The Bombay High Court on Thursday ruled that two circulars issued by the Reserve Bank of India (RBI) granting moratoriums on payment of installments on term loans do not apply to mutual funds and debentures.
“A perusal of circulars issued by RBI on March 27 and May 23, 2020, clearly indicates that it applies to all commercial banks, all primary (urban) co-operative banks, State co-operative banks, district central co-operative banks, all India financial institutions, all non-banking financial companies and also deals with terms loans and working capital facilities provided by those entities,” a division bench of Justices R.D. Dhanuka and V.G. Bisht observed. “It is clearly beyond reasonable doubt that those two circulars would not apply in case of mutual funds and debentures,” the court held.
The court was hearing a Zee Learn Ltd. petition seeking a three-month extension on the July 8 redemption date for debentures issued in 2015. The petition had placed reliance on the RBI’s moratoriums of March 27 and May 23.
The company had made a private placement of 650 unlisted redeemable non-convertible debentures of ₹10 lakh each for cash at par aggregating to ₹65 crore in March 2015.
Zee had defaulted in making certain payments and cited the pandemic while seeking time to make the balance payment with interest as per the Debenture Deed agreed upon by the parties.
