Delhi High Court Issues Notice to Centre, RBI, Ministry of Finance and A Private Bank, In Petition Seeking Implementation of Restructuring Circular 2.0 Dated 5.5.2021 And On ECLGS.

(Judicial Quest News Network)

The Delhi High Court on Friday issued notice to the Centre, RBI, Ministry of Finance and a Private bank returnable on 18.04.2022 in a petition seeking the implementation of Restructuring Circular 2.0 dated 5.5.2020 and on Emergency Credit Line Guarantee Scheme (ECLGS)

A single judge bench Justice Rekha Palli.

The petition was filed Argued by Supreme Court lawyer Vishal Tiwari and his Associate, Advocates. , Sarang Rastogi Ritika Khanna and Anamika Sharma.

The petition is filed by SAGAR ENTERPRISES & ORS VS Union of India & Ors. Therefore, the present petition is filed in this present Hon’ble Court

The petitioner contends that the all reliefs are only on papers and the common citizen is still facing the economic hardship due to which they are not able to repay their dues and needs time for that. The restructuring facility announced by the RBI on 5-5-2021 is not implemented in its letter and Spirit.

That the petitioners took a Loan from Respondent No.3 (FICCL) for purchase of property/Against Property for an amount or 3,00,50,000/- to avail the loan facility. As per Loan Agreement the loan facility was repayable via liquated Monthly Instalments; “EMIs”) and EMI was to lie calculated after taking interest applicable at that point of time which rate of interest was however variable in nature. It was agreed upon in the Loan Agreement that timely payment of the equated monthly Instalments shall be the essence of agreement and in the event of default in payment of EMIs besides other consequences, default interest in terms of the Loan Agreement, shall be levied. In addition, you above named Addresses also executed other loan and security documents such as Demand Promissory.

The petitioners further submitted that That the default in payment by the petitioners was not deliberate but it was due to his Income loss because of COVTD-19 lockdown and closure of business. To recover from the economic stress the RBI and Finance ministry has announced various measures for the borrowers. The petitioners are also entitled for the same but the bank is not implementing the COVID 19 schemes in its true sense and petitioners has been suffering and his fundamental Rights have been at Stake. the Circular dated 05.05.2021 has been initiated for the welfare of the commercial borrowers so as to decrease the financial burden under the light of second wave of the COVID-19. To decrease the financial burden of the commercial borrowers, the Reserve Bank of India initiated the resolution framework 2.0 under the circular dated: 05.05.2021 to provide relief to the commercial borrowers. However, in response to such circular, the Petitioners approached Respondent no. 3 for the availing of

the financial facility but in reality, the Respondent no. 3 blatantly refused the facility lo the Respondent stating that the Petitioners entity does not come under the eligibility threshold and therefore is rejected from the same. In furtherance to this, the Petitioners is being mentally harassed by the Respondent 3 to pay back the defaulted amounts along with its recovery agents. Persistent mental pressure has made the struggle really worse for the Petitioners. However, in reality, the Petitioners is absolutely

eligible to get the financial facility, the respondent no. 2 hasn’t provided any direction and guideline for the implementation of the same and the Bank (FICCL) Fullerton Finance has arbitrarily didn’t abide by the circular.

It is further submitted that the fundamental rights, to live with dignity and right to livelihood is at stake. The banks are acting in arbitrary manner and deliberately avoiding the financial Schemes announced during COVID19 by the RBI. And also, not following the guidelines and directions given by this court. Earlier in 2020 the Hon’ble Supreme Court intervened in implementation of the moratorium circular dated 27-3-2020 and issued direction for the implementation of the circular in its letter and Spirit, and because of these directions the citizens were relaxed from the economic burden during COVID19 in 2020.

The emergence of the COVID -19 and the subsequent lockdown initiated to restrict the transmission of COVID-19 has impacted the world economically. Each and every business sector in India had faced a huge economic hardship wherein it had become a daily struggle for sustenance. The RBI Circular dated 27.03.2020 providing moratorium to all commercial borrowers under the light of COVID-19 came as an oxygen to such entities as it would have become a huge financial burden for the borrowers to pay the EMIs regularly in this period. However, the Petitioner in this present case was denied that facility by the Respondent 3 despite being the instruction that every commercial borrower whether individual or legal entity. Such arbitrary practice of the Respondent 3 has made the financial hardship of the Petitioner entity more deadly.

