Economic policy review and moratorium relief: no mandated loan waiver, but compound and penal interest during deferment was impermissible.

The Disaster Management Act, 2005 did not impose a mandatory duty to frame a sector-wise loan waiver or a specific financial relief package for pandemic-affected borrowers, because the statutory scheme leaves relief policy to enabling powers and coordinated executive action. Judicial review would not disturb the RBI's moratorium and resolution framework as economic policy absent patent arbitrariness, discrimination, mala fides or constitutional inconsistency. However, a moratorium is only a deferment of payment, so charging interest on interest, compound interest or penal interest for that period was held impermissible. Amounts already recovered under that head were required to be refunded or adjusted in future instalments.

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Issues: (i) Whether the National Disaster Management Authority and the Union of India were obliged under the Disaster Management Act, 2005 to frame sector-wise financial reliefs and a specific loan-relief policy for borrowers affected by the pandemic; (ii) Whether the moratorium and resolution measures issued by the Reserve Bank of India could be interfered with in judicial review on the ground that they were arbitrary, discriminatory or inadequate; (iii) Whether interest on interest, compound interest or penal interest could be charged for the moratorium period.

Issue (i): Whether the National Disaster Management Authority and the Union of India were obliged under the Disaster Management Act, 2005 to frame sector-wise financial reliefs and a specific loan-relief policy for borrowers affected by the pandemic?

Analysis: The statutory scheme separates functions among the National Disaster Management Authority, the National Executive Committee, the Central Government and the concerned Ministries. The Act contemplates a National Plan and enables the National Authority to lay down policies and guidelines, but it does not transfer all disaster-response functions to one body or create a duty to issue a uniform sector-wise loan waiver. Section 13 uses enabling language and permits the National Authority to recommend relief in repayment of loans or fresh loans, but does not mandate a particular form of relief in every case. The existence of broader governmental measures and RBI measures also showed that the disaster response was not absent.

Conclusion: No mandamus could be issued to compel a sector-wise loan waiver or a particular financial package under the Disaster Management Act, 2005.

Issue (ii): Whether the moratorium and resolution measures issued by the Reserve Bank of India could be interfered with in judicial review on the ground that they were arbitrary, discriminatory or inadequate?

Analysis: The challenged measures were economic and fiscal policy decisions taken in an unprecedented situation, after balancing borrower relief, banking stability, depositor interests, and broader economic consequences. The Court reiterated that economic policy lies within the province of expert bodies and is open to interference only when it is patently arbitrary, discriminatory, mala fide, or contrary to statute or the Constitution. The moratorium, the subsequent resolution framework, and the sectoral parameters were held to reflect a policy choice within the regulator's competence. The fact that some borrowers sought more relief did not make the policy unconstitutional.

Conclusion: The court would not interfere with the policy choices on moratorium, resolution framework, extension of moratorium, or sector-specific reliefs.

Issue (iii): Whether interest on interest, compound interest or penal interest could be charged for the moratorium period?

Analysis: The moratorium was a deferment of payment and non-payment during that period could not be treated as wilful default. Charging interest on interest for the moratorium period was held to be unjustified, and the subsequent ex gratia scheme was found to be arbitrary to the extent it restricted relief to specified loan categories and loan limits. The Court therefore directed that no interest on interest, compound interest or penal interest be recovered for the moratorium period, and that any amount already recovered under that head be refunded or adjusted in future instalments.

Conclusion: The levy of interest on interest, compound interest and penal interest for the moratorium period was not permissible, and borrowers were entitled to refund or adjustment of sums already recovered under that head.

Final Conclusion: The petitions failed insofar as they sought wider economic reliefs, sector-wise packages, extension of moratorium and extension of the resolution window, but succeeded to the limited extent of prohibiting recovery of interest on interest, compound interest and penal interest during the moratorium period.

Ratio Decidendi: Courts will not substitute their own views for expert economic policy choices unless the policy is patently arbitrary, unconstitutional or ultra vires, but a moratorium intended as deferment cannot justify recovery of compound or penal interest for the deferred period.

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