Supreme Court refuses to bail out hospitality sector

By: |
September 21, 2021 2:15 AM

A Bench led by Justice DY Chandrachud refused to entertain the petition, saying such recommendations fall under the realm of policy, and the hotel body should approach the appropriate government for relief.

The restrictions against retrenchment were implemented without any compensation for the expenditure incurred by the sector to stay afloat, the association said.The restrictions against retrenchment were implemented without any compensation for the expenditure incurred by the sector to stay afloat, the association said.

The Supreme Court on Monday refused to entertain a petition by the Federation of Hotels and Restaurants Associations of India seeking direction to the government to bear the financial burden — such as loan restructuring and interest subvention — on all loans till the sector resumes normal functioning after the pandemic.

The plea also said the government should, among other measures, make available additional sources of finance like soft loans, cash credit facilities with low interest rate and long tenures to the sector to meet its working credit requirements. Besides, the association also wanted the government to restructure loans without a cap of `50 crore on loan exposure and remove the condition for lending institutions to keep provision of 10% of the residual debt of the borrower.

A Bench led by Justice DY Chandrachud refused to entertain the petition, saying such recommendations fall under the realm of policy, and the hotel body should approach the appropriate government for relief.

Senior counsel Mukul Rohtagi and counsel Sumit Goel submitted that though the lockdowns during the first and second wave of he pandemic were reasonable restrictions, they needed to be coupled with adequate relief measures to help hotels and restaurants tide over their admitted impact.

The labour ministry had issued an advisory on March 30 last year seeking cooperation from employers by not terminating employees or reducing wages. Soon after, the central government had issued a direction under the DMA Act, asking all employers to pay wages during the closure of establishments. While the hospitality sector was asked to shut operations, the government cast a duty on it to continue to pay salaries and wages to its staff, the lawyers argued.

The restrictions against retrenchment were implemented without any compensation for the expenditure incurred by the sector to stay afloat, the association said.

It said the government had offered schemes like additional loans to hotels and restaurants, which are inadequate, and no relief was given on existing loan exposure. “This reflects the arbitrariness in the actions of the central government,” the association said in its appeal filed through Parekh and Company.

“Schemes like the Emergency Credit Line Guarantee Scheme, which is additional working capital loan based on existing loan exposure, only provide additional loan which has to be repaid with interest, and thereby put additional loan burden on the sector. The loan restructuring is a facility/ window to seek resolution. While both the measures help under the given circumstances but come at a cost … Repayment schedules under both the schemes are hit by the second wave,” the petition said.

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