Waiver of complete interest and extension of the moratorium not allowed by Supreme Court

The Supreme Court on Tuesday has pronounced its judgment on a batch of pleas related to the six-month loan moratorium period, stating that it cannot allow waiver of complete interest and extension of the moratorium.

The judgment was delivered by a Bench of Justices Ashok Bhushan, R Subhash Reddy, and MR Shah in a batch of petitions filed by companies, individuals, and business associations challenging the decision of the Centre and RBI to charge interest during the moratorium period and restrict waiver of interest on interest to certain categories of borrowers who had availed loans of less than Rs. 2 crore.

The Court partly allowed the petitions which had challenged the decision of the Centre and RBI to restrict waiver of interest on interest to certain categories of borrowers who had availed loans of less than Rs. 2 crores. We are of the opinion that there is no justification for waiving compound interest only on loans of up to Rs 2 crore. There shall be no interest on interest or compensation interest during moratorium period, irrespective of the loan amount. If any such amount has been collected it shall be refunded. However, the Court held that any amount collected as compound interest shall be adjusted to the next installment payable instead of refunding it to the borrower, the Court ruled.

The following prayers made by borrowers were, however, rejected by the top court.

(i)  total waiver of interest during the moratorium period; (ii)  to extend the period of moratorium; (iii) to extend the period for invocation of resolution mechanism; (iv)  prayer for sector wise reliefs provided by RBI; (v)  further reliefs over and above the packages already offered.

The Court in its judgment also underscored that the extent and manner in which economic packages and reliefs are to be provided fall within the scope of the executive and the Court does not have the expertise to deal with the same.