HC restrains Punjab and Sind Bank from declaring educational society NPA

The Delhi High Court has restrained the Punjab and Sind Bank from declaring an educational society, which defaulted in repaying loan installments, as a Non-Performing Asset during the nationwide lockdown.

Justice Rekha Palli, who heard the case through video, issued notices to Punjab and Sind Bank and the Reserve Bank of India, seeking their response on the petition filed by Shakuntla Educational and Welfare Society against being declared its account an NPA.

Before listing the matter for May 4, the court told the society it will have to pay the pending installments within one week of the UP government withdrawing its order asking educational institutes to not pressure parents to pay fees during the lockdown.

The society has sought a reprieve of three weeks in paying loan installment due to the lockdown, citing an RBI circular imposing a moratorium of three months in respect of all term loans. It said the institutes run by it were in Uttar Pradesh and the state government has issued a directive prohibiting it from coercing students to pay fees.

The society said it was engaged in the business of technical and higher education and had availed six term loans from the bank to set up institutes.It said it had been making repayments but failed to pay the installment payable on or before March 31.

It assured the court it will pay the installments within a week from the date of withdrawal of the UP government directive.

The plea was opposed by Punjab and Sind bank, which said the default qua installments had already fallen due on December 31, 2019, and the March 31, 2020, deadline was with respect to the loan accounts turning into NPA.

It said since the installment had become due before March 1, the moratorium envisaged by the RBI would not be applicable to the society and the regulatory policy did not provide for deferment of an account being classified as NPA due to the coronavirus pandemic.

The court directed the bank to not declare the society's account NPA till May 4.

"In these circumstances, I am of the view that the petitioner has made out a prima facie case for restraining the respondent (bank) from declaring its two accounts as NPA, when the countrywide lockdown is still continuing.

"Any classification of the petitioner's accounts as NPA would certainly amount to altering the position as existing on March 1, 2020, and,therefore, grave and irreparable loss will be caused to the petitioner, in case, its accounts are declared as NPA, only on account of its failure to pay the installments, which were admittedly payable on or before March 31, 2020, the judge said.