Small Scale Industrial Manufactures Association (Regd.) vs Union of India and Others

Disaster Management Act, 2005 – ss.3,6-14, 23, 35-37 – Natural disasters; Pandemic – Plea that there is no National Plan at all therefore, the National Disaster Management Authority failed to perform its duty – Held: Cannot be accepted – There is already a National Disaster Management Plan prepared even prior to the Covid-19 pandemic – Under the National Plan, there is a National Disaster Management Institutional Mechanism – The said plan also envisages nodal ministries for management of different disasters – Disaster due to Covid-19 pandemic would fall under disaster due to “biological emergencies” – Considering the very nature of the pandemic which would have PAN--India impact, empowered groups were constituted by the NDMA – Therefore, when there is already in existence a National Plan, which might have been prepared even prior to the Covid-19 pandemic, it cannot be said that there is no National Plan by the NDMA at all – For every disaster, there shall not be a new National Plan.

Words & Phrases – “may” – Disaster Management Act, 2005 – s.13 –Held: Word used in s.13 is “may” and not “shall” – While interpreting a particular provision, the language used is to be read as it is – The legislature has deliberately used the word “may” -– “may” is used after considering the object and purpose of the Act as a whole and the role to be played by the Central Government through different ministries, by the State Government, by the District Authority at the district level – In the present case, the Ministry of Finance and the RBI have already come out with different packages/reliefs in repayment of loans or grant of fresh loans to the persons affected by disaster – Interpretation of Statutes. Partly allowing the writ petitions, the Court

HELD: 1.1 In catena of decisions and time and again this Court has considered the limited scope of judicial review in economic policy matters. From various decisions of this Court, this Court has consistently observed and held-The Court will not debate academic matters or concern itself with intricacies of trade and commerce; It is neither within the domain of the courts nor the scope of judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether better public policy can be evolved. Nor are the courts inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical. Wisdom and advisability of economic policy are ordinarily not amenable to judicial review; Economic and fiscal regulatory measures are a field where Judges should encroach upon very warily as Judges are not experts in these matters. [Para 14][75-D-F]

1.2 Laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. The function of the Court is to see that lawful authority is not abused but not to appropriate to itself the task entrusted to that authority. The function of the court is not to advise in matters relating to financial and economic policies for which bodies like RBI are fully competent. The court can only strike down some or entire directions issued by the RBI in case the court is satisfied that the directions were wholly unreasonable or in violative of any provisions of the Constitution or any statute. It would be hazardous and risky for the courts to tread an unknown path and should leave such task to the expert bodies. Matters of economic policy ought to be left to the government. What is best in the national economy and in what manner and to what extent the financial reliefs/packages be formulated, offered and implemented is ultimately to be decided by the Government and RBI on the aid and advise of the experts. The same is a matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review. Merely because some class/sector may not be agreeable and/or satisfied with such packages/policy decisions, the courts, in exercise of the power of judicial review, do not ordinarily interfere with the policy decisions, unless such policy could be faulted on the ground of mala fide, arbitrariness, unfairness etc. The correctness of the reasons which prompted the government in decision taking one course of action instead of another is not a matter of concern in judicial review and the court is not the appropriate forum for such investigation. The policy decision must be left to the government as it alone can adopt which policy should be adopted after considering of the points from different angles. In assessing the propriety of the decision of the Government the court cannot interfere even if a second view is possible from that of the government. [Paras 14.1, 14.5, 15, 17][76-G-H; 77-C-D; 78-F-H; 79-B-C]

R.K. Garg v. Union of India (1981) 4 SCC 675 : [1982]

1 SCR 947; Arun Kumar Agrawal v. Union of India (2013) 7 SCC 1 : [2013] 3 SCR 508; Peerless General Finance and Investment Co. Ltd. v. RBI, (1992) 2 SCC

343 : [1992] 1 SCR 406; State of M.P. v. Nandlal Jaiswal, (1986) 4 SCC 566 : [1987] 1 SCR 1; BALCO

Employees’ Union (Regd.) v. Union of India, (2002) 2 SCC 333 : [2001] 5 Suppl. SCR 511; Narmada Bachao Andolan v. Union of India, (2000) 10 SCC 664 : [2000]

4 Suppl. SCR 94; Prag Ice & Oil Mills v. Union of India AIR 1978 SC 1296 : [1978] 3 SCR 293; P.T.R. Exports (Madras) P. Ltd. v. Union of India (1996) 5 SCC 268 : [1996] 2 Suppl. SCR 662 – relied on.

