State cannot enrich itself during Health Emergency: Plea in Supreme Court to waive off Interest on 3 Months Moratorium on Loans by Banks

A petition has been filed in the Supreme Court seeking a direction to the Government of India and RBI to waive off the accrued interest on term loans during the moratorium period of March 2020 to May 2020.The plea states that “State cannot enrich itself nor permit anyone to enrich from the unfortunate situation by charging interest for moratorium period.”.After the COVID-19 outbreak struck India and impacted the economy of the country, a Circular dated March 27 was issued by RBI to all Banks and Financial Institutions to the extent that it provided that interest shall accrue on the outstanding portion of the term loans during the moratorium period (March 2020 to Mary 2020), however, the EMIs for these months could be paid in the month of June.Advocate and Activist Amit Sahni has moved the top court to set aside the March 27 Circular in a way so that the cumulative EMIs to be paid in June is not waived off but the interest to accrue during the moratorium period is not deducted..Petitioner respectfully submits that the petition does not stress that the EMIs for moratorium should be waived but the relief required is that there should be no interest upon the EMIs (not paid) during the moratorium period.Plea in Supreme Court.The plea maintains that though moratorium is a legal authorization to debtors to postpone payment, as announced by the RBI, however it “is an eyewash as it provides that the interest shall be chargeable during the moratorium period and that the accumulated accrued interest shall be recovered immediately after the completion of Moratorium Period.”.Sahni states that it is indeed a settled proposition that financial policy decisions should ordinarily not be interfered with by the Courts while exercising its powers under Writ Jurisdiction but “under the State of Health Emergency, the Government and RBI are under obligation to act as a Welfare State and to extend benefit to all its citizen.”Charting down examples as to how the scheme proposed by RBI would impact consumers, Sahni states:Impact on auto loan:For a loan of Rs 6 lakh with a remaining maturity of 54 months, the additional interest payable would be Rs 19,000 nearly equal to an additional 1.5 EMIs.Impact on home loan:For a loan of Rs 30 lakh with a remaining maturity of 15 years, the net additional interest would be nearly Rs 2.34 lakh equal to 8 EMIs..Thereby, the petitioner urges the Court stating that the “state cannot enrich itself or permit any other organization or institution to be enriched particularly when it is dealing with an Emergency”, and that “it would not be fair to permit Banks/Financial Institutions to charge interest on the outstanding amount for the Moratorium Period, when citizens cannot work to comply the Government’s instructions and are compulsorily incapacitated to generate funds.”.The plea, apart from praying for the setting aside of the Circular to the extent it provides that the interest shall accrue on the outstanding portion of the term loans during the moratorium period in the larger public interest, also prays for extension of the Moratorium period.