ECLGS-2.0 refers to the scheme for providing 100% Guarantee to member lending institutions in respect of eligible credit facility extended by them to its borrowers in the 26 sectors identified by the Kamath Committee on Resolution Framework vide its report dated 04.09.2020 and the Healthcare sector whose total credit outstanding (fund based only) across all lending institutions and days past due as on February 29, 2020 was above Rs.50 crore and not exceeding Rs.500 crore and upto 60 days respectively. ECLGS 2.0(Extension) refers to the scheme for providing additional support to existing borrowers of ECLGS 2.0 or new borrowers eligible under ECLGS 2.0 based on revised reference date of March 31, 2021. ECLGS 3.0 refers to the scheme for providing 100% guarantee to member lending institutions in respect of eligible credit facility extended by them to its borrowers in the Hospitality (hotels, restaurants, marriage halls, canteens etc.), Travel & Tourism, Leisure & Sporting and Civil Aviation (scheduled and non-scheduled airlines, chartered flight operators, air ambulances, airports and ground handling units) sectors whose days past due are upto 60 days as on February 29, 2020. ECLGS 3.0(Extension) refers to the scheme for providing additional support to existing borrowers of ECLGS 3.0 or new borrowers eligible under ECLGS 3.0 based on revised reference date of March 31, 2021. ECLGS 4.0 refers to the scheme for providing 100% guarantee to member lending institutions in respect of eligible credit facility extended by them to eligible hospitals/nursing homes/clinics/medical colleges / units engaged in manufacturing of liquid oxygen, oxygen cylinders etc. for setting up of on-site oxygen producing plants.

the second wave of COVID-19 pandemic with high number of transmission cases had surrounded the country. India was again under a serious risk of high transmission with the new mutant of the petitioner pointed out that COVID-19 found again all over India. The official reports had rightly predicted the fact that the rate of transmission is much more in comparison to last year. The figure pertaining to number of cases per day had increased rapidly which forced the state governments to impose lockdown in their respective states, such imposition of lockdown in various states had brought a lot of hardship on the revenue inflow of various individuals including the Petitioner.

The Petitioner therefore prays for the immediate judicial intervention of this Hon’ble Court as the Petitioner is under immense pressure to daily sustain.

It is further submitted that The RBI has also not constituted any Special portal or forum for COVID19 reliefs Grievances and complaints where the petitioner can redress his grievances. Therefore, at this situation, it has become impossible for the Petitioner to sustain without the relief provided by the Respondents.

The Petitioner therefore as per the circular dated: 05.05.2021 approached the Respondents to provide relief as per the provisions of circular, however the situation became worse for the Petitioner as the bank refused to implement the circular and didn’t provide any relief to

the Petitioner stating that the Petitioner entity is not eligible under this circular.

Eligible Borrowers

Under ECLGS 1.0, all borrower accounts pertaining to Business Enterprises /MSMEs/Loans to individuals for specific businesses purposes (as specified in the FAQs) with total credit outstanding (fund based only) across all lending institutions of up to Rs. 50 crore as on 29.2.2020 are eligible. MLIs are expected to check with credit bureau the overall outstanding of the borrower to assess the eligibility of the borrower. To be eligible 5 under ECLGS 1.0, the Borrower accounts should be less than or equal to 60 days past due as on 29th February, 2020 i.e. they should not have been classified as SMA 2 or NPA by any of the lender as on 29th February, 2020. Under ECLGS 1.0(Extension), all borrowers who have availed assistance under ECLGS 1.0 or new businesses which are eligible under ECLGS 1.0 based on the revised reference date of 31st March 2021 and meet the other terms of these guidelines are eligible. Under ECLGS 2.0, all Business Enterprises /MSMEs in the 26 Covid related stressed sectors identified by the Kamath Committee on Resolution Framework and the Healthcare sector who have availed loan for business purposes with total credit outstanding (fund based only) across all lending institutions above Rs.50 crore and upto Rs.500 crore as on 29.02.2020 are covered. To be eligible under ECLGS 2.0, the borrower accounts should be less than or equal to 60 days past due as on February 29, 2020 i.e. they should not have not been classified as SMA 2 or NPA by any of the lender as on 29 th February 2020. Under ECLGS 2.0(Extension), all borrowers who have availed assistance under ECLGS 2.0 or new businesses which are eligible under ECLGS 2.0 based on the revised reference date of 31st March 2021 and meet the other terms of these guidelines are eligible. Under ECLGS 3.0, all Business Enterprises /MSMEs in the Hospitality (hotels, restaurants, marriage halls, canteens etc.), Travel & Tourism , Leisure & Sporting and Civil Aviation (including scheduled and non-scheduled airlines, chartered flight operators, air ambulances, airports and ground handling units) sectors whose days past due are up to 60 days as on 29.02.2020 are eligible  Under ECLGS 3.0(Extension), all borrowers who have availed assistance under ECLGS 3.0 or new businesses which are eligible under ECLGS 3.0 based on the revised reference date of 31st March 2021 and meet the other terms of these guidelines are eligible. Under ECLGS 4.0, all existing hospitals/nursing homes/clinics/medical colleges / units engaged in manufacturing of liquid oxygen, oxygen cylinders etc, who have a credit facility from a lending institution with days past due up to 90 days as on 31.03.2021 are eligible for assistance of up to Rs.2 crore for setting up technologies like Pressure Swing Adsorption for on-site oxygen producing plants. Loans provided to Business Enterprises / MSMEs constituted as Proprietorship, Partnership, registered company, trusts and Limited Liability Partnerships (LLPs) or any other legal entity shall be eligible under the Scheme.

