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SC disposes of plea seeking waiver of interest on interest during the loan moratorium period [Read Judgment]

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New Delhi (ILNS): The Supreme Court today has disposed of the petition filed by Gajendra Sharma seeking waiver of Interest on interest during the Loan Moratorium period declared by Centre owing to COVID 19 pandemic. 

A three-judge bench of Justices Ashok Bhushan, R. Subhash Reddy & M. R. Shah has said the pandemic of COVID-19 has not only caused serious threat to the health of the people but also cast its shadow on the economic growth of the Country as well as other countries in the entire world. Due to the lockdown imposed by the GOI in exercise of powers under the Disaster Management Act, 2005, there can be no denial that most of the businesses including private sector as well as public sector have been adversely affected, it noted. 

The Government in view of the pandemic has provided loan moratorium facilities initially for three months starting from 27/03/2020 and which was extended till August 31, in order to provide relief to the people. 

The petition filed before the Supreme Court stated that the imposition of the interest during the moratorium period is ultra vires and shall defeat the purpose of permitting the moratorium of loans. The petition had been filed by Gajendra Sharma who had availed housing loan of Rs 38 Lakh approx from ICICI Bank. He contended that RBIs notification dated Mar 27, 2020 made it clear that interest shall continue to accrue on the outstanding portion of the term loan during the moratorium period. He averred in his petition, the said contention of the RBI is completely devastating and cause hindrance and obstruction in the Right to Life guaranteed by Article 21 of the Constitution. He said that the additional Interest burden for three months moratorium period is also equally divided in all future EMIs which is to increase the monthly bill of the Customer. 

The Supreme Court had issued notice to Central Government and sought their replies. In the affidavit filed by the Central Government the Apex Court was informed that they have chosen to waive off the interest during the loan moratorium period. In its affidavit dated 23/10/2020 the Centre informed the Court that in order to provide reliefs for the COVID-19 pandemic waiver of interest upto Rs.2 Crores in eight categories has been approved by the Union Cabinet.

The Central Government had submitted before the Supreme Court that,

“it is fully conscious of the difficulties faced by the various sectors and the stakeholders of various sectors within the purview of the Ministry of Finance and other Ministries. It is further pleaded that Finance Ministry, after the outbreak of the COVID-19 pandemic globally, has taken several measures of relief dealing with the potential problems faced by several sectors and in several spheres of all financial worlds.”

In its affidavit the Central Government submitted that it took many Policy decisions for granting various reliefs for the Covid pandemic which is a ‘disaster’ within the meaning of the Disaster Management Act, including a policy decision whereby the following borrowers were declared eligible for the benefit of waiver of ‘interest on interest’: (i) MSME loans up to Rs. 2 crore (ii) Education loans up to Rs. 2 crore (iii) Housing loans up to Rs. 2 crore (iv) Consumer durable loans up to Rs. 2 crore (v) Credit card dues up to Rs. 2 crore (vi) Automobile loans up to Rs. 2 crore (vii) Personal loans to professionals up to Rs. 2 crore (viii) Consumption loans up to Rs. 2 crore

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The petitioner has expressed its satisfaction on the measures taken by the Government of India and in view of that the Court has disposed off the plea.

Read Judgment here;


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