NPA accounts cannot claim relief under recent RBI circulars and policy guidelines : Delhi High Court

Benefit of RBI circulars and policy guidelines are to be given to genuine borrowers and not those who have been defaulting since before the pandemic. The High Court Bench consisting of J. Prathiba M Singh, decided upon the matter of Amit Khaneja & Ors. v. IL & FS Financial Services Ltd. [W.P. (C) 3580/2020], and explained upon who could avail benefits during the pandemic under the RBI policy and rules.

The Petitioners had availed various credit facilities from IL&FS between 2006 and 2018 after which, owing to defaults from their end, their account was classified as a Non-Performing Asset and out of the two properties mortgaged by the petitioners, one was taken over and an application under Section 14 of the SARFAESI Act was moved to take over the other property. The petitioners approached the DRT seeking for quashing of these proceedings which failed and thereafter the a writ petition was filed according to which the petitioners were to deposit a total of Rs. 10 crores within 2 weeks and the rest of the dues were to be cleared within 12 months. These directions were not complied to and the petitioners filed an application for modification of the deposit amount to Rs. 5 crores which was rejected. The two properties were taken over after which various One Time Settlement proposals were given by the petitioners which did not fructify. Hence, the IL&FS revoked the proposals through a letter which was challenged in the present writ petition.

The counsel for the petitioner argued that based on the RBI circulars on ‘COVID-19 Regulatory Package’ as well as the RBI Policy Guidelines titled “Statement on Developmental and Regulatory Policies”, breathing time is to be given to borrowers and the revocation of the OTS proposals run contrary to the same.

The HC held that “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 make 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”. Hence, the petition was dismissed and the court held that no further relief could be granted to the petitioners.

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