In the third instance of a court permitting relief to loan defaulters due to the economic impact of the COVID-19 pandemic, the Delhi High Court has now restrained Punjab & Sind Bank from declaring an educational society’s account a non performing asset.

Delhi-based Shakuntala Educational & Welfare Society (SEWS) had moved the court against Punjab & Sind Bank, seeking relief from its loan being downgraded as an NPA, and to be given relief under RBI’s March 27 moratorium announcement to help borrowers tide over the COVID-19 related economic distress.

SEWS had availed six term loans from the Punjab & Sind Bank , of which four term loans were repaid. SEWS claimed it was making regular payments on the remaining two term loans, until March 2020, when the COVID pandemic set in.

The bank, on its part, argued that the borrower’s loans had fallen due on December 31, 2019 itself and, therefore, the moratorium envisaged by the RBI would not be applicable to defaulters like the petitioner. The RBI moratorium announced on March 27, the bank argued, does not envisage any such moratorium in cases of instalments which had already become due prior to March 1, 2020.

The court has granted a conditional stay on downgrading the borrower as an NPA by Punjab & Sind Bank until the next hearing in May.

This marks the third such instance after the Anant Raj versus Yes Bank case and Transcon Isconia & Transcon Skycity versus ICICI Bank case, where a similar relief was provided by court on declaration of NPA, even though dues were outstanding before the RBI prescribed limit of March 1- May 31, 2020.

Also read: RBI circular on loan moratorium challenged in Supreme Court