M/S Esperanza Educational Society vs. The Union Of INDIA And 3 Others

Facts

The petitioner, M/s Esperanza Educational Society, operates preschools and child care centers. Due to the COVID-19 pandemic, its revenue significantly declined. The society had taken two vehicle loans from YES BANK Limited (4th respondent). The Reserve Bank of India (RBI) issued notifications providing for moratoriums and resolution frameworks for COVID-19 related stress. The petitioner requested loan restructuring and moratorium extension from YES BANK. While YES BANK initially restructured the loans and provided a moratorium until October 2021, the petitioner sought further extension under the RBI's Resolution Framework 2.0. The petitioner claims YES BANK delayed processing their request, and they submitted the required documents on November 1, 2021, after the stipulated deadline of September 30, 2021. Aggrieved by YES BANK's refusal to restructure the loans under the framework, the petitioner filed a complaint with the RBI Ombudsman (3rd respondent), which was rejected. The petitioner then filed a writ petition in the High Court challenging the Ombudsman's order.

Held

The Court held that the petitioner had not complied with the guidelines prescribed by the RBI for restructuring of loan accounts and for extending the moratorium period from October 2021 to March 2022. The Resolution Framework 2.0 stipulated that applicants should submit their request before September 30, 2021, and a decision was to be taken by the lending institutions by the same date. The petitioner admittedly made a written request only on November 1, 2021. The Court found that the petitioner's contention that they were unaware of the requirement for a written format was not tenable, as they had successfully availed moratorium extensions and restructuring previously under the 1.0 Guidelines. The Court reasoned that when the availability of a benefit is dependent on fulfilling certain conditions, these conditions cannot be dismissed as mere procedural matters. Therefore, the Court found no illegality in the order of the 3rd Respondent (RBI Ombudsman) in rejecting the complaint and saw no reason to set aside the order dated January 27, 2022. The writ petition was dismissed.

Key Issues

1. Whether the action of the 3rd Respondent (RBI Ombudsman) in rejecting the petitioner's complaint was illegal, arbitrary, and violative of Articles 14, 19, and 21 of the Constitution of India, and Section 35A of the RBI Act, and contrary to the Resolution Framework 2.0 dated 05.05.2021. - Petitioner's argument: The Ombudsman's order was a non-speaking, unreasoned order. The 4th Respondent (YES BANK) was attempting to evade responsibility by claiming a lack of written request, despite acknowledging the petitioner's approach in August 2021. The requirement for a written request was not prescribed by the Resolution Framework 2.0, and substantive benefits should not be denied for procedural irregularities, citing Sardar Associates and R.R. Global Enterprises. - Revenue/State's argument: The petitioner failed to comply with the prescribed timeline for submitting the restructuring application under the Resolution Framework 2.0. The application was submitted on November 1, 2021, after the deadline of September 30, 2021. The conditions for availing the benefit were not procedural but substantive, and the petitioner had prior experience with moratorium extensions.