Metropolis Theatre Co. v. Chicago, 57 L Ed 730 : 228 US 61 (1913) – referred to.

1.3 Legality of the policy, and not the wisdom or soundness of the policy, is the subject of judicial review. The scope of judicial review of the governmental policy is now well defined. The courts do not and cannot act as an appellate authority examining the correctness, stability and appropriateness of a policy, nor are the courts advisers to the executives on matters of policy which the executives are entitled to formulate. Government has to decide its own priorities and relief to the different sectors. It cannot be disputed that pandemic affected the entire country and barring few of the sectors. However, at the same time, the Government is required to take various measures in different fields/sectors like public health, employment, providing food and shelter to the common people/migrants, transportation of migrants etc. and therefore, as such, the government has announced various financial packages/reliefs. Even the government also suffered due to lockdown, due to unprecedented covid-19 pandemic and also even lost the revenue in the form of GST. Still, the Government seems to have come out with various reliefs/packages. Government has its own financial constraints. Therefore, as such, no writ of mandamus can be issued directing the Government/RBI to announce/declare particular relief packages and/or to declare a particular policy, more particularly when many complex issues will arise in the field of economy and what will be the overall effect on the economy of the country for which the courts do not have any expertise and which shall be left to the Government and the RBI to announce the relief packages/economic policy in the form of reliefs on the basis of the advice of the experts. Therefore, no writ of mandamus can be issued. [Paras 18, 19][79D-H; 80-A]

1.4 No State or country can have unlimited resources to spend on any of its projects. That is why it only announces the financial reliefs/packages to the extent it is feasible. The court would not interfere with any opinion formed by the Government if it is based on the relevant facts and circumstances or based on expert advice. When Government forms its policy, it is based on a number of circumstances on facts, law including constraints based on its resources. It is also based on expert opinion. It would be dangerous if court is asked to test the utility, beneficial effect of the policy or its appraisal based on facts set out on affidavits. No right could be absolute in a welfare State. Man is a social animal. He cannot live without the cooperation of a large number of persons. Every article one uses is the contribution of many. Hence every individual right has to give way to the right of the public at large. Not every fundamental right under Part III of the Constitution is absolute and it is to be within permissible reasonable restriction. This principal equally applies when there is any constraint on the health budget on account of financial stringencies. It is the cardinal principle that it is not within the legitimate domain of the court to determine whether a particular policy decision can be served better by adopting any policy different from what has been laid down and to strike down as unreasonable merely on the ground that the policy enunciated does not meet with the approval of the court in regard to its efficaciousness for implementation of the object and purpose of such policy decision. Whether there shall be a waiver of interest during the moratorium period or whether there shall be sectorwise relief packages and/or RBI should have issued directions which are sector specific and addressing such sector specific issues and/or whether the moratorium period should be extended beyond 31.08.2020 or the last date for invocation of the resolution mechanism, namely, 31.12.2020 provided in the 6.8.2020 circular should be extended are all in the realm of the policy decisions. Not only that, if such reliefs are granted, it would seriously affect the banking sectors and it would have far-reaching financial implications on the economy of the country. [Paras 20-22][80-BD-G, H; 81-A-B]

1.5 Now so far as the relief sought of waiver of interest during the moratorium period is concerned, it is required to be noted that the bankers/lenders have to pay the interest to the depositors and their liability to pay the interest on the deposits continue even during the moratorium period. There shall be administrative expenses also required to be borne by the bankers/lenders. Continue payment of interest to depositors is not only one of the most essential banking activities but it shall be a huge responsibility owed by the banks to crores and crores of small depositors, pensioners etc. surviving on the interest from their deposits. There may be several welfare funds schemes, category specific and sector specific which might be surviving and are implemented on the strength of the interest generated from their deposits. All such welfare funds would depend on the income generated from their deposits for the survival of their members. Therefore, to grant such a relief of total waiver of interest during the moratorium period would have a far-reaching financial implication in the economy of the country as well as the lenders/banks. Therefore, when a conscious decision has been taken not to waive the interest during the moratorium period and a policy decision has been taken to give relief to the borrowers by deferring the payment of installments and so many other reliefs are offered by the RBI and thereafter by the bankers independently considering the Report submitted by Kamath Committee consisting of experts, the interference of the court is not called for. [Para 23][81-C-F]

1.6 Now so far as the submission on behalf of the petitioners that the RBI should have issued directions which are sector specific and addressing such sector specific issues is concerned, at the outset, it is required to be noted that as such the Committee headed by Shri K.V. Kamath had gone into such sector specific issues and gave its recommendations. The recommendations of the Kamath Committee have been substantially accepted by the RBI in its circular dated 7.9.2020 which provides for separate threshold for 26 sectors including power, real estate and construction. Even otherwise, it is required to be noted that every sector might have suffered differently and therefore it will not be possible to provide sector specific/sector-wise reliefs. The petitioners cannot pray for sector specific relief by either waiver of interest or restructuring by way of present proceedings under Article 32 of the Constitution of India and the question of such financial stress management measures requires examination and consideration of several financial parameters and its impact. Now so far as the submission on behalf of the petitioners that as per the notifications/circulars/reliefs offered by the RBI and/or Finance Department of the Union of India ultimately it is left to the bankers and it should not have been left to the bankers and the Government/RBI must intervene and provide further reliefs is concerned, at the outset, it is required to be noted that as such the bankers are commercial entities and since the customer profile, organizational structure and spread of each lending institution is widely different from others, each lending institution is best placed to assess the requirements of its customers and therefore, the discretion was left to the lending institutions concerned. Any borrowing arrangement is a commercial contract between the lender and the borrower. RBI and/or the Union of India can provide for broad guidelines while recommending to give the reliefs. [Paras 24, 25][81-G-H; 82-A-E]

1.7 Now so far as the submission on behalf of the petitioners that the relief packages which are offered by the UOI/RBI/Bankers/Lenders are not sufficient and some better and/or more reliefs should be offered is concerned, it is not within the judicial scope of the courts to issue such directions. No mandamus can be issued to grant some more reliefs/packages. The court cannot interfere with the economic policy decisions on the ground that either they are not sufficient or efficacious and/or some more reliefs should have been granted. The Government might have their own priorities and the Government has to spend in various fields and in the present case like health, medicine, providing food etc. Even as per the case of the Union of India and so stated in the counter filed on behalf of the Union of India and the RBI, so many policies have been announced to mitigate the impact of Covid-19 pandemic. While offering the financial relief packages, the financial constraint and/or financial burden on the government is also required to be considered and borne in mind, which can be considered by the experts and the government and the courts have not expertise to assess the financial burden. From the various steps/measures/policy decisions/packages declared by the Union of India/RBI and the bankers, it cannot be said that the UOI and/or the RBI have not at all addressed the issues related to the impact of Covid-19 on the borrowers. As such, none of the petitioners have specifically challenged the various circulars/policy decisions taken by the UOI/RBI. The borrowers want something more than the reliefs announced. Merely, since the reliefs announced by the UOI/RBI ither may not be suiting the desires of the borrowers, the reliefs/policy decisions related to Covid-19 cannot be said to be arbitrary and/or violative of Article 14 of the Constitution of India. It cannot be said that any of the fundamental rights guaranteed under the Constitution are infringed and/or violated. Economic decisions are required to be taken keeping the larger economic scenario in mind. [Para 26][82F-H; 83-E-H]

