This Court Is Not Only The Court Of Law But Also A Court Of Equity: Supreme Court Directs ₹125 Crore Payment To Settle Loan Dispute

The Court was hearing appeals against a Calcutta High Court Division Bench judgment concerning SBI’s classification of the company’s loan account as a non-performing asset and the subsequent assignment of the debt to an asset-reconstruction company for ₹250 crore.

A Bench comprising Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana observed: “This Court is not only the Court of law but also a Court of equity and the relief has been granted after balancing the interests of both parties and to do complete justice between the parties.”

Senior Advocate Narender Hooda appeared for the appellant. Senior Advocate Dr Abhishek Manu Singhvi appeared on the respondents’ side.

Background

Atibir Industries had obtained cash-credit, term-loan and letter-of-credit facilities from a consortium led by SBI. In March 2021, SBI classified the company’s account as an NPA with retrospective effect from October 16, 2020. It subsequently initiated recovery proceedings before the DRT and insolvency proceedings before the NCLT, besides taking measures under the SARFAESI Act.

During the company’s writ proceedings, SBI assigned the debt to an asset-reconstruction company on March 24, 2023, for ₹250 crore. A Single Judge set aside the NPA classification and consequential assignment, but the Division Bench reversed that decision and upheld SBI’s action.

Before the Supreme Court, the company offered to pay ₹250 crore under a stipulated schedule. After payments were made, the Court appointed former Supreme Court judge Justice Anil R. Dave to determine the interest or other liability payable over that amount.

Justice Dave’s report calculated possible returns on the assignee’s investment at rates ranging from 13% to 15% and suggested ₹50 lakh towards costs. The company sought to restrict any additional payment to 7.5% interest and questioned the source of the assignee’s funds. The assignee contended that it was entitled to recover the entire assigned debt and that the report had overlooked the contractual and statutory framework governing asset-reconstruction companies.

Court’s Observations

Equitable Relief To Protect A Running Company

The Court observed that SBI had approached the DRT and NCLT, initiated SARFAESI proceedings and thereafter assigned the debt soon after rejecting the company’s one-time-settlement proposal. It also noted the dispute over the retrospective NPA classification and the circumstances surrounding the assignment.

The Bench stated that the company remained a running concern employing several persons whose livelihoods could be affected. It also considered the RBI circulars issued during the COVID-19 pandemic while balancing the interests of the company and the debt assignee.

The Court observed: “Be that as it may, it is in these peculiar facts and circumstances and in the interest of the Appellant-company which is a running concern that a number of employees whose livelihood will be affected and also considering the circulars issued by the RBI from time to time and the COVID-19 pandemic circulars, this Court has to pass an order in the interest of justice and equity and also to balance the interest of the Appellant and the Respondent No.2.”

NPA Classification And Assignment Issues Left Open

The Court clarified that it was not adjudicating whether the NPA classification was valid, whether the assignment itself was lawful or whether the transfer complied with Section 5 of the SARFAESI Act.

The Bench considered Transcore v. Union of India (2008) concerning simultaneous statutory recovery remedies, ICICI Bank Limited v. Official Liquidator of APS Star Industries Limited (2010) concerning the assignability of bank debt, and Bijnor Urban Cooperative Bank Limited v. Meenal Aggarwal (2023) concerning the absence of an enforceable right to compel acceptance of a one-time settlement. It nevertheless left the disputed legal issues open because of the settlement arrangement it proposed.

The Court stated: “Though there are disputed issues such as the classification of NPAs were valid or not, whether the assignment in favour of the Respondent No.2 itself was valid or not in the light of the fact that the account being classified as NPA itself was in doubt and whether the transfer in favour of Respondent No.2 is in compliance with Section 5 of the SARFAESI Act, are all the issues which are kept open and not gone into due to the order that we propose to make in these proceedings.”

Additional ₹125 Crore Fixed As Full And Final Settlement

The Court noted that the company had already paid ₹250 crore to the assignee under its interim orders, although it had failed to follow some payment deadlines and had required extensions.

While accepting Justice Dave’s report with modification, the Court fixed the additional amount at ₹125 crore. It considered the highest return of 15% calculated in the report, the period that had elapsed since the report and the costs and expenses incurred by the assignee.

The Bench held: “We have arrived at this sum, keeping in mind the highest rate of interest at 15% per annum as per Justice Anil R. Dave’s report and the fact that more than 18 months have passed since the report, and the costs and expenses incurred by the Respondent no.2. This will be towards the full and final settlement of the entire dues payable by the Appellant towards the debt assigned by the Respondent No.1 in favour of the Respondent No.2. This amount has been fixed without going into the issue whether it is a return on investment or otherwise so as to bring an end to the dispute which is continued between the parties for years.”

Settlement Conditional On Timely Payment

The Court directed the company to pay the additional amount within 12 weeks. It clarified that failure to comply with the deadline would allow the respondents to revive the proceedings and would deprive the company of the judgment’s benefit.

The Bench stated: “In case, the Appellant does not abide by the said direction and the timeline, the Respondents will be at liberty to revive the proceedings as against the Appellant and it is clarified that the benefit of this judgment will not be available to the Appellant.”

Conclusion

The Supreme Court directed Atibir Industries to pay ₹125 crore to the assignee within 12 weeks, in addition to ₹250 crore already paid. The amount would constitute full and final settlement of the assignee’s claims against the company concerning the assigned debt.

Upon receiving the amount, the respondents were directed to return the title deeds and release all securities and guarantees within four weeks. The proceedings pending before the NCLT, Kolkata, under Section 7 of the Insolvency and Bankruptcy Code and before DRT-I, Kolkata, would stand disposed of accordingly.

The Court clarified that failure to make the payment within 12 weeks would permit the respondents to revive the proceedings and disentitle the company from the judgment’s benefit. The appeals and pending applications were disposed of.

Cause Title: Atibir Industries Co. Ltd. v. State Bank of India and Another (Neutral Citation: 2026 INSC 1156)

Appearances

Appellant: Senior Advocate Narender Hooda; Advocates Arijit Bardhan, Amit Kumar Singh and Archana; Advocate-on-Record Rashmi Singh

Respondents: Senior Advocate Dr Abhishek Manu Singhvi; Advocates Kunal Vajani, Kartikey Bhatt, Tanish Arora, Siddharth Seem, Samar Veer, Surya Prakash, Kartikey Kaushik, Shristi Kundu, Shubhra Kapur and Anuraj Mishra; Advocates-on-Record Kunal Mimani and Sanjay Kapur

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