SMALL SCALE INDUSTRIAL MANUFACTURES ASSOCIATION (REGD.) v. UNION OF INDIA AND OTHERS

The Judgment of the Court was delivered by M. R. SHAH, J. C

1Copy pinpoint1. Writ Petition (Civil) No. 476 of 2020 has been preferred under Article 32 of the Constitution of India by the Small Scale Industrial Manufactures Association, Haryana for an appropriate writ, direction or order directing the Union of India and others to take effective and remedial measures to redress the financial strain faced by the industrial sector, D particularly MSMEs due to the Corona Virus Pandemic. It appears that the writ petitioner is not satisfied with the steps taken by the RBI vide notification dated 27.03.2020. According to the petitioner, the Covid-19 Regulatory Package notified by the RBI vide notification dated 27.03.2020 insofar as the terms loans, working capital facilities and restructuring of E Stressed Account is inadequate, ineffective and does not offer any substantial relief, aid or assistance to the industries particularly MSMEs. According to the petitioner, the above-mentioned Regulatory Package will not in any manner salvage the MSMEs and help them recover from financial losses that have been caused due to the unforeseen circumstances. With the above broad grievances, it is prayed as under: F (a) issue writ/writs including a writ of mandamus or any other writ or direction in the nature thereof, directing the respondents to permit the lending institutions not to recover interest component from the industries particularly MSMEs on Term Loans and Working Capital Facilities availed by them for three months from G 01.03.2020 to 31.05.2020; (b) issue writ/writs including a writ of mandamus or any other writ or direction in the nature thereof, directing the respondents to permit the lending institutions to grant interest free moratorium period for Term Loan and not recovery of interest on Working Capital Facilities for three months from 01.03.2020 to 31.05.2020; H

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(c) issue writ/writs including a writ of mandamus or any other A writ or direction in the nature thereof, directing the respondents to allow restructuring of Stressed Accounts; (d) issue writ/writs including a writ of mandamus or any other writ or direction in the nature thereof, directing the respondents to extend the date for depositing GST from 20th of every month to B 30th of every month for a period of six months; (e) issue writ/writs including a writ of mandamus or any other writ or direction in the nature thereof, directing the respondents to refund the pending GST amounts and utilise pending GST amounts for payment of Government expenses for the MSMEs industries. C 1a. Writ Petition (Civil) No.542 of 2020 under Article 32 of the Constitution of India has been preferred by the petitioners – CREDAI – Maharashtra Chambers of Housing Industry and another which has been filed for and on behalf of the real estate sector challenging notification dated 27.03.2020 issued by the RBI with a prayer that the same may be D declared as ultra vires to the extent it charges interest on the loan amount during the moratorium period (which has been declared between March 1, 2020 till August 31, 2020). Therefore, the main grievance in this writ petition is to continue not to charge the interest on the outstanding portion of the term loans during the moratorium period. E 1b. By way of Writ Petition (Civil) No. 945 of 2020 preferred under Article 32 of the Constitution of India, the petitioner, a practising Advocate, has prayed for an appropriate writ, direction or order directing the Union of India – Ministry of Finance, Ministry of Home Affairs and the RBI to extend the moratorium period till 31st December, 2020, which was lastly extended vide notification dated 23.05.2020. F 1c. Writ Petition (Civil) No. 937 of 2020 has been preferred under Article 32 of the Constitution of India by the Contract Carriage Operators Association to quash notification dated 27.03.2020 issued by the RBI to the extent charging interest during the moratorium period. It is also prayed to direct the RBI to extend the period of moratorium by another six G months, without any interest being levied on the loans availed by the members of the petitioner organisation. 1d. Writ Petition (Civil) No. 1024 of 2020 has been preferred under Article 32 of the Constitution of India by the petitioner – Confederation of Real Estate Developers Association of India (CREDAI), H

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A for and on behalf of the private real estate developers in Chhattisgarh, also challenging notification dated 27.03.2020 issued by the RBI to the extent charging interest on the loan amount during the moratorium period. It is also prayed for an appropriate writ, direction or order directing the respondents – Union of India to take adequate measures of reliefs to the disaster affected persons in accordance with letter and spirit of Disaster B Management Act, 2005, more particularly Sections 12 and 13 of the said Act, more particularly to the reliefs with respect to waiver of loan and/ or interest on all kind of loans availed by the borrowers/disaster affected persons through a well informed and formulated policy. 1e. Writ Petition (Civil) No. 1025 of 2020 under Article 32 of the C Constitution of India has been preferred by the Chhattisgarh Sponge Iron Manufacturers Association, also challenging notification dated 27.03.2020 issued by the RBI, which has been further extended vide notification dated 23.05.2020 to the extent it charges interest on the loan amount during the moratorium period. It is also prayed to direct the D Union of India and others to take steps/grant reliefs to the disaster affected persons in accordance with letter and spirit of Disaster Management Act, 2005, more particularly in terms of Sections 12 and 13 of the said Act. 1f. Writ Petition (Civil) No. 1006 of 2020 has been preferred under E Article 32 of the Constitution of India by an individual M/s Supertech Limited for an appropriate writ, direction or order directing the RBI and the National Housing Bank to instruct all the banks/financial institutions/ non-banking financial companies to restructure all loan accounts availed by the petitioner on its projects and to calculate the repayment @ 8% simple interest from the date of disbursement till its final repayment in F the light of paragraphs 28 to 30 of the decision of this Court dated 10.⁶.2020 passed in Writ Petition (Civil) No. 940 of 2017 (Amrapali group matter) and to protect the interest of the home buyers. 1g. Writ Petition (Civil) No. 959 of 2020 under Article 32 of the Constitution of India has been preferred by Federation of Self-Financing G Technical Institutions and others for an appropriate writ, direction or order directing the Union of India – Ministry of Finance, RBI and others to provide such financial relief to its members freezing all financial liabilities of financial institutions of the petitioners – banks and financial institutions. It is also prayed for waiver of the penal interest charged for H a period of one year or until such time as it takes for the pandemic to

SMALL SCALE INDUSTRIAL MANUFACTURES ASSOCIATION 19 (REGD.) v. UNION OF INDIA [M. R. SHAH, J.]

