Court acknowledges unequal treatment of NBFCs, directs further hearings on Article 14 violation

The court recognized the prima facie arbitrariness in excluding NBFCs from RBI notification benefits, leading to unequal treatment and downgrading of assets. It acknowledged the violation of Article 14 of the Constitution and found merit in the petitioner's case, directing further hearings to address the concerns raised by the petitioner regarding the unfair treatment of NBFCs compared to other borrowers. The court considered the matter triable and allowed for the case to proceed, despite arguments of legislative domain interference by the respondents.

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Issues:
- Exclusion of NBFCs from RBI notification benefits
- Downgrading of assets for NBFCs
- Violation of Article 14 of the Constitution
- Prima facie arbitrariness in circulars
- Legislative domain interference

Exclusion of NBFCs from RBI notification benefits:
The petitioner raised concerns about NBFCs being excluded from the benefits of an RBI notification dated August 6, 2020, which provided relief to borrowers. The petitioner argued that NBFCs play a significant role in the finance sector and should not be unfairly excluded from such benefits, especially during the pandemic situation. The contention was that while other borrowers could restructure loans, NBFCs were subject to downgrading without the same relief.

Downgrading of assets for NBFCs:
The petitioner highlighted that the circulars issued by RBI created a situation where NBFCs could not downgrade assets of their borrowers, while being subject to downgradation themselves. This was seen as arbitrary treatment and a hindrance to the functioning of NBFCs as lenders. The argument emphasized the need for equal treatment under the law and the potential impact on the financial stability of NBFCs.

Violation of Article 14 of the Constitution:
The petitioner contended that the exclusion of NBFCs from the benefits of the circulars violated the principles enshrined in Article 14 of the Constitution of India. It was argued that such arbitrary exclusion had no nexus with the objective of providing economic benefits to the pandemic-affected sections of society. The petitioner sought relief based on the constitutional violation and the need for fair treatment.

Prima facie arbitrariness in circulars:
The judgment acknowledged the prima facie manifest arbitrariness in the exclusion of NBFCs from the benefits of the circulars. The court recognized the concerns raised by the petitioner regarding the unequal treatment of NBFCs compared to other borrowers. The court found that the exclusion of NBFCs from certain benefits while imposing restrictions on them was arbitrary and needed further examination.

Legislative domain interference:
The respondents argued that the reliefs sought by the petitioner fell within the legislative domain and were matters of policy decision not typically interfered with by the court under the writ jurisdiction. However, the court considered the arguments presented by both parties and concluded that the petitioner had made out a strong prima facie case and a triable issue to be decided in the writ petition. The respondents were directed to file their affidavits-in-opposition, and the matter was set for further hearing to address the concerns raised by the petitioner.

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