# In the matter of Small Scale Industrial Manufactures
Association (Regd.) Vs. Union of India and others Writ Petition (C) No. 476 of 2020

> SC judgment dated 2021-03-23. Citation: TCN-2021-SC-00061. This case involves a batch of writ petitions filed under Article 32 of the Constitution of India,…

- **Court:** SC
- **Order date:** 23 Mar 2021
- **Citation:** TCN-2021-SC-00061
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/supreme-court-of-india/small-scale-industrial-manufactures-association-regd-vs-union-of-india-and-other-9b041969

## Summary

### Background

This case involves a batch of writ petitions filed under Article 32 of the Constitution of India, primarily concerning the charging of interest on loans during the moratorium period announced by the Reserve Bank of India (RBI) in response to the COVID-19 pandemic. The petitioners, representing various sectors including MSMEs, real estate, power, and others, challenged the RBI's notifications and sought waivers of interest, sector-specific relief packages, and extensions of the moratorium period. They argued that the charging of interest during the moratorium period was detrimental to their financial stability and violated their fundamental rights.

## Facts

The COVID-19 pandemic led to a nationwide lockdown, causing significant economic disruption across various sectors in India. The Reserve Bank of India (RBI) announced a moratorium on loan repayments to ease the financial burden on borrowers. However, banks continued to charge interest during the moratorium period, including interest on interest (compound interest). Several writ petitions were filed challenging the charging of interest during the moratorium, arguing it exacerbated financial distress. Petitioners represented diverse sectors like MSMEs, real estate, power, and individual borrowers. They sought complete waiver of interest, sector-specific relief packages, and extension of the moratorium. The Union of India and RBI defended their policies as necessary to

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## Issues and analysis

### Issue 1: Whether there should be a complete waiver of interest or interest on interest during the moratorium …

**Ratio:** The court recognized the limited scope of judicial review in economic policy matters and

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**Reasoning:** The court reasoned that a complete waiver of interest would have significant financial

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**Interpretation:** The court interpreted the relevant provisions of the Constitution, the DMA, and

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**Application:** The court applied the principle of limited judicial review in economic policy

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## Parties

- **Judges:** Ashok Bh…; R. Subhash…; +1 more
- **Appellants:** Small Scale…
- **Respondents:** Union of…

## Timeline

- **2020-03-27 — RBI Circ…**: RBI issued a circular permitting lending institutions to grant a moratorium on payment of…
- **2020-05-23 — Moratorium Ex…**: The moratorium period was…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 3 — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-3)

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