients are reducing now..

SC to continue hearing tomorrow

#SupremeCourt
#LoanMoratorium