As part of its regulatory role, the Reserve Bank of India had permitted banks to extend moratorium for various loans in view of Covid-19 pandemic. Basically, the purpose of extending moratorium was to avoid showing the accounts as non-performing assets for banks. This enables banks to continue to charge interest in such accounts and take it to profit and loss (P&L) account and also avoid making provision for bad debts out of its P&L account immediately. The scheme also helps borrowers extend the period of repayment. At the time of announcing this scheme, nobody could have thought that it will boomerang.

The borrowers thought that the scheme was intended to help them, but had to approach the Supreme Court with the plea that they should not be charged any interest for the moratorium period. Then the discussion went on to the issue of charging of interest on interest.

Basically, banks are commercial institutions that are governed by laws of the land and regulated by the RBI.

Montesquieu, a French scholar, found that concentration of power in one person or a group of persons results in tyranny. And, therefore, for decentralisation of power to check arbitrariness, he felt the need for vesting the governmental power in three different organs, the legislature, the executive, and the judiciary.

Distinctive roles

In India, we have distinctive roles and powers under the legislature, executive and judiciary. The principle implies that each organ should be independent of the other and none should perform functions that belong to the other.

In India, the judiciary does occupy an important place. An independent judiciary is not doubt required to safeguard the rights of citizen, and protect them from arbitrary exercise of power by the administration. But this does not mean that the judiciary can encroach into the powers of other organs like the legislature and the executive.

In Sidheswar Sahakari Sakhar Karkhana Ltd vs. Union of India , the Supreme Court had ruled, “Normally in such policy matters, a court of law will not interfere unless the policy is shown to be contrary to law, inconsistent with the provisions of the Constitution or otherwise arbitrary or unreasonable.”

Judicial review is central in dealing with the malignancy in the exercise of power. But unless the administrative action is violative of law or the Constitution, arbitrary or mala fide , courts should not interfere in administrative decisions.

Only under the following circumstances, the intervention of judiciary will be justifiable.

Lack of jurisdiction: When the public official or administrative agency acts without proper or adequate authority.

Error of law: This category of cases arises when the official misconstrues the law and imposes upon the citizen obligations which are absent in law.

Error of fact: This arises when action is initiated by the administration on wrong assumptions.

Error of procedure: This is when due procedure, as prescribed by law, is not followed by the administration.

Abuse of authority: This is malfeasance. This is when the executive acts vindictively to harm a person or uses authority for personal gain.

Considering these, should the judiciary provide administrative guidelines to the government and the RBI on how the banks must treat the loan accounts during the moratorium period? One wonders why the government is not submitting to the court this point.

Judicial review of administrative action is inherent in our Constitution, which is based on rule of law and separation of powers. It is considered to be the basic features of our Constitution, which cannot be abrogated even by exercising the constituent power of Parliament. It is the most effective remedy available against administrative excesses.

But there should be restraint by the judiciary also while exercising its powers. When there is no lack of jurisdiction or when there is no error of law, fact or procedure, or when there is no abuse of authority, the judiciary must refrain from interfering in the role of the administration.

The writer is a retired banker

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