A humble suggestion for minimising damage to economy by waiver of Interest, rent, wages for the lock-down period.)
The unprecedented situation created by the outbreak of COVID -19 has devastating effects on the economy. Governments all over the world have reacted similarly to deal with its economic impact, like granting a moratorium on repayment of loan, suspending operation of insolvency code, suspending eviction of tenants for non-payment of rent, etc. The efficacy of such measures is doubtful as the Supreme Court has rightly stated: “On one hand you are granting moratorium (on loans) but continuing with interest. It is more detrimental.”
A threat to the very existence of mankind, created by this pandemic has no parallel in history. Unprecedented measures like nationwide lockdown, taken by the administration, to contain the outbreak of this contagious disease, caused devastating effects on the economy which was already in bad shape. At the macro level, there is unanimity among economists that the Indian Economy will contrast during this financial year.
At the micro-level, each business entity, except a few engaged in the supply of essentialities, has suffered a lot, by production coming to a grinding halt and supply chain disruptions. They are neither today in position, nor will be a year afterward, to pay interest on borrowed capital, wages to labour and rent to an immovable property for the period when such factors remained idle for no fault of either side.
There is another side to the problem. These factors also cannot sustain such non-payments. The banks, which are already under stress, due to mounting NPA, cannot sustain a waiver of interest. Labour cannot survive without wages. The owners of capital assets have to pay for borrowed capital and fixed expenses for the maintenance of these assets.
In the present legal framework, political executives cannot do much to answer this situation. They cannot interfere between the contractual rights and obligations. At the most, they could have deferred enforcement of the contractual/statutory rights, which they have done. But, as stated, these measures are of no help in the present scenario and rather aggravating the problem. It is for sure that a majority of business entities would not be able to survive under these situations, resulting in widespread lockdown, further mounting NPA’s in Banks balance-sheet, unemployment, and hunger.
The present situation so peculiar and unprecedented which cannot be dealt with by adhering to the existing rules, though they are developed over centuries. We cannot think for a solution without freeing ourselves from clutches of contractual and statutory rights of individuals, which are otherwise also at imminent perils, if nothing is done.
The present scenario reminds us the “story of some Englishmen” taught in the first year of our law courses. Some person who being tossed in the main ocean without food or drink, killed one of their members, on whom the lot fell, and assuaging in some measure with his body their intolerable and almost famished condition. When they, at last, came to shore, were not even tried for homoside. Another example is a chilling account from the Nazi holocaust. A group of Jews was hiding from the Nazis. They sought to prevent the Nazis from discovering their hiding place, but a crying baby jeopardized their safety. The group smothered the baby to death in order to prevent the Nazis from discovering their hiding place and killing them all. The act was declared permissible. Our law teachers, when telling these stories, were not justifying homicide for necessity, but were explaining the dynamics and adaptability of our legal systems to deal with the extreme situations.
To deal with the present situation, we can get a clue from zero period policy declared by UP govt to give relief to the real estate developers from charging of penal interest if project is delayed for no fault on their side. On similar lines, the time spent during lockdown may be treated as zero period, by way of appropriate legislation, for all purposes. The legislation would provide total waiver from interest on loans and deposits, a waiver from rent on lease, graded waiver from payment of wages and salaries coupled with financial State’s support to deprived ones and sector-specific higher tax burden on those to whom this pandemic has brought a fortune. A policy worked out on these lines, after in-depth study of available statistical data, would certainly help in minimizing impact of it on the economy.
The business entities will get a reprieve from payment of interest, rent, and to an extent from salaries and wages. The position of the bank will also not worsen as though they would not get interest on loans advanced, they would also not be required to pay interest on deposits. The persons having deposits in securities and salaried persons are apparently sufferer, but in real terms not. If no action is taken, the very survival of the economy is at peril and its collapse would wipe their entire deposits and jobs in hand. Even otherwise, they, except the marginal cases, are fittest to bear the brunt, because, in their case it is only loss of income, whereas others case is of survival. Needless to say, that appropriate arrangements are required to be made to safeguard the interests of small investors, low paid employees, and bluecollar workers.
Judiciary, all over the world, has used necessity doctrine to justify executive or legislative actions that were not otherwise permissible. In modern times, the doctrine was first used, rather misused, by Pakistani Chief Justice Muhammad Munir in 1954 to validate the extra-constitutional use of emergency powers by Governor-General, Ghulam Mohammad. In his judgment, the Chief Justice cited Bracton’s maxim, ‘that which is otherwise not lawful is made lawful by necessity’. Our own Supreme Court placed reliance on this doctrine, by referring the article titled “Hard Case” penned by Ronald Dworkin and published in April, 1975 issue of Harvard Law Review, to resolve the controversy in Ayodhya dispute. The scope of judicial discretion, under necessity doctrine, is lucidly explained in the said article in following words.
“Theories of adjudication have become more sophisticated, but the most popular theories still put judging in the shade of legislation. The main outlines of this story are familiar. Judges should apply the law that other institutions have made; they should not make new law. That is ideal, but for different regions, it cannot be realized fully in practice. Statutes and common law rules are often vague and must be interpreted before they can be applied to novel cases. Some cases, moreover, rise issues so novel that they cannot be decided even by stretching or reinterpreting existing rules. So judges must sometimes make a new law, either covertly or explicitly. But when they do, they should act as deputy to the appropriate legislature, enacting the law that they suppose the legislature would enact if seized of the problem.”
So the judges, when invoking necessity doctrine, merely supplement the legislative function. Evidences of legislative interventions in private contractual relations are available, such as Landlord and Tenant (War Damages) Act, 1939, and its amending act of 1941, passed by U K’s parliament. By this act, the UK parliament, came in rescue of tenants to save them from expenses of repair of damages caused by war. The amending act of 1941 was aimed to save tenants from payment of rent for the period when the leased premises was un-habitable due to war damages. The prevailing situation is much graver than the situation during the 2nd World War. Indian Parliament, being a sovereign power, is fully empowered to pass an appropriate legislature to declare the time lost as zero period. Such a legislation would not be repugnant to the basic structure of our Constitution, which is the only limitation on our parliaments legislative powers. Now, it is high time, for out political bosses to rise to the occasion and take tough decisions without caring for their impact on electoral prospects.
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