Bombay High Court declares calculation of 90days NPA should not include lockdown duration.

In a major relief to a construction firm based in Mumbai, the Bombay High Court said the lockdown duration is to be eliminated when calculating 90 days for the Non-performing Assets (NPAs) declaration.

The High Court’s ruling came on a Transcon Iconica petition that took a loan from ICICI Bank and failed to make payments twice — January 15 and February 15 — and it has not been paid so far.

According to the RBI circulars and notifications if there is no payment made and the accounts are not regularized within 90 days of the default date, then the account of the borrower is listed as NPAs. Yet the lockdown was announced before the end of this time frame. The RBI also declared the moratorium on loan payments, effective from March 1 through May 31.

The single-judge bench led by Justice G.S. Patel noted that to calculate the 90-day NPA declaration period, ICICI Bank would not reckon with the moratorium time during which there is a lockdown.

“Thus, as currently instructed, the duration from 1 March to 31 May during which a lockdown exists would be removed from the 90-day NPA declaration estimate until — and this is the requirement — the lockdown is lifted,” the High Court stated.

The court further noted that regardless of the extension of the moratorium until May 31, if the lockdown is lifted at an earlier date, this protection applicable to the petitioners would end on the day the lockdown is removed, and the calculation and reckoning of the remaining 90-day duration would continue with the earlier lifting of the lockdown end date.

The High Court has explained that, like any other case, this order would not act as a precedent for any other borrower who is in default or any other bank. Each of such situations would have to be judged on its own basis, it added.

After the RBI released a circular granting of liberty to all banks to require a three-month moratorium on payment of outstanding instalments as on March 1, the construction firm moved the court seeking moratorium period to be “excluded even for the calculation of any NPA-declaration balance days 90-day duration.”

Justice Patel explained that this directive is not a backward extension of the January 2020 moratorium. “The moratorium period from 1 March 2020 to 31 May 2020 does not in itself grant the petitioners any new benefits with respect to the previous defaults, i.e. those that happened before 1 March 2020. Accordingly, the petitioners’ relief is co-terminus with the lockdown era, not the announced end of the moratorium. It is the only way the present requirements on both sides can be harmonised,” the court noted.

ICICI bank had, however, questioned the viability of the petition through its counsel Viraag Tulzapurkar.