Bombay HC grants interim relief to Transcon Skycity, Transcon Iconica; excludes period of lockdown from 90-day period for NPA calculation

Extending ad-interim relief to Mumbai-based Transcon Skycity and Transcon Iconica, the Bombay High Court has prima facie ruled that the period of lockdown will be excluded while calculating the 90-day period for declaration of an account as a non-performing asset..The order was passed by a Single Judge Bench of Justice GS Patel..The Petitioners, Transcon Skycity Pvt Ltd and Transcon Iconica Pvt Ltd had availed finance facilities from ICICI Bank, which were to be repaid in instalments..However, the Petitioners defaulted on two payments due on January 15, 2020 and February 15, 2020. .The Court was informed that as per the relevant RBI circulars and notifications, if there was a default and the account was not regularised within 90 days of the date of default then the borrower’s account was classified as an NPA. .It was added that mindful of the exigencies arising out of the COVID-19 lockdown, the RBI issued a circular and a press note stating that that there would be a three-month moratorium in regard to the repayments and classifications as NPAs, starting March 1..The grievance of the Petitioners before the High Court was that ICICI Bank had not responded to the Petitioners’ requests for extending the moratorium for its loan accounts..The Petitioners contended that the moratorium period must be excluded even for the computation of any balance days of the NPA-declaration, otherwise, the moratorium itself would be meaningless..Reliance was placed on a Delhi High Court order passed in the case of Anant Raj Ltd vs Yes Bank..Yes Bank could not have classified a firm as Non-Performing Asset for failing to pay loan instalment due to COVID-19 crisis: Delhi HC.ICICI Bank challenged the maintainability of the writ petitions against it and argued that the Court should be slow in extending any such relief by an ad-interim order that may be construed to apply across the board..After considering the submissions made by the parties, the Court stated that the question was whether the moratorium period ordered by RBI was excluded in the computation of the 90-day period for amounts that fell due prior to March 1, 2020 and which remain unpaid or in default..Leaving the issue of maintainability of the writ petition open, the Court opined,"What needs to be done is to fashion a workable order limited to the facts of this particular case ensuring that it sets no precedent for ICICI Bank in other cases and yet ensuring that the Petitioners have enough latitude to be able to service their debt..".Thus, in view of the facts of this case, and recognizing the need to sufficiently protect the interests of both sides, the Court prima facie ordered that the period of the moratorium during which there is a lockdown will not be reckoned by ICICI Bank for the purposes of computation of the 90-day NPA declaration period..If the lockdown extends beyond May 31, 2020 then these days will be deferred accordingly, irrespective of whether the moratorium itself is extended beyond May 31, 2020, the Court stated..It added that in case the lockdown is lifted before May 31, 2020, the Petitioners will have 15 days after the ending of the lockdown to regularize the payment under the first instalment and a further three weeks thereafter to regularize the payment under the second instalment..The Court nontheless clarified,.To be abundantly clear about these provisions: this order is therefore not a backward extension of the moratorium to January 2020. It is predicated on, and only on, the current lockdown period which makes normal functioning impossible. The moratorium period of 1st March 2020 to 31st May 2020 does not per se give the Petitioners any additional benefits in regard to the prior defaults, i.e. those that occurred before 1st March 2020. Thus, the relief to the Petitioners is co-terminus with the lockdown period, not the declared end of the moratorium.Bombay High Court.The Court added that neither would ICICI Bank be held accountable or liable for these extensions, nor would the order serve as a precedent for any other borrower who is in default. .Each of these cases will have to be assessed on their own merits, the Court said..Dr. Birendra Saraf, Senior Advocate and DSK Legal team comprising of Samit Shukla, Associate Partner; Saloni Shah, Associate and Shivani Khanwilkar, Associate with Advocates Munaf Virjee, Rushabh Parekh and Akash Agarwal appeared for the Petitioners i.e. Transcon Skycity and Transcon Iconica..Senior Advocate Viraag Tulzapurkar with Advocates Bindi Dave, Ieshan Sinha, Aayesh Gandhim, Dhruvi Mehta from Wadia Ghandy & Co..Read the Order: