Lockdown period to be excluded while computing 90 days for NPA: Bombay HC

A Mumbai based company can now let out a sigh of relief as the Bombay High Court announced that the duration of the lockdown is to be excluded while calculating 90 days for the declaration of non-performing assets (NPAs).

This significant decision came after a petition was filed by Transcon Iconica, that had taken a loan from ICICI Bank, and twice failed to make  the payments - January 15 and February 15 - and the loan has not been paid till now.

As per notifications and circulars of the Reserve Bank of India (RBI, in case of a failure of payment and in an instance where the accounts are not regularised within 90 days of the date of default, the borrower's account gets classified as NPAs or non performing assets. However, before the completion of this period, the 21-day nationwide lockdown was announced. The RBI also stated the moratorium on loan payments, which would start from March 1 to May 31.

The single judge bench headed by Justice G.S. Patel ruled that the duration 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.

"As currently advised, therefore, the period of March 1 until May 31 during which there is a lockdown will stand excluded from the 90-day NPA declaration computation until -- and this is the condition -- the lockdown is lifted", said the High Court.

The court also specified that irrespective of the continuance of the moratorium until May 31, if the lockdown happens to be lifted at an earlier date, then this protection available to the petitioners will cease on the date the lockdown has been ended and the computing and reckoning of the remainder of the 90-day period will start from that earlier lifting of the lockdown-ending date.

The Bombay High Court made it clear that this ruling will not serve as a precedent for any other case pertaining to any other borrower who is in default or any other bank. Each of these cases will have to be assessed on their own merits, it said.

The Mumbai based construction company moved to the court seeking moratorium period to be "excluded even for the computation of any balance days of the NPA-declaration 90-day period,” after the RBI issued a circular giving liberty to all banks to allow a moratorium of three months on payment of instalments outstanding as on March 1.

Justice Patel clarified this order is not a backward extension of the moratorium to January 2020. "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. This is the only way to harmonise the present requirements of both sides," observed the court.