1.8 Similarly, the relief sought that the moratorium period should be extended and/or the last date for invocation of the resolution mechanism namely 31.12.2020 provided under the 06.08.2020 circular should be extended are all in the realm of policy decisions. Even otherwise, almost five months were available to eligible borrowers when circular dated 6.8.2020 was notified providing for a separate resolution mechanism for Covid19 related stressed assets. Therefore, sufficient time was given to invoke the resolution mechanism. Therefore, the petitioners shall not be entitled to any reliefs, namely, (i) total waiver of interest during the moratorium period; (ii) to extend the period of moratorium; (iii) to extend the period for invocation of the resolution mechanism, namely 31.12.2020 provided under the 6.8.2020 circular; (iv) that there shall be sector-wise reliefs provided by the RBI; and (v) that the Central Government/RBI must provide for some further reliefs over and above the relief packages already offered which can be said to be in the realm of the economic policy decisions and for the reasons stated hereinabove and as observed hereinabove granting of any such reliefs would have a far reaching financial implication on the economy of the country. It appears, whatever best can be offered has been offered for the different fields and to the common people as well as those persons who are affected due to Covid-19 pandemic. [Para 27][84-A-F]

2.1 On conjoint reading of the relevant provisions of the DMA 2005, it cannot be said that the functions of all the Ministries are to be discharged by the NDMA which should take decision qua the area in each Ministry. It also cannot be said that the functions of the Ministries will stand transferred to the NDMA and will have to be discharged by the NDMA either directly or indirectly for the purpose of disaster management. Various Ministries under the Central Government have to take various relief measures within their respective spheres for remedying the effects of the disaster. From the pleadings, it is borne out that in fact there is already a National Disaster Management Plan prepared even prior to the Covid-19 pandemic. Under the National Plan, there is a National Disaster Management Institutional Mechanism, which is reproduced hereinabove. The said plan also envisages nodal ministries for management of different disasters. For example, if the disaster is due to drought, Ministry of Agriculture and Farmers Welfare would be the nodal agency; if the disaster is due to floods, Ministry of Housing and Urban Affairs would be the nodal agency and if the disaster is due to “biological emergencies”, the Ministry of Health and Welfare would be the nodal agency. The disaster due to Covid-19 pandemic would fall under disaster due to “biological emergencies”. However, it appears that Covid-19 pandemic disaster is of such a nature that it could not be confined to one nodal ministry and whatever measures/reliefs are required to be taken/given are provided by every Ministry in each and every day needed. Therefore, various reliefs/packages are provided by different Ministries, such as, Ministry of Railways, Ministry of Finance, Ministry of Health and Family Welfare etc. It also appears that even considering the very nature of the pandemic which would have PAN-India impact, empowered groups were constituted by the National Disaster Management Authority. Therefore, when there is already in existence a National Plan, which might have been prepared even prior to the Covid-19 pandemic, it cannot be said that there is no National Plan by the NDMA at all. National Plan would be for a long term and even with respect to disaster to happen in future. For every disaster, there shall not be a new National Plan. National Plan would be comprehensive in nature which is already there in existence. Therefore, the submission that there is no National Plan at all and therefore the NDMA has failed to perform its duty cannot be accepted. [Para 29][90-D-H; 91-A-D]

2.2 Now so far as the submission on behalf of the petitioners that the NDMA has failed to perform its duty cast under Section