abate. It is also further prayed to direct the Union of India – Ministry of A Finance and the RBI to direct the financial institutions to grant additional credit facility of Rs. 2 crores to each member institutions of the petitioners without interest to meet salary cost and other overheads during the Covid- 19 pandemic. It is also further prayed to direct to the financial institutions to reschedule the loan instalments for one academic year without any charge of interest over the interest for the unpaid period. 1h. Writ Petition (Civil) No. 955 of 2020 under Article 32 of the Constitution of India has been preferred by the CREDAI – HR for and on behalf of the real estate sector for an appropriate writ directing the respondents – Union of India, RBI and others to provide such financial relief to its members, freezing all financial liabilities of such members towards banks and financial institutions. It is also further prayed to direct the RBI to apply Circular dated 27.03.2020 to all banks, non-banking financial companies, housing finance companies and other financial institutions compulsorily and mandatorily to all loan accounts without any discrimination or classification. D 1i. Writ Petition (Civil) No. 506 of 2020 under Article 32 of the Constitution of India has been preferred by one private limited company challenging notification dated 27.03.2020 issued by the RBI to the extent charging interest on the loan amount during the moratorium period. E 1j. Writ Petition (Civil) Diary No. 12389 of 2020 under Article 32 of the Constitution of India has been preferred by the Shopping Centres Association of India (SCAI) for and on behalf of its members who are engaging in Malls and Shopping Centres challenging notification dated 27.03.2020 issued by the RBI to the extent charging interest on the loan amount during the moratorium period. It is also prayed to extend the F moratorium period beyond August, 2020. An application has also been filed for exemption from paying court fee and notarized affidavits. The said prayer is allowed in terms of clause 3 of the application. 1k. Writ Petition (Civil) No. 568 of 2020 under Article 32 of the Constitution of India has been preferred by CREDAI – MCHI, Mumbai G for and on behalf of its members – real estate developers for an appropriate writ, direction or order for waiver of interest in respect of its instalments due as on March, 2020 until end of fourth quarter of financial year 2020-2021. It is also further prayed to direct the RBI and financial institutions to make available additional source of finance in the nature H

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A of grant of additional loans, working capital facilities, guaranteed emergency credit line and construction finance etc. 1l. Writ Petition (Civil) No. 606 of 2020 under Article 32 of the Constitution of India has been preferred by an individual also challenging notification dated 27.03.2020 issued by the RBI as ultra vires to the B extent it charges interest on the loan amount during the moratorium period. It is prayed to direct the respondents to provide relief in repayment of loan by not charging interest during the moratorium period declared by notification dated 27.03.2020, further extended by notification dated 23.05.2020. C 1m. Writ Petition (Civil) No. 608 of 2020 under Article 32 of the Constitution of India has been preferred by the Association of Power Producers and others for and on behalf of the private power developers in India, owning power plants in the country for an appropriate writ, direction or order directing the RBI to issue directions to lending institutions not to charge interest on interest accrued during the moratorium period in terms of notification dated 27.03.2020. It is also prayed to direct the RBI to extend moratorium on interest and principal for an additional period of six months ending on 31.03.2021 without treating any member of the petitioner no.¹ as defaulter. It is also further prayed to direct the RBI to de-link interest rates issued by lending institutions from credit rating till such time that the stress on the power sector caused due to the Covid-19 pandemic is eased. It is also further prayed to direct the RBI to provide a special dispensation to the lenders to allow extension of the Scheduled Commercial Operation Date of projects under construction, due to delays in completion of under- construction projects on account of Covid-19 and the lockdown, by another one year while maintaining the “standard” asset categorisation. It is also further prayed to direct the respondents to include Non- Convertible Debentures as part of the relief granted by the RBI in its notification dated 27.03.2020, as well as, any other Covid-19 related relief which may be granted. G 1n. Writ Petition (Civil) No. 711 of 2020 under Article 32 of the Constitution of India has been preferred by Coimbatore Jewellery Manufacturers Association for and on behalf of its members to declare that part of notification dated 27.03.2020 issued by the RBI, as extended by notification dated 23.05.2020, as ultra vires to the extent it charges interest on the loan amount during the moratorium period. It is also prayed

SMALL SCALE INDUSTRIAL MANUFACTURES ASSOCIATION 21 (REGD.) v. UNION OF INDIA [M. R. SHAH, J.]

to direct the Union of India and the RBI to provide relief in repayment of loan by not charging interest during the moratorium period declared by notification dated 27.03.2020, further extended by notification dated 23.05.2020. It is also further prayed to extend the moratorium period on payment of instalments/interest by a further period of 18 months, in exercise of powers under Section 21 read with Section 35A of the Banking B Regulation Act, 1949. 1o. Writ Petition (Civil) No. 785 of 2020 under Article 32 of the Constitution of India has been preferred by CREDAI Tamil Nadu praying for waiver of interest/penal interest for a period of one year or until such time as it takes for the pandemic to abate. It is also prayed to direct the respondents to provide such financial relief to the members of the association including freezing all financial liabilities of such members towards banks and financial institutions from whom the members of the petitioner’s association have taken loans, for a further period of six months. It is also further prayed to direct the respondents to provide such financial relief including one-time restructuring for all accounts of real estate projects which were standard as on 31.¹².2019. 1p. Writ Petition (Civil) No. 802 of 2020 under Article 32 of the Constitution of India has been preferred by the Textile and Knitwear Association challenging notifications dated 27.3.2020 and 23.05.2020 issued by the RBI as ultra vires to the extent charging interest on the loan amount during the moratorium period. It is also prayed to direct banks and financial institutions not to charge the interest on the due payments towards principal/interest for a period of three years. 1q. Writ Petition (Civil) No. 829 of 2020 under Article 32 of the Constitution of India has been preferred by the Northern India Textile F Mills Association also challenging notifications dated 27.03.2020 and 23.05.2020 to the extent charging interest during the moratorium period. 1r. Writ Petition (Civil) No. 826 of 2020 under Article 32 of the Constitution of India has been preferred by the Federation of Industrial and Commercial Organization (FICO) also challenging notification dated G 27.03.2020 to the extent charging interest on the loan amount during the moratorium period. It is also prayed to direct the respondent – RBI to direct banks and financial institutions to make all due payments towards principal/interest in a three-year period after expiry of the forbearance period, without charging any interest on the same. H