Loans provided to individuals for business purposes shall be eligible for coverage under ECLGS 1.0 (as specified in the FAQs) under specified categories. For the purpose of ECLGS 1.0, Business Enterprises / MSMEs would include loans covered under Pradhan Mantri Mudra Yojana extended on or before 29.2.2020 and reported on the MUDRA portal. All eligibility conditions including the condition related to Days past due would also apply to PMMY loans. Loans provided in individual capacity are covered under ECLGS 1.0.

However, such loans should be restricted to business loans taken by individuals (as specified in the FAQs) for their own businesses and should be supported with a Management Certificate to this effect 6 at the time of guarantee application. These loans should also meet the other eligibility criteria of the scheme. The Scheme is valid for existing customers on the books of the MLIs. Days Past Due status as on 29.2.2020/31.03.2021 to be checked across all lending institutions from credit bureau while availing assistance under ECLGS. All borrower accounts which had NPA or SMA-2 status as on 29.2.2020 shall not be eligible under ECLGS 1.0, ECLGS 2.0 and ECLGS 3.0. Similarly, all borrower accounts which had NPA or SMA-2 status as on 31.03.2021 shall not be eligible under ECLGS 1.0 (Extension), ECLGS 2.0(Extension) and ECLGS 3.0 (Extension). All borrower accounts which had NPA status as on 31.03.2021 shall not be eligible under ECLGS 4.0. However, as per decision taken on September 08, 2020, exception has been allowed for overdues of the borrower in respect of their credit card/savings account/current account provided the said overdues did not exceed 1% of the loan amount (i.e. GECL amount) extended under ECLGS facility and that the overdue amount were regularized prior to assistance being extended under ECLGS and provided further that the member lending institutions ensure that the overdues were covered by the materiality concept being followed by the MLIs. Business Enterprises / MSME borrower must be GST registered in all cases where such registration is mandatory. This condition will not apply to Business Enterprises / MSMEs that are not required to obtain GST registration. An ‘opt-out’ option should be provided to the eligible borrowers under ECLGS 1.0to enable them to choose whether they wish to opt out of the GECL facility. Facility under ECLGS 2.0 , ECLGS 3.0 & ECLGS 4.0 however, shall be on ‘Opt-in’ basis. For the purpose of this Scheme it is not necessary that the existing loans of the borrowers should be covered under the existing NCGTC or CGTMSE Scheme

That on account of aforesaid default in repayment of the loan facility, which amounted to an event of default in terms of Loan Agreement thereby entitling the Secured Creditor to recall the loan facility sanctioned to the Petitioner.

That the default in payment by the Petitioner was not deliberate but it was due to his Income loss because of COVID19 lockdown and closure of business. To recover from the economic stress the RBI and Finance ministry has announced various measures for the borrowers. The petitioner is also entitled for the same but the bank is not implementing

the COVID19 schemes in its true sense and petitioner has been suffering and his fundamental Rights have been at stake.

The petition was filed with following prayer

direct the Respondent 2 to initiate instructions and guidelines for the implementation of the circular dated: 05.05.2021 in its letter and spirit;

direct the Respondent 2 to initiate instructions and guidelines for the implementation of the Emergency Credit Line Guarantee Scheme (ECLGS) Operational Guidelines updated as on October 01, 2021.

Issue of directions against the Respondent 3 to abide by the circular dated: 05.05.2021 in its letter and spirit in the interest of justice and to stay the recovery proceedings initiated against the Petitioner.

Any other order or direction, which your lordships may deem just and proper in the facts and circumstances of the case, may also kindly be passed in favour of the public at large and in the interest of justice.