13 is concerned, at the outset, it is required to be noted that the word used in Section 13 is “may” and not “shall”. As per the settled proposition of law, while interpreting a particular provision, the language used is to be read as it is. On a fair reading of Section 13, it appears that the legislature has deliberately used the word “may”. This “may” is used after considering the object and purpose of the Act as a whole as well as the role to be placed by the Central Government through different ministries, role to be placed by the State Government, role to be played by the District Authority at the district level. In the present case, the Ministry of Finance and the RBI have already come out with different packages/reliefs in repayment of loans or grant of fresh loans to the persons affected by disaster. Even the Central Government through Ministry of Finance and the RBI has taken various steps for granting reliefs to the disaster affected borrowers. The Central Government has also come out with a new definition of MSMEs for improving turnover caps for better access of schemes/benefits. There are other reliefs also announced by the Central Government. The Central Government has also declared the moratorium from March to August, 2020. The proceedings under the IBC are also suspended during the moratorium period. As per the provisions of the DMA 2005, the responsibilities and functions of the discharge of functions by the NDMA would be confined to Section 6 of the Act. However, on-ground disaster management and relief measures shall have to be undertaken by the Central Ministries and the State Government Ministries depending upon the need of the disaster and only in a case where the NDMA is satisfied that the reliefs which are already announced are not sufficient and/or no steps are taken at all with respect to the reliefs mentioned in Section 13, the National Authority may recommend the reliefs in repayment of loans etc. Therefore, it cannot be said that the National Authority has failed to perform its duty as cast under Section 13 of the Act. It is required to be noted and so stated in the affidavit dated 31.08.2020 filed on behalf of the Union of India that NDMA also took cognizance of the issues being dealt with by the RBI and sent its “views and recommendations” given by O.M. dated 28.08.2020 and the NDMA also opined that RBI may consider granting further reliefs, as deemed appropriate, after considering and taking into account the financial relief packages issued by the Ministry of Finance, as well as, other relief measures that have already been issued/declared by the RBI itself. The “views and recommendations” of the NDMA were communicated to the RBI vide letter dated 31.08.2020. Therefore, it cannot be said that the NDMA has not stepped into at all. It is to be noted that even as per Section 13 of the Act, the National Authority “may” and “recommend” relief in repayment of loans or grant of fresh loans to the persons affected by disaster on such concessional terms as may be appropriate. Thereafter, as per the “views and recommendations” of the NDMA, RBI has come out with Resolution framework and on the basis of the same the lenders/bankers after getting the approval of their Board of Directors have come out with the policies. Thus, from the above, it cannot be said that NDMA has failed to perform its duty cast under Section 13 of the Act. From the above, it also cannot be said that there is no National Plan in existence at all. [Paras 30, 301.1-30.3][91-D-H; 92-A-E; 93-B]

2.3 There is no justification shown to restrict the relief of not charging interest on interest with respect to the loans up to Rs. 2 crores only and that too restricted to the categories as enumerated. What are the basis to restrict it to Rs. 2 crores are not forthcoming. Therefore, as such, there is no rational to restrict such relief with respect to loans up to Rs. 2 crores only. Even otherwise, it is required to be noted that the scheme dated 23.10.2020 granting relief/benefit of waiver of compound interest/interest on interest contains eligibility criteria and it provides that any borrower whose aggregate of all facilities with lending institution is more than Rs. 2 crores (sanctioned limit or outstanding amount) will not be eligible for ex-gratia payment under the said scheme. Therefore, if the total exposure of the loan at the grant of the sanction is more than Rs. 2 crores, the borrower will be ineligible irrespective of the actual outstanding. For Example, if the borrower has been sanctioned a loan of Rs. 5 crores and has availed of the same, even though he might have repaid substantially bringing down the principal amount of less than Rs. 2 crores as on 29.02.2020, but because of the sanction of the loan amount of more than Rs. 2 crores, he will be ineligible. It also further provides that the outstanding amount should not be exceeded to Rs. 2 crores and for this purpose aggregate of all facilities with the lending institution will be reckoned. Therefore, if a borrower, for example, MSME Category has availed and has outstanding of business loan of Rs. 1.99 crores and also has dues of its credit card of Rs. 1.10 lakhs, thereby making the aggregate to Rs. 2.10 crores, it stands ineligible. Therefore, the aforesaid conditions would be arbitrary and discriminatory. Even otherwise, it is required to be noted that compound interest/interest on interest shall be chargeable on deliberate/willful default by the borrower to pay the installments due and payable. Therefore, it is in the nature of a penal interest. By notification dated 27.03.2020, the Government has provided the deferment of the installments due and payable during the moratorium period. Once the payment of installment is deferred as per circular dated 27.03.2020, non-payment of the installment during the moratorium period cannot be said to be willful and therefore there is no justification to charge the interest on interest/compound interest/penal interest for the period during the moratorium. The present petitions seeking reliefs, namely, (i) total waiver of interest during the moratorium period; (ii)to extend the period of moratorium;

