A recent judgement in the case of Zee Learn Vs UTI Asset Management has upheld that RBI’s moratorium scheme cannot be applied to mutual funds and debentures.

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Zee Learn, the petitioner, had defaulted on a payment of Rs 44 cr to UTI Asset Management under a debenture deed, which was to be redeemed on July 8, 2020. In its writ petition filed at the Bombay High Court, Zee Learn claimed the default occurred due to COVID-19 related challenges. It also sought an extension of the redemption date to three months after the government allowed schools to fully open.

Zee Learn’s counsel had argued in court that although Reserve Bank of India’s March 27 and May 23 moratorium did not refer to mutual funds or debentures, the principles behind the circulars should be extended to the petitioner.

UTI Asset Management Company opposed the claim, submitting that Zee Learn had defaulted in its repayments as early as July 2019, far before the spread of the COVID-19 in India. UTI also argued that RBI’s directions in the matter were not applicable to debentures and mutual funds. It also stated that more than 21,000-odd small investors were required to be repaid by Zee Lean for the debentures they held. Therefore, any relief granted to them would impact all the 21,000-odd small investors.

The two-judge bench comprising of Justice RD Dhanuka and Justice VG Bisht ruled in favour of UTI Asset Management Company, and directed Zee Learn to make good on the default.

The order read, “The entire Petition is based on the reliance placed on the moratoriums dated 27th March, 2020 and 23rd May, 2020 issued by Reserve Bank of India. A perusal of the said circular clearly indicates that it applies to all Commercial Banks, all Primary (Urban) Co-operative Banks, States Co-operative Banks, District Central Cooperative Banks, All India Financial Institutions, All Non-Banking Financial Companies and also deals with terms loans and working capital facilities provided by those entities. It is clearly beyond reasonable doubt that those two circulars would not apply in case of mutual funds and debentures. In our view the reliance placed by the petitioner on those two circulars for the purpose of availing benefits under those two circulars is misplaced. None of these circulars would apply to the facts of this case. The concession provided under those two circulars cannot be availed by the petitioner.”