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A 1s. Writ Petition (Civil) No. 964 of 2020 under Article 32 of the Constitution of India has been preferred by Chattisgarh Laghu and Sahayak Udyog Sangh for and on behalf of its members declaring the portion of notification dated 27.03.2020 issued by the RBI, as extended by notification dated 23.05.2020, charging the interest and also interest on interest (penal interest) during the moratorium period as ultra vires. B 1t. Writ Petition (Civil) No. 1029 of 2020 under Article 32 of the Constitution of India has been preferred by an individual challenging notifications dated 27.03.2020 and 23.05.2020 to the extent charging interest on the loan amount during the moratorium period. C 1u. Writ Petition (Civil) No. 1157 of 2020 under Article 32 of the Constitution of India has been preferred by the Chhattisgarh Udyog Mahasangh also challenging notifications dated 27.03.2020 and 23.05.2020 to the extent charging interest/interest on interest (penal interest) on the loan amount during the moratorium period. It is also prayed to direct the Union of India to take adequate and effective measures of reliefs to the disaster affected persons in accordance with letter and spirit of Disaster Management Act, 2005, more particularly in terms of Sections 12 and 13 of the said Act, and such reliefs including inter alia suitable waiver of loan and/or interest on all kind of loans availed by the borrowers/disaster affected persons through a well informed and formulated policy. 1v. Writ Petition (Civil) Nos. 1132 of 2020 and 1178 of 2020 under Article 32 of the Constitution of India have been preferred by Chhattisgarh Hotel and Restaurant Association and Raipur Automobile Dealers Association (RADA) respectively for the same reliefs as have been prayed in Writ Petition (C) No. 1157 of 2020. 1w. Writ Petition (Civil) No. 1190 of 2020 under Article 32 of the Constitution of India has been preferred by a private limited company – Fabworth Promoters Private Limited for an appropriate writ, direction or order directing the Union of India – Ministry of Finance and RBI and others challenging the RBI Circular dated August 06, 2020 to the extent mentioned in 10A and 10B. It is also prayed to direct not to charge any additional interest or additional charges of any nature by the lending institutions, including but not limited to, towards grant of additional finance while approving a resolution plan under the RBI Covid-19 Resolution Framework dated August 06, 2020. It is also further prayed for an H

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appropriate writ, order directing the respondents to formulate a relief package/policy to make effective provisions for the hospitality sector including but not limited to make available additional source of finance in the nature of grant of additional loans, working capital facilities, guaranteed emergency credit line etc., without payment of any additional interest on the existing contractual rates of interest or additional charges of any nature. It is also further prayed to direct the respondents to formulate a relief package/policy making it mandatory for all lending institutions to pass on the benefit of reduction of repo rates by RBI to all loans and facilities granted by all lending institutions.

2Copy pinpoint2. Considering the reliefs sought in the respective writ petitions, referred to hereinabove, the reliefs sought by the respective petitioners in their respective petitions can be broadly bifurcated into four parts, namely, (1) waiver of compound interest/interest on interest during the moratorium period; (2) waiver of total interest during the moratorium period; (3) extension of moratorium period; and (4) there shall be sector- wise economic packages/reliefs. D Submissions on behalf of the respective Petitioners

3Copy pinpoint3. Shri Ravindra Shrivastava, learned Senior Advocate appearing on behalf of the respective petitioners in Writ Petition (C) Nos. 964/ 2020, 1024/2020, 1025/2020, 1132/2020, 1157/2020 and 1178/2020 has made the following submissions: E

i) that this Court ought not to limit the scope for relief and directions only qua waiver of compound interest which is limited to a highly restricted segment of the class of borrowers. It is submitted that shorn of technicalities of pleadings and specific prayers, this Court must take cognizance in public interest of the severity and the magnitude of the disaster and mould the relief accordingly to extend an effective measure of relief to an utterly distressed class of people affected by the pandemic of Covid-19; ii) that Covid-19 pandemic is a disaster in itself of an unprecedented history. It undoubtedly requires disaster management; iii) that the “disaster management” must be and can only be addressed under the statutory regime of law enacted by the Parliament. The question of executive response will come into play only after the special law on the aspect of “disaster management” has run its full course. H

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A There is no way that the issues arising out of the disaster of Covid-19 can be addressed without travelling the course of path under the Disaster Management Act, 2005 (hereinafter referred to as the “DMA 2005”); iv) that the Statement of Objects and Reasons of DMA 2005 specifically states that the DMA 2005 has been enacted to provide for requisite institutional mechanisms for drawing up and monitoring the implementation of the disaster management plans, ensuring measures by various wings of Government for prevention and mitigating effects of disasters and for undertaking a holistic, coordinated and prompt response to any disaster situation. It is submitted that the preamble of the Act states that it is an Act to provide for the effective management of disasters and for matters connected therewith or incidental thereto; v) that by reason of the very provision of Section 72 of the Act which accords to it overriding effect, DMA 2005 is a special law and is a complete code in itself;

D vi) that the aspects of “disaster management” which inter alia includes grant of relief and concessions to the distressed community of borrowers affected by the disaster, has not at all been considered, addressed and much less sought to be remedied under the statutory framework. Whatever little has been seen is only executive response. The conspectus of the provisions of DMA 2005 simply imposes legal and statutory duty on statutory authorities who have to perform the legal obligation in the interest of the distressed community of people suffering the disaster and its impact. It is submitted that in the matter of grant of reliefs and concessions and adopting measures for minimising the pains and agony of the disaster, the statutory authorities have not risen at all to their task and legal duty; vii) it is submitted that Covid-19 pandemic is a “disaster” within the meaning of Section 2(d) of the Act. It is submitted that not only disaster but it is a “disaster of severe magnitude” within the contemplation of Section 13 of the Act. Any disaster inflicted on mankind within the territory of India, requires “disaster management” to be carried out by several tier of authorities as are established under the Act; the National Disaster Management Authority being the foremost, seemingly omnipotent and omnipresent. It is submitted that the “disaster management” is defined in Section 2(e) of the Act;