(iii) to extend the period for invocation of the resolution mechanism, namely 31.12.2020 provided under the 6.8.2020 circular; (iv)that there shall be sector-wise reliefs provided by the RBI; and (v) that the Central Government/RBI must provide for some further reliefs over and above the relief packages already offered stand dismissed. However, it is directed that there shall not be any charge of interest on interest/compound interest/penal interest for the period during the moratorium and any amount already recovered under the same head, namely, interest on interest/penal interest/compound interest shall be refunded to the concerned borrowers and to be given credit/adjusted in the next instalment of the loan account. All these petitions are partly allowed to the aforesaid extent only and as observed for the reliefs, the petitions are dismissed. Interim relief granted earlier not to declare the accounts of respective borrowers as NPA vacated. [Paras 31, 31.1, 32][93-F-H; 94-A-E, G-H; 95-A-C]

Charan Lal Sahu v. Union of India, (1990) 1 SCC 613 : [1989] 2 Suppl. SCR 597; Union Carbide Corporation Limited v. Union of India, (1991) 4 SCC 584 : [1991] 1 Suppl. SCR 251; Kailash Chand Sharma v. State of Rajasthan, (2002) 6 SCC 562 : [2002] 1 Suppl. SCR 317; M. Nagaraj v. Union of India, (2006) 8 SCC 212 : [2006] 7 Suppl. SCR 336; Rattan Arya v. State of T.N. (1986) 3 SCC 385 : [1986] 2 SCR 596; State of W.B. v. Anwar Ali Sarkar [1952] SCR 284 : AIR 1952 SC 75; D.S. Nakara v. Union of India, (1983) 1 SCC 305 : [1983] 2 SCR 165; Roop Chandra Adlakha v. Delhi Development Authority, 1989 Supp. (1) SCC 116 : [1988] 3 Suppl. SCR 253; T.N. Godavarman

Thirumulkpad v. Union of India (1997) 2 SCC 267 : [1996] 9 Suppl. SCR 982; Pradip Kumar Maity v. Chinmoy Kumar Bhunia (2013) 11 SCC 122 : [2013] 7 SCR 117; Chinnamarkathian v. Ayyavoo (1982) 1 SCC

159 : [1982] 2 SCR 146; Official Liquidator v. Dharti Dhan (P) Ltd. (1977) 2 SCC 166 : [1977] 2 SCR 964; Bachahan Devi v. Nagar Nigam, Gorakhpur (2008) 12 SCC 372 : [2008] 2 SCR 424; Delhi Administration v. Umrao Singh (2012) 1 SCC 194 : [2011] 11 SCR 838; Union of India v. Kumho Petrochemicals Co. Ltd. (2017)

8 SCC 307 : [2017] 4 SCR 324; Federation of Railway Officers Association v. Union of India (2003) 4 SCC

289 : [2003] 2 SCR 1085; Dhampur Sugar (Kashipur) Ltd. v. State of Uttaranchal, (2007) 8 SCC 418 : [2007]

10 SCR 199; Dalmia Cement (Bharat) Ltd. v. Union of India (1996) 10 SCC 104 : [1996] 1 Suppl. SCR 825; Villianur Iyarkkai Padukappu Maiyam v., Union of India (2009) 7 SCC 561 : [2009] 9 SCR 225; Shri Sitaram Sugar Co. Ltd. v. Union of India (1990) 3 SCC 223 : [1990] 1 SCR 909 – referred to.