Case Note & Summary
Velankani Information Systems Limited, a company operating an IT park and a five-star hotel in Bengaluru, availed term loans aggregating Rs. 475 crores from HDFC Bank, Federal Bank, and Aditya Birla Housing Finance Limited. The loans were secured by escrow arrangements where lease rentals and hotel revenues were deposited, and EMIs were debited. The accounts were standard and no default existed. Following the outbreak of COVID-19, the Government of India invoked the Disaster Management Act, 2005 on 24.03.2020 and imposed a nationwide lockdown. The Reserve Bank of India (RBI) issued a circular dated 27.03.2020 as part of a regulatory package, permitting banks and financial institutions to grant a three-month moratorium on payment of term loan instalments falling due between 01.03.2020 and 31.05.2020 to ease financial stress. The RBI circular (paras 2, 4, 8) and subsequent FAQs published by the Indian Bank Association indicated that the moratorium was available across the board to all standard asset borrowers without additional paperwork. The petitioner alleged that Respondent Banks arbitrarily denied the moratorium and continued to recover EMIs, causing financial hardship during the lockdown. The petitioner filed a writ petition under Articles 226 and 227 of the Constitution seeking directions to enforce the RBI package, quashing of the banks' decisions, grant of moratorium, reversal of recovered EMIs, and transfer of credits from escrow accounts. The matter was heard and reserved for orders on 01.07.2020, and the order was pronounced on 08.07.2020 via video conference. The judgment text provided is incomplete and does not contain the court's analysis, reasoning, or final decision.
Issue of Consideration
Whether directions should be issued to enforce the RBI regulatory package and quash the banks' communications denying moratorium
Case Details
2020 LawText (KAR) (07) 208
WP No. 6775 of 2020 (GM-RES)
Basava Prabhu Patil (Sr. Counsel) for Ms. Smitha Singh; M.B. Naragund (ASG) and M.N. Kumar (CGC) for R1 & R2; Government Advocate for R3; R.V.S. Naik (Sr. Counsel) for T. Suryanarayana (M/s King and Partridge) for R4; Udaya Holla (Sr. Counsel) for H.N. Vasudevan for R5; Vijay Kumar V for R6; Dyan Chinnappa (Sr. Counsel) for Rawley Muddappa I.P for R7
Velankani Information Systems Limited
Secretary, Ministry of Home Affairs; Secretary, Ministry of Finance; State of Karnataka; Governor, Reserve Bank of India; HDFC Bank Limited; Federal Bank Limited; Aditya Birla Housing Finance Limited
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Nature of Litigation
Writ petition under Articles 226 and 227 of the Constitution seeking enforcement of RBI's COVID-19 regulatory package and quashing of banks' decisions denying moratorium on loan repayments.
Remedy Sought
Directions to enforce RBI circular, grant moratorium, restrain recovery, reverse recovered EMIs, and transfer credits to petitioner's current account.
Filing Reason
Banks denied moratorium as per RBI circular, continued recovery of EMIs, and did not release credits from escrow accounts, causing financial distress during lockdown.
Issues
Whether the RBI circular dated 27.03.2020 providing a three-month moratorium on term loan repayments is mandatory and binding on banks.
Submissions/Arguments
Petitioner contended that the RBI circular dated 27.03.2020 provided a mandatory across-the-board moratorium on all term loans for standard assets, requiring no application, and that banks' denial was unlawful and contrary to the circular and FAQs.
Judgment Excerpts
In respect of all term loans (including agricultural term loans, retail and crop loans), all commercial Banks... are permitted to grant a moratorium of three months on payment of all instalments falling due between March 1st, 2020 and May 31st, 2020.
All term loans... and cash credit / overdraft are eligible to avail the benefits under the package. This is available to all such accounts, which are standard assets as on March 1st 2020. Further, to avoid unnecessary paperwork the facility has been extended across the Board to all the borrowers by extending repayment of term loan installments (includes interest) by 90 days.
Procedural History
The writ petition was filed under Articles 226 and 227. It came up for hearing and was reserved for orders on 01.07.2020. The order was pronounced on 08.07.2020 via video conference.
Acts & Sections
- Constitution of India: Article 226, Article 227
- Disaster Management Act, 2005:
- Banking Regulation Act, 1949:
