Supreme Court ends Atibir Industries loan fight at Rs 375 crore, Rs 125 crore above what the ARC paid SBI
A three-judge bench led by Chief Justice Surya Kant orders the sponge iron maker to pay its assignee ARC Rs 125 crore in 12 weeks as full and final settlement, closing DRT and NCLT proceedings while leaving the NPA and assignment questions undecided.
State Bank of India sold the Atibir Industries loan to an asset reconstruction company for Rs 250 crore on 24 March 2023, the same day the borrower rushed to the Calcutta High Court to stop the sale. On 26 October 2026 the Supreme Court put a price on ending that dispute: Atibir must pay the ARC a further Rs 125 crore, on top of the Rs 250 crore it has already paid under the Court’s orders, within 12 weeks. The payment settles every claim on the assigned debt, frees the securities and guarantees, and disposes of