The Supreme Court on Tuesday rejected the plea's by various sectors seeking extension of loan moratorium and other reliefs in view of the COVID-19 pandemic.
The Court observed that complete waiver of interest cannot be granted during the loan moratorium period and that no sector specific relief(s) can be granted by the Court.
On the issue of interest on interest, Court held that no borrower shall be charged compounding interest during moratorium period and that whatever amount of interest of interest has been charged, unless the same is wilful default, shall be adjusted in the next instalment.
"Interest on Interest is in the nature of penal interest. No justification has been given to charge penal interest during the lockdown period. Amount recovered in the form of interest on interest will be refunded"
- Supreme Court
The Top Court rejected the contention advanced by Senior Advocate Kapil Sibal that no National plan was put in place by the Government during the pandemic to handle the financial implications and that it would be incorrect to say that all ministries functions will be transferred to the NDMA under the Disaster Management Act.
Court further noted that the matters of financial and fiscal policy were not to be decided upon by the Court.
"Courts are not to strike down an economic policy and fiscal policy is a field which judges must tread upon warningly as judges are not experts in this field. Policy Matters must be discussed by the government in consultation with RBI & experts. Economic and fiscal policy measures are not a matter of judicial review and decision should be left with the government. Court cannot interfere even if a second view is possible. Scope of judicial review of government policy is defined. Courts are not advisors on government policies. It cannot be disputed that the pandemic affected various sectors but the Government announced relief packages for this regard. Even the Government suffered during the pandemic," the bench noted.
A bench headed by Justice Ashok Bhushan had reserved its verdict on the batch of pleas on December 17, 2021 after extensively hearing arguments from various stakeholders.
The Centre had earlier submitted before the top court that if it were to consider waiving interest on all the loans and advances to all categories of borrowers, it could lead to foregoing of over 6 lac crore, also leading to substantially wiping out the net worth of the banks concerned.