ECLGS Benefit was to be Granted to Petitioners as their a/c weren’t Classified as NPA till the Time Scheme was in Force | HC

Case Details: Guha Roy Food Joint and Hotel (P.) Ltd. v. State of West Bengal - [2023] 153 taxmann.com 506 (HC-Calcutta)

Judiciary and Counsel Details

• • Moushumi Bhattacharya, J.
  • Mainak Bose, Rupak Ghosh & Mrs Sweta Gandhi, Advs. for the Petitioner.
  • Prantik Garai, Debnath Ghosh, Ms Sudeshna Mazumdar & Ms Sipra Chanda, Advs. for the Respondent.

Facts of the Case

In the instant case, the financial institution/R3 granted a term loan to the petitioner company in 2019 against a mortgage repayable in equated monthly instalments. RBI issued a circular extending a moratorium for 6 months on payment of instalments falling due between 1-3-2020 to 31-8-2020.

The Emergency Credit Line Guarantee Scheme (ECLGS) was floated by the Ministry of Finance to provide 100% guarantee coverage for additional working capital term loans in case of banks and financial institutions and additional term loans in case of NBFCs up to 20% of their outstanding credits as on 29-2-2020, on which date account of borrower have to be standard/regular.

Since, the petitioners made continuous default in payment of instalments of the term loan, R3 classified the account of the petitioners as NPA on 31-3-2021. The petitioners filed an instant writ petition seeking a direction to R3 to grant the benefit of the Emergency Credit Line Guarantee Scheme (ECLGS) to them and praying that it was eligible under the same which was specifically extended to borrowers in the hospitality sector.

High Court Held

It was found that consequent to the circular issued by RBI, the petitioners were granted a moratorium with regard to the repayment of instalments and the said notice reflected that the petitioners’ account were standard on 29-2-2020, which made them eligible under ECLGS.

Thus, the instant writ petition was to be allowed by directing R3 to consider the grant of benefit of ECLGS to the petitioners.

List of Cases Reviewed

• • Olive Tree Retail (P.) Ltd. v. South Indian Bank Ltd. [2023] 150 taxmann.com 397 (Cal.) followed.
  • Central Bank of India v. Ravindra [2002] 36 SCL 1 (SC)
  • Federal Bank Ltd. v. Sagar Thomas [2003] 10 SCC 733
  • Small Scale Industrial Manufacturers Association v. Union of India [2021] 125 taxmann.com 336 (SC) (para 23) distinguished.

List of Cases Referred to

• • Central Bank of India v. Ravindra [2002] 36 SCL 1 (SC) (para 8)
  • Federal Bank Ltd. v. Sagar Thomas [2003] 10 SCC 733 (para 9)
  • Small Scale Industrial Manufacturers Association v. Union of India [2021] 125 taxmann.com 336 (SC) (para 16)
  • Olive Tree Retail (P.) Ltd. v. South Indian Bank Ltd. [2023] 150 taxmann.com 397 (Cal.) (para 23).