Question & AnswerQ&A (Republic Act No. 401)
The main purpose of Republic Act No. 401 is to condone all unpaid interests accruing from January 1, 1942, to December 31, 1945, on all obligations outstanding as of December 8, 1941, and to apply payments of interests paid after February 28, 1945, to the principal obligation if still outstanding, to aid the rehabilitation of those who suffered from the ravages of war.
The Act covers all debts and other obligations outstanding on December 8, 1941, with interest periods accruing from January 1, 1942, to December 31, 1945, involving the Government or Government-owned or controlled corporations as creditors.
Unpaid interests are condoned when the debtor was unable to pay due to refusal of payment acceptance or business closure by creditors, involvement in resistance activities or imprisonment by the enemy, financial hardship caused by the war, or because the creditor’s assets were under enemy control and payments were made to an enemy instrumentality.
All interests paid on debts outstanding as of December 8, 1941, corresponding to the period from January 1, 1942, to December 31, 1945, and paid from or after February 28, 1945, shall be applied to the principal obligation, if it is still outstanding.
The Act took effect fifteen days after its publication in the Official Gazette.
The declared policy is to facilitate the rehabilitation of those devastated by war by extending condonation of interests to debtors of the Government or its controlled corporations, enabling them to pay their pre-war obligations under beneficial terms and conditions.
Debtors under this Act are those obliged to pay debts or obligations owed to the Government or Government-owned or controlled corporations that were outstanding as of December 8, 1941.
December 8, 1941, is the reference date for outstanding debts and obligations; all debts existing on that date are subject to the condonation of interest accrued during the war period specified in the Act.
This refers to interest payments made to entities like the Enemy Alien Property Custodian that controlled creditor assets during the war. Payments made in good faith or due to fear of reprisals are valid, and the unpaid interests in such cases are condoned under the law.
The text of Republic Act No. 401 does not specify penalties for non-compliance; its focus is on condoning unpaid interests and facilitating debt rehabilitation.