The Delhi High Court has restrained YES Bank from declaring a loan account as a 'Non Performing Asset' for non payment of installment due to unprecedented circumstances brought about by COVID19 pandemic.
Following the order passed in the case Anant Raj Ltd vs Yes Bank Ltd, the Single Bench of Justice Hari Shankar held that the Petitioner was entitled to the restoration of state of affairs, with respect to the loan account, as it existed on March 1, 2020. The Court also took into account the the statement made by Reserve Bank of India Governor on April 17 regarding exclusion of lockdown period for NPA classification.
"I see no reason to give, either of the parties before me, a treatment different from that which is to be found in the order, dated 6th April, 2020 of a learned Single Judge of this Court in M/s. Anant Raj Limited (supra). For the reasons which are already exhaustively set out in the said order, present petitioner would also be entitled to the restoration as status quo ante, as status of its account existed on 1st March, 2020. This relief would additionally be justified in view of the paragraph 17 of the statement by the Governor, RBI", the Court observed in the interim order in the case in the case J R Toll Road Pvt Ltd vs Yes Bank Ltd.
In the present case, the Petitioner was constituted as a Special Purpose Vehicle for development of the NH-11. In 2011, the said SPV was granted a loan of ₹389 crores by the Respondent Bank.
The loan agreement required the Petitioner to inform the bank of any loss or damage, suffered owing to any force-majeure circumstances, such as earthquake, flood, typhoon etc. against which the petitioner may not have insured its property. Default in payment of the principal or interest amount empowered the respondent to terminate the loan agreement and take additional steps.
The Petitioner's case was that due to the nationwide lockdown, which also resulted in closure of national highways, the Petitioner is unable to generate revenue from toll collection. Hence, the obligation to pay installment should stand deferred as per the moratorium announced by the Reserve Bank of India by its Circular dated 27/03/20.
Senior Advocate Dayan Krishnan, who appeared for the Petitioner, informed the court that as per Circular dated 25/03/20 by the Toll Section of MoRTH to NHAI, it was made clear that the closure of highways 'may be taken as force majeure of thetransaction/contract agreement.'
Mr Krishnan also drew court's attention to subsequent liberalisation declared by the RBI Governor by Circular dated April 17, 2020. The new Circular entitled Petitioner's account to restoration of the status-quo ante in respect thereof, as it existed on 1st March, 2020, on which date, it was, admittedly, in the SMA–II Category, the declaration of the petitioner's account as NPA having come into effect only on 31st March, 2020.
Countering these arguments, Mr Ashish Chawla, who appeared for the Respondent Bank, the declaration of the Petitioner's account as NPA, is an automated procedure, which follows the guidelines issued by the IRAI and that, if paragraph 17 of the Statement made by the Governor of the RBI this morning is to be accorded a literal interpretation, it would fly in the face of the said guidelines.
Mr Chawla further submitted that the NHAI's Circular dated 25/03/20 will have no application in the present case as amounts were due from the Petitioner as far back as in December, 2019.
Therefore, Mr Chawla argued, that even if the benefits of the said Circular were to be extended to the Petitioner, the Petitioner ought to be directed to deposit the amounts due, with the bank within a period of at least one week after the lifting the closure of the Fee Plaza, by the said circular; as thereafter the force majeure condition would cease to operate.
However, Mr Krishnan countered this submission of making payment within one week of opening of operations, by reiterating that the latest RBI Circular does not make the freezing of the status of the account, as on 1st March, 2020, subject to any payment.
While giving its order, the court applied the directions given by its coordinate bench in the case of Anant Raj Limited. The court noted that in the said case the Petitioner himself had promised to pay the installments within one week of resuming operations, the said promise is absent in the present case.
However, the court observed, that despite the absence of such a promise, the court cannot subject the Petitioner in the present case to conditions which are different from the ones granted in the previous case.
Therefore, while the court has made the Petitioner entitled to freezing of the status of the account, a duty has also been placed to pay the installments within a period of 5 weeks post the resuming of the operations.
Click here to download order