Lockdown Period to be Excluded for Declaration of NPA

In the matters of Transcon Skycity Pvt. Ltd v. ICICI Bank & Ors and Transcon Iconica Pvt. Ltd. v. ICICI Bank & Ors, the High Court of Bombay held that the period of lockdown will be excluded while calculating the ninety (90) day period for declaration of an account to be a non-performing asset (“NPA”).

FACTS

The Petitioners had availed finance facilities from ICICI Bank, which were to be paid in instalments. However, the Petitioners defaulted in making two instalments, namely on January 15, 2020 and February 15, 2020.

Now in terms of the existing RBI circulars, if a borrower is in default account for a period of ninety (90) days, then such account of the borrower is to be classified as an NPA. In order to prevent the classification of their accounts as NPA, the Petitioners wrote to the Respondents, referencing the Reserve Bank of India (“RBI”) Regulatory Package dated March 27, 2020 and requested the Respondents, not to include the lockdown period for the purpose determining / classifying its account, as a NPA.

ISSUE

If the borrower is already in default prior to the commencement of moratorium period, i.e. March 01, 2020, will the moratorium period be excluded for the purpose of computation of the ninety (90) day period for declaration of NPA?

JUDGEMENT

The High Court of Bombay held that the period of the moratorium during which there is a lockdown will not be reckoned by ICICI Bank for the purposes of computation of the ninety (90) day period for declaration of NPA. Further it held that:

  • If lockdown is lifted before May 31, 2020, the Petitioners will have fifteen (15) days from the end of lockdown to regularize the payment under the first instalment which was due on January 15, 2020 and three (3) weeks to regularize the payment under the second instalment which was due on February 15, 2020.
  • The relief granted to the Petitioners is only for the duration of the lockdown. It is not granted for the entire moratorium period (March 01, 2020 – May 31, 2020).
  • This case would not serve as a precedent for other borrowers who are in default, and each case will be assessed on its merit.