Home >News >India >SEBI calls CREDAI's plea on moratorium clarification a 'proxy litigation'
Securities and Exchange board of India. (Photo: Reuters)
Securities and Exchange board of India. (Photo: Reuters)

SEBI calls CREDAI's plea on moratorium clarification a 'proxy litigation'

Credai had filed a plea in the Apex court on 12 May seeking clarification on whether the notification made it mandatory for all NBFC to be eligible for loan moratorium or the bank could use its discretion to grant this benefit

The Securities and Exchange Board of India (SEBI) in an affidavit filed in Supreme court has alleged that the plea filed by the Confederation of Real Estate Developers Association of India (Credai) on RBI granted moratorium appears to be a “proxy litigation" and claims it to be abusing the process of the Apex court.

Credai had filed a plea in the Apex court on 12 May seeking clarification on whether the notification made it mandatory for all non-banking finance companies (NBFC) to be eligible for loan moratorium or the bank could use its discretion to grant this benefit.

As per SEBI, CREDAI is contending on behalf of NBFCs/HFCs, assuming robust NBFCs/HFCs can lend to real estate industry in future, and no concerns are raised regarding the current obligations of real estate industry towards Mutual Funds. Thus, the present petition is liable to be dismissed on this ground alone, the reply states.

Additionally, the reply also states that not only the Real Estate sector but almost all the industries in India have been suffering due to pandemic COVID-19 and as a result of this, it does not imply that all kinds of loan and contractual transactions are to be put to under moratorium. SEBI submitted that RBI under its power had issued Circular dated 27.03.2020 and statement dated May 22, 2020 thereby giving an option to Banks and Financial Institutions to offer moratorium to its customers, and simultaneous to that, the Government of India, Ministry of Finance and Reserve Bank of India have been taking steps to meet with the situation by taking measures such as reduction of repo rates, infusion of money in the economy, offering various packages etc. which in turn are going to help the entire economy.

In a hearing on 15 May, Solicitor general Tushar Mehta told the bench, headed by Justice L Nageswara Rao that he would take instructions from RBI, finance ministry and the Securities and Exchange Board of India on the matter.

The central bank had on 22 May extended moratorium on term loans till 31 August amid the nationwide lockdown due to covid-19. In March, the central bank had allowed a three-month moratorium on payment of all term loans due between 1 March and 31 May.

Moratorium basically means you don't have to pay your EMIs for that time period and no penal interest will be charged. It is not a concession of any kind and is simply a deferment of the payment to provide some relief to borrowers facing liquidity issues.

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