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viii) that the “disaster management” is a continuous and integrated A process of planning, organising, coordinating implementing measures which are necessary and expedient for “…Mitigation or reduction of risk of any disaster or its severity or consequences…”. That the issues which arises squarely fall within the meaning and amplitude of “disaster management” which is statutorily mandated under Section 2(e) of the B Act; ix) that the word “mitigation” has been defined in Section 2(i) and the word “resources” has been defined in Section 2(p) of the DMA 2005; x) that in the present case the steps for disaster management have not been undertaken by the statutory authorities under the Act, which makes out a plain and simple case of issue of mandamus to put the statutory authorities in action for performing their duties under the law; xi) that while Section 11 mandates duty to draw up a plan for disaster management for the whole country, at least this Court has not been informed of any such national plan; xii) that Section 12 of the Act imposes a mandatory duty on the National Authority to recommend guidelines for the minimum standards of relief to be provided to ‘persons affected by disaster’ which includes inter alia the reliefs mentioned in three sub-clauses in Section 12 of the Act. The width and scope of the Section is widest and admits of no limitations. The expression minimum standards of relief to ‘persons affected by disaster’ are all such reliefs which are necessary and required for sustenance and survival of meaningful living existence of the ‘people affected by disaster’. This will include within its fold monetary relief and concessions, apart from other measures; xiii) that the Union of India has filed various affidavits but none of them places on record any recommendation of National Authority for guidelines for providing minimum standards of relief for ‘persons affected by disaster’ in discharge of legal duty under the Act; G xiv) that Section 13 of the Act is more specific and directly pertinent to the issues which have been raised in these petitions. The Parliament is cognizant of the fact that an occurrence of disaster of severe magnitude can inevitably seriously impair the ability and capacity of the borrowers for repayment of loans and further the ‘persons affected by disaster’ H

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A may require for living existence grant of fresh loans. Being aware of such a contingency which is most likely to occur in cases of disaster of severe magnitude, the National Authority has been enjoined upon with legal duty to “recommend relief” – in repayment of loans or grant of fresh loans to persons affected. It is submitted that what would be form of relief in the payment of loan or grant of fresh loans on concessional terms, is the exclusive domain and authority of the National Authority. It is submitted that the relief envisaged under Section 13 of the Act has to be meaningful and substantive; it has to be based on rational consideration and not a pittance. A legal and faithful discharge of duty cast upon the National Authority would require the Authority in minimum to undertake an empirical study of the severity of the magnitude and in proportion the requirement of the number and class of people and the exact nature of relief to be extended which is possible only after collection of relevant data and undertaking a study by experts; xv) that Section 13 which casts duty upon the National Authority D to recommend relief in the matter of repayment of loans and/or grant of fresh loans on concessional terms does not make any differentiation among the class of ‘persons affected by disaster’. The class of persons affected by disaster is one integrated class as the Covid-19 pandemic has affected every single individual person, the difference may be of degree. Section 13 intends to provide relief in the matter of repayment of loans etc. to all the persons affected by the disaster and does not admit of any classification. While this much is the minimum scheme of law, the National Authority has not made any recommendation with regard to relief in the repayment of loans and/or for grant of fresh loans to persons affected by disaster on such concessional terms as may be appropriate. There has been a complete inaction on the part of the National Authority in performing the legal duty. It is submitted that any recommendations of the National Authority under Section 13 of the DMA 2005 have not been brought to the notice of this Court; xvi) that some of the measures which are suggested to have been taken are only executive measures and are dehors of the provisions of Sections 12 and 13 of the DMA 2005. Those measures cannot be read in substitution of the requirements of Sections 12 and 13. The only and exclusive authority to make recommendations either under Section 12 or 13 of the Act is only the National Authority. It is submitted that in view of the clear provision of the Act entrusting the duty of making H

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recommendations for extending reliefs for persons affected by disaster is on the National Authority. The case on behalf of the UOI so stated in paragraph 29 of affidavit dated 31.⁸.2020 that as the reliefs/measures in financial sector were being examined and supervised by the Ministry of Finance, the NDMA did not step in as, by its very nature, it may not have expertise in dealing with the complex policy decisions effecting the financial stability of the nation in general and that of banking sector in particular, is not only incorrect, unacceptable but rather uncharitable to the highest body of NDMA. It is submitted that therefore the NDMA has not stepped in despite the clear mandate under Section 13 of the Act. It is submitted that the entire executive government both, at the level of Centre and the State C are under the command of the National Authority and bound to act in aid of the National Authority in discharging its duties. It is submitted that the National Authority is not an expert body is unacceptable. It is submitted that the National Authority has all the powers to seek assistance from other bodies for performing its legal duties. The task of Disaster D Management also includes capacity building and augmentation of resources which the National Authority can work on. Lack of resources in terms of funds is neither an answer nor an excuse for not performing its duties and obligations under the DMA to provide relief to the persons affected by disaster; xvii) that the Ministry of Finance and the RBI do have an important role to play but their role is and can only be to aid and assist the National Authority in formulation of the measures of relief. The actual decision and based thereon the recommendations to various stakeholders including the lending institutions is solely the jurisdiction and authority of the National Authority, which jurisdiction and power can neither be delegated nor abdicated. The measures formulated by the Ministry of Finance and RBI have to have the approval and sanction of the National Authority which alone has the authority to make their recommendations; xviii) that even the government in discharge of executive functions and providing administrative response have to act as “parens patriae” G which doctrine is embedded in the preamble of the Constitution. It is submitted that the government in democracy or any other government has to act only and only for the welfare of the people. In support of his submission, reliance is placed on the decision of this Court in the case of H

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SMALL SCALE INDUSTRIAL MANUFACTURES ASSOCIATION 29 (REGD.) v. UNION OF INDIA [M. R. SHAH, J.]

to show any further consideration much less any grant of further relief by the RBI, pursuant to the views and recommendations of the NDMA; xxii) Now so far as the waiver of compound interest by way of Ex- Gratia Scheme vide memo dated 23.¹⁰.2020 is concerned, it is vehemently submitted that the very use of the word “ex-gratia” is inappropriate and indicates complete lack of empathy and a misdirected approach of the Union of India. What the persons affected by the disaster are entitled to at the hands of the statutory authority and also the welfare Government towards disaster management and within its contemplation extension reliefs and concessions, is misconceived as matters of bounty and/or charity described as ex-gratia. The distressed class of persons affected by the disaster are entitled to reliefs and concessions as a matter of right because that flows from the legal and statutory duty imposed by the statutory law of Parliament – DMA 2005 and the supreme law of the land, i.e., the Constitution of India. It is submitted that it is because of this approach of a gratis underlying the scheme that both the statutory authorities and Union of India have miserably failed to address the issue in right perspective and grant relief and concessions to the persons affected by the disaster in an effective, meaningful and substantial manner; xxiii) that even the Scheme dated 23.¹⁰.2020 contains the eligibility criteria as under: E “4. Eligibility criteria under the scheme (1) Borrowers in the following segments/classes of loans, who have loan accounts having sanctioned limits and outstanding amount of not exceeding Rs.² crore [aggregate of all facilities with lending institutions] as on 29.².2020, shall be eligible F under the Scheme: (i) MSME loans (ii) Education loans (iii) Housing loans G (iv) Consumer durable loans (v) Credit card dues (vi) Automobile loans (vii) Personal loans to professionals H

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A (viii) Consumption loans Any borrower whose aggregate of all facilities with lending institutions is more than Rs.² Crore (sanctioned limits or outstanding amount) will not be eligible for ex-gratia payment under this scheme. B (2) The aforesaid eligibility shall be subject to the following further conditions and stipulations: (i) Account should be standard as on 29th February 2020, i.e., loan should not be a Non-performing Asset (NPA) as on 29th February, 2020. C (ii) Lending institution must be either a banking company, or a Public Sector Bank, or a Co-operative Bank [i.e., an Urban Co-operative Bank or a State Co- operative Bank or a State Co-operative Bank or a District Central Co-operative Bank], or a Regional D Rural Bank, or an All-India Financial Institution, or a Non-Banking Financial Company or a Housing Finance Company registered with RBI or National Housing Bank as the case may be. A Non-Banking Financial Company as the case may be. A Non- Banking Financial Company-Micro Finance E Institution should be a member of a Self-Regulatory Organization (SRO) recognized by RBI. (iii) The ex-gratia payment under this scheme shall be admissible irrespective of whether the borrower in sub-clause (1) has fully availed or partially availed or not availed of the moratorium on repayment announced by RBI vide its circular DOR. No. BP.BC.47/21.⁴.048/2019-20, dated 27 th March, 2020 and extended on 23rd May, 2020.” It is submitted that a perusal of the aforesaid will show that the relief and concession which was announced in the affidavit of the Union of India dated 02.¹⁰.2020 has been further restricted making it wholly arbitrary and eyewash. It is submitted that the following restrictions are obvious from paragraph 4: i. That it is applicable to the borrowers in the 7 class/segments; H

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ii. It is applicable to the borrowers who have loan accounts A having sanction limits and outstanding amount of not exceeding 2 crores; iii. The aggregate of all facilities with lending institutions should not exceed 2 crores as on 29.².2020; iv. That the account should be standard as on 29.².2020 i.e. B the loan should not be a non performing asset as on that date. It is submitted that the eligibility criteria enshrined in para 4 of the scheme has stark contrast with affidavit dated 02.¹⁰.2020. It is submitted that the Ministry of Finance has added more and drastic conditions reducing it to an illusion of reliefs and concessions. The arbitrary and irrational criteria is so striking that the scheme is virtually nugatory. In the first place, para 18 of the affidavit dated 02.¹⁰.2020 as well as para 4 of the scheme, both make it evident that if the total exposure of the loan at the grant of sanction is more than Rs. 2 crores, the borrower will be ineligible irrespective of the actual outstanding. For example, if the borrower has been sanctioned a loan of Rs. 5 crores and has availed of the same, even though he might have repaid substantially bringing down the principal amount to less than Rs. 2 crores as on 29.².2020 but because of the sanction of the loan amount of more than Rs. 2 crores, he stands ineligible. It is submitted that more remarkable is the condition that the outstanding amount should not exceed Rs. 2 crores and for which purpose the aggregate of all facilities with the lending institutions will be reckoned. It means that hypothetically a borrower, for example MSME category, has availed and has outstanding of business loan of Rs. 1.99 crores and also has a due on his credit card of Rs.¹.¹⁰ lakh thereby making the aggregate to Rs.².¹⁰ crores, he stands ineligible. This cannot be justified by any logic; xxiv) that even the categorisation of borrowers limited to 8 categories only is not based on collection of any data and any empirical study in an objective manner, much less a study of the severity of the magnitude and effect of the pandemic disaster on the borrowers, the classification on the borrowers limited to 8 categories has no nexus with the object sought to be achieved. It is submitted that it cannot be suggested nor can it be accepted logically that the borrowers outside 8 categories are not or would not be affected by the severity of the disaster, i.e, the H

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A pandemic and make them the class of persons affected by the disaster entitling to a similar treatment on parity. On what basis the categorisation limited to 8 categories has been made is not discernible nor can be comprehended; xxv) that affidavit dated 02.¹⁰.2020 shows that there is a B classification between ‘small borrowers’ and ‘big borrowers’. It is submitted that this classification is wholly arbitrary. It is submitted that in the process of this classification a sizable and much bigger class of ‘middle class borrowers’ has been completely excluded and no treatment has been accorded to the class of borrowers situated between the small and big classes. It is submitted that this classification therefore is clearly C unrealistic and unscientific. It is submitted that neither any study has been done nor the classification has been made on any rational basis which has nexus with the ground reality; xxvi) that the classification of borrowers is both discriminatory and arbitrary and thereby in violation of Article 14 of the Constitution. It D is submitted that the classification is solely irrational, unreal, unscientific and highly subjective, thereby suffering from the vice of arbitrariness violating Article 14 of the Constitution; xxvii) that the classification has no nexus at all with the object sought to be achieved whereas the object is clear, statutory, constitutional and singular, i.e., extending reliefs to ameliorate the distress and miseries of the distress class of persons which are severely hit by the disaster of pandemic and do constitute a sizable and significant class of persons affected by the disaster requiring disaster management; xxviii) that the impugned classification is based on whims and caprice of the executive rather than an objective and real consideration. No material is available on record to show the basis of the classification. The Union of India cannot seek to clothe a decision which is so evidently discriminatory and arbitrary under the protective shield of policy decision inasmuch as any policy can neither be arbitrary nor discriminatory. In G support of his submissions, Shri Ravindra Shrivastava has heavily relied upon the decisions of this Court in the cases of Rattan Arya v. State of T.N. (1986) 3 SCC 385; State of W.B. v. Anwar Ali Sarkar 1952 SCR 284: AIR 1952 SC 75 (paras 83 & 84); and D.S. Nakara v. Union of India, (1983) 1 SCC 305 (paras 13 & 14);

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xxix) that even within the class of classified eligible borrowers, the arbitrariness is writ large because categories and the borrowers of each categories are inherently dissimilar but are sought to be painted with one brush. They are made to wear the shoes of one size to fit in all. The borrowers in 8 categories compared with each other unequal. For example, a business loan to MSME category is considered at par with home loan and educational loan. The conditions of the loans and interests are bound to be different so much so the credit card holders and consumer durable loans and automobile loans are inherently dissimilar, also the personal loans to professional and the MSME loans are different in content. It is submitted that thus unequals are being treated as equals which itself is a case of classic discrimination. Reliance is placed on the decision of this Court in the case of Roop Chandra Adlakha v. Delhi Development Authority, 1989 Supp. (1) SCC 116 (paras 19 & 20); xxx) that even charging interest on interest/compound interest can be said to be in the form of penal interest. It is submitted that the penal interest can be charged only in case of wilful default. It is submitted that in view of the effect of pandemic due to Covid-19 and even otherwise defer the payment of loan during the moratorium period as per circular dated 27.3.2020, it cannot be said that there is any wilful default which warrants interest on interest/penal interest/compound interest. It is submitted that there shall not be any interest on interest/penal interest/ compound interest charged for and during the moratorium period; E

xxxi) that even otherwise limiting relief and concessions to the victims of disaster to waiver of compound interest alone is arbitrary, insufficient, irrational and discriminatory. It is submitted that the so-called waiver of compound interest can only be one of the measures but ought not to be allowed to be the end of the road by closure of the case as has been sought by the Union of India. Only a proper and objective study will reveal whether relief more than the waiver of compound interest is the dire need of the persons affected by the disaster. Sections 12 and 13 of the DMA 2005 envisage reliefs in terms of more than what is sought to be done under the pretence of ex-gratia scheme. It is submitted that even a judicial notice can be taken that the severity of the impact and consequences of the disaster upon the common class of people, such as employees, businessmen, farmers, workers, industrialists, professionals etc. are beyond description. To a significant class of people, the impact of the disaster has threatened their very survival and meaningful existence H

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A of life and liberty. It is submitted that therefore it is a complete misconception of the Union of India that relief of waiver of compound interest is sufficient to provide redress within the meaning of Sections 12 and 13 of the DMA 2005. It is submitted that the measures of reliefs were required to be laid down sector and group wise classified on the basis of common denominating factors, which have not been done; B xxxii) Now so far as the measures proposed by RBI vide circular dated 6.⁸.2020 is concerned, it is vehemently submitted that the same cannot be said to be a relief of ‘disaster management’ which otherwise is arbitrary and discriminatory. It is submitted that the RBI Circular dated 6.⁸.2020 is a sheet anchor of case of both the Union of India and the C RBI. This circular seeks to provide for the resolution framework for Covid-19 based on the “Prudential Framework for Resolution of Stressed Assets Directions 2019” dated 7.⁶.2019. It is submitted that on the face of it the resolution framework only adopts and incorporates the circular dated 2.⁶.2019, which is prior to onset of pandemic disaster; D xxxiii) that the RBI is not the authority though it may have supportive role to play to take a decision in regard to the measures of relief and concession to the disaster affected persons arising out of the task of disaster management under DMA 2005. It is submitted that the circular is not a substitute for the decision of the NDMA under Sections E 12 and 13 of the DMA 2005; xxxiv) that though the resolution framework mentions Covid-19 but is not tailor made suited to the extraordinary and unprecedented impact, consequences and distress caused to the persons affected by the disaster of pandemic Covid-19. The resolution framework for the stressed assets governed by the prudential framework cannot be ipso facto applied for grant of reliefs and concessions to the disaster affected persons under the task of disaster management. The prudential norms have nothing to do with the peculiarities of impact and consequences of the disaster such as Covid-19 the management of which has entailed into repeated nationwide lockdown unprecedented in history and its continuous cascading impact and consequences hitting across the life and liberties, business, industries and environment. Importation of prudential norms designed for resolution framework for stressed assets for lessor conditions of economic distress is only whimsical and irrational. It is submitted that it is, as such, dereliction of duty; H

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xxxv) that the resolution framework as per 6.⁸.2020 has itself been held to be inadequate by none other than the NDMA as is evident from the views and recommendations of NDMA contained in the OM dated 28.⁸.2020. Having taken cognizance of RBI Circular dated 6.⁸.2020 the NDMA has observed that the borrowers require further relief from the banking system and exalted the RBI to grant further relief. Such inadequate measure of so-called resolution framework in the RBI circular dated 6.⁸.2020 ought not be accepted by this Court; xxxvi) that the resolution framework in RBI circular is highly bank centric and leans not only heavily but only in favour of the banks and lending institutions rather than walking extra mile for the distress class of persons and borrowers. The resolution framework by virtue of the conditions of eligibility in paragraph 2 thereof is per se discriminatory and arbitrary. MSME borrowers whose aggregate exposure to lending institutions collectively is Rs. 25 crores or less on 1.3.2020 are not eligible for resolution framework. This classification is solely arbitrary and is based on no intelligible differentia having nexus with the object. It is submitted that the resolution framework is applicable only to those borrowers who are having distress on account of Covid-19 but in what manner such factor would be determined is not provided for, leaving therefore, the benefit of the resolution framework to subjective satisfactory and arbitrariness of the banks, it has been left to the unguided, ultimate and final discretion of the banks to lay down their individual policies and framework creating gross inequality and introducing total subjectivity; xxxvii) It is further submitted by Shri Ravindra Shrivastava, learned Senior Advocate appearing on behalf of some of the petitioners that the trigger for filing these petitions and the Court taking the cognizance thereof are conditions of exceeding distress, financial and otherwise which seriously impinge upon the fundamental rights of Article 14, 19 and 21 of the Constitution in their full ramifications. It is submitted that the occasion for this Court is an extraordinary human tragedy of unparallel origin and precedence and therefore requiring extraordinary statutory legal and constitutional response by the statutory authorities and the Government of India. It is submitted that the issues are far more important to be asked to be closed on the basis of few affidavits and circulars which fall far short from the requirements of constitutional and statutory duties. It is submitted that the statutory authorities must act without any more H

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A delay, the Government of India being the parens patriae has to act in a meaningful manner and meaning of the doctrine as the father of the citizens of the republic and therefore the ultimate custodian and guardian of their welfare. It is submitted that the role of the parens patriae by the Government of India has not been discharged as per the doctrine which has been explained by the Constitution Bench in Charan Lal B Sahu (supra); xxxviii) that the very nature of the issues involved in this case and of which cognizance is required to be taken are such that there is an eminent need in public interest of continuous monitoring of the statutory and executive action by this Court and further issuance of continuous directions and mandamus to all the authorities concerned. It is submitted that neither the magnitude and severity of the disaster which has continuous and cascading effect and considering the very concept of “disaster management” under the Act as an integrated and continuous process, the relief and measures adopted or required to be adopted cannot be a sort of one-time grant or package. It is submitted that with the evolution of situation there is a strong public interest and need for this Court to keep exercising its constitutional jurisdiction under Article 32 of the Constitution so that the authorities do not fail, they remain active and vigilant and enormous class of victims of the disaster do not remain crying for the redressal of the grievances. In support of his submission, heavy reliance is placed on the decision of this Court in the case of T.N. Godavarman Thirumulkpad v. Union of India (1997) 2 SCC 267.

4Copy pinpoint4. Dr. Abhishek Manu Singhvi, learned Senior Advocate appearing on behalf of the power sector has further submitted in addition to what is submitted by Shri Ravindra Shrivastava, learned Senior Advocate that during the lock down due to Covid-19 pandemic, power sector is badly affected. It is submitted that therefore there shall be a special package of relief for the power sector. It is submitted that therefore not enabling/ considering the impact of lockdown due to pandemic, vis-à-vis power sector and not providing special package for the power sector, unequals are treated equally. It is submitted that therefore the NDMA/UOI/RBI must devise suitable and appropriate sector specific measures essentially for the continued operation of the power generation sector. 4.¹ It is submitted that the RBI Circular relating to Covid-19 relief packages viz. impugned RBI notifications, RBI Circulars dated 6.⁸.2020, H 7.9.2020 have left the option of providing relief to the discretion of lenders

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instead of making it mandatory. It is submitted that as per the aforesaid notifications, the lenders are permitted to grant a moratorium of three months on payment of all instalments for repayment of term loans and working capital facilities falling due during the moratorium period. It is submitted that as per paragraphs 14 and 15 of Part B of circular dated 6.⁸.2020, the decision to provide relief has been left to the discretion of the lenders; as per paragraph 18 of circular dated 06.⁸.2020, the resolution process has to be invoked by not less than 75% of lenders by value and not less than 60% of lenders by number. It is further submitted that paragraph 7 of circular dated 7.9.2020 provides a window to the lenders to vary from the provisions of the circular dated 6.⁸.2020. 4.² It is further submitted that in order to ensure that relief is granted to borrowers impacted by the spread of Covid-19 pandemic and the subsequent national lockdown, the above-mentioned circulars ought to be binding on all lenders who would otherwise qualify as “financial creditors” under the Insolvency and Bankruptcy Code, 2016. 4.3 It is further submitted that by leaving the application of the said RBI circulars to the discretion of the individual lenders, borrowers, who are under severe financial stress on account of Covid-19, are denied appropriate relief as lenders tend to focus on their own statutory and internal compliances and interests. It is submitted that the purpose of providing a relief framework for the borrowers affected by the Covid- E 19 pandemic stands defeated since lenders are incentivised to recover their costs. It is submitted that in such a scenario, the RBI ought to have made it mandatory for all lenders to provide relief under the impugned RBI notifications, Circulars dated 6.⁸.2020 and 7.9.2020 available at the option of the borrowers and not at the discretion of the lenders in order to provide relief to borrowers impacted by the outbreak of Covid-19. F

5Copy pinpoint5. Shri Kapil Sibbal, learned Senior Advocate appearing on behalf of CREDAI – Real Estate Sector has vehemently submitted that Real Estate Sector is also badly and severely affected due to nationwide lock down. It is submitted that the measures undertaken by the UOI/RBI are arbitrary, discriminatory, illusory and inadequate and does not offer any G reliefs to the Real Estate Sector, when Real Estate Sector because of its importance and contribution towards country’s economy requires special consideration. 5.¹ It is further submitted that the Union of India/NDMA have failed to perform their statutory duty cast under Sections 12 and 13 of H

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A the DMA 2005. It is submitted that while providing reliefs, no data is collected with respect to impact on individual sectors. It is submitted that even as required under the DMA 2005, there is no national plan prepared while considering the disaster – Covid-19 pandemic. 5.² It is further submitted that even the terms of reference of B Kamath Committee are ex-facie contrary to the aim and object of policies framed by the RBI/UOI, which was primarily to mitigate and alleviate the debt burden of the borrowers. It is submitted that the Kamath Committee Report, (i) proceeds on the basis that businesses which were shut down due to Government action [i.e. National Lockdown] and defaulters. (ii) The Terms of Reference of Kamath Committee are only aligned for interest of the lending institutions and not for continuous viability of businesses as seen from the chart annexed. (iii) The stringent conditions so imposed are difficult to comply and will turn all businesses into NPA. (iv) Restructuring plan is required to be approved by December 2020 although the Real Estate sector has barely commenced functioning due to COVID – 19 restrictions i.e. the “force majeure’ even continues and no proposal is possible. (v) The ratios of borrowing limits / net asset value which were never there in the original loan agreements are imposed under the Restructuring Policy. F (vi) Moratorium Policy expired on 31.⁸.2020 and due to the inability of the businesses in the real estate sector to make payments during the months of September, October and November 2020, their credit rating has already been downgraded to Grade “D” and as NPAs. Therefore, they G do not qualify for restructuring. (vii) Being a restructured loan, banks will have to make additional 10% integral provisioning for such lending and as a result of credit rating downgrading, the banks will have to charge few percentage basis points for all such loans. H

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5.3 It is further submitted that the banks are the beneficiaries of the policies framed by the RBI, who have profiteered at the peril of borrowers who are unable to withstand the effects of the disaster. It is submitted that the real estate sector is seeing a continuous decline in sales, investments, leasing and pricing in 2021 owing to the effect of Covid-19 pandemic. Shri Sibbal, learned Senior Advocate has further submitted that if the moratorium period is not extended till 31st March, 2021 and if the reliefs as sought for in the writ petition are not granted, then majority of all accounts will be qualified as NPA as per RBI Prudential norms on Income Recognition; asset classification and provisioning pertaining to advances; virtually no accounts would qualify for restructuring under the Restructuring Policy, since it is made applicable only to those accounts which are not in default for more than 30 days as on 01.03.2020 and credit rating of members of the CREDAI will be downgraded and permanently impaired, resulting in the witnesses of the members of the association becoming commercially unviable. It is submitted that real estate sector is one of the most affected sectors on account of the lockdown and the ongoing pandemic. The precarious situation has adversely affected not only over 1400 members of CREDAI – MCHI but also the 270 ancillary industries dependent on the real estate industry. If the sector suffers such irreparable loss, all the allied industries would also be severely affected. Therefore, it is prayed in para 8 to grant the following reliefs: E 8.¹ The Moratorium Policy be made mandatory and extended by the Respondent No.² from 01.09.2020 until 31st March, 2021 or complete normalcy is achieved, whichever is earlier. 8.² All borrowers in the real estate sector must be granted the benefit of interest waiver (including interest on interest), as the case may be, till complete normalcy is achieved or till the Resolution Plan under Restructuring Policy is approved [if invoked], whichever is earlier. 8.3 Restructuring Policy dated 07.⁸.2020 and 07.09.2020 to be simplified, broad based and implemented across board without any classification so that the true object of bailing out the borrowers under stress [precipitated by the national disaster / pandemic / force majeure event] and supporting the revival of the Indian economy / its GDP through its focal sector i.e. real estate can be seamlessly achieved. H

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A 8.⁴ All accounts which have not been declared as NPA as on 01.03.2020 are to be made eligible for restructuring without any further provisioning of 10% by banks.

6Copy pinpoint6. The other learned Advocates appearing for the other respective petitioners, such as, Textile Association, Healthcare Sector, Hotelier B Association, Shopping Centres and Malls, Travellers and other industries have by and large made the submissions which are narrated hereinabove and therefore they are not repeated again here. Reply on behalf of the Union of India

7Copy pinpoint7. All these petitions are opposed by Shri Tushar Mehta, learned C Solicitor General of India, appearing for the Union of India, Shri Harish Salve, learned Senior Advocate appearing on behalf of the Indian Bank Association, Shri V. Giri, learned Senior Advocate appearing on behalf of the RBI and Shri Mukul Rohatgi, learned Senior Advocate appearing on behalf of the SBI. 7.¹ Shri Tushar Mehta, learned Solicitor General has taken us to various affidavits/additional affidavits filed on behalf of the Union of India. He has also taken us to the various provisions of the DMA 2005, which shall be referred to and dealt with hereinbelow: Shri Tushar Mehta, learned Solicitor General has submitted that it is a fact and nobody can dispute that the pandemic has caused stress to large and small business and to individual borrowers who have lost their jobs and livelihoods. That they need relief which will help them to get back on their feet. It is submitted that however different segments/sectors have suffered differently. It is submitted that to mitigate the burden of debt servicing brought about the disruptions in the market conditions on account of Covid-19 pandemic, RBI came out with a circular dated F 27.03.2020 which permitted lending institutions to grant a moratorium on payment of all instalments of term loams falling due between 1.3.2020 and 31.5.2020, which came to be extended till 31.⁸.2020. It is submitted that one of the grievances pertains to grant of waiver from paying interest which has accrued during the moratorium period while making the G repayment of loan after the moratorium is over. It is submitted that one other grievance is waiver from paying interest on interest/compound interest accrued during the moratorium period. It is submitted that the Central Government is fully conscious of the difficulties faced by the various sectors and the stakeholders of various sectors within the purview of the Ministry of Finance and other Ministries. H

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7.² It is submitted that the Finance Ministry, after the outbreak of A the COVID-19 pandemic globally, has taken several measures of relief dealing with the potential problems faced by several sectors and in several spheres of all financial worlds. All these measures were taken as a responsible and measured response to mitigate the problems faced by the sudden outbreak of the pandemic and keeping in mind- B (i) The financial stability of the economy; (ii) The additional unforeseen and unexpected financial burden imposed on the exchequer to provide relief packages to citizens at large, adversely affected due to the pandemic; (iii) The very nature of the pandemic whose duration remains C uncertain; (iv) The difference in implications of the reliefs granted for various sectors; and (iv) The fact that the resources of any country would not be unlimited. D It is further submitted that the Central Government has also taken a number of measures to mitigate financial suffering, which include, inter alia, the following: - (i) Agriculture loans: 3% subvention on interest rate payable on prompt repayment has been made admissible despite availing E moratorium. (ii) Housing loans: Subvention on interest rate under Pradhan Mantri Awas Yojna has been extended by one more year up to 31.03.2021. F (iii) Small business borrowers: 2% subvention on interest rate has been introduced for small business loans under Pradhan Mantri Mudra Yojana. (iv) Micro Food Processing Units: Credit-linked subsidy of Rs.¹⁰,000 crore has been introduced for 2 lakh food-processing micro-enterprises. G

(v) Micro, Small and Medium Enterprises (MSMEs): Emergency credit line of up to Rs.3 lakh crore, backed by 100% guarantee from the Government, at capped rate of interest has been launched. H

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