INTRODUCTION
In a judgment the Karnataka High court has held that the petition under article 226 of the constitution is maintainable against the Private Banks concerning the implementation of loan moratorium announced by the reserve bank of India during the COVID-19 lockdown , the court stated that the circular was implemented to protect the economic impact during the covid-19 pandemic .
BACKGROUND
The issue arose from a petition filed by the business entity engaged into the running of the IT Park and a five star hotel . And the petitioner has availed the term loan of Rs.475 crores from HDFC, FEDERAL BANK, and Aditya Birla Finance Limited . and due to the continuous lockdown the petitioner business was affected and due to that the petitioner applied for the loan moratorium which was issued by the RBI which allowed a 3 month moratorium on the term loan installment. But the HDFC bank refused the moratorium due to its income from the tech park rents . And the bank also amount of installment from the ESCROW A/c where the lease rentals were deposited and the similar actions were taken by the other two banks which leads to the financial strains on the petitioner , even the complaint to the banking ombudsman the petitioner request for the moratorium were not granted , leading to the filing of the writ petition.
KEY POINTS
- Duty of the Banks : The Supreme Court has observed that the RBI circular was issued in the public interest to protect the economy during the pandemic , and creates a statutory limitation upon the banks to grant a moratorium , thereby casting a public duty upon the banks .
- Jurisdiction of the Writ : The court held that the enforcement of the RBI circular is binding upon the public banks.
- Moratorium rights : The court analysed that the circular created a right for the borrowers to avail the moratorium and its denial leads to the violation of the Circular.
- Escrow account deposit : The unilateral deposit from the escrow account was a contentious issue.
RECENT DEVELOPMENTS
The court stated that the petitioner writ petition is maintainable and it is the public duty of all the banks to implement the circular as the circular implemented creates the right in the favour of all the eligible borrowers and is enforceable under Article 226 of the constitution of India
CONCLUSION
This Judgement has highlighted the applicability of the writ jurisdiction against the private banks for enforcing the statutory obligation of the public nature . and it also stated that the RBI circular of moratorium is applicable on all the banks upon which the public duty imposes . This circular set a precedent for the similar cases in which the borrower seeks relief under the regulatory directives issued in the public interest .
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WRITTEN BY: PRINCE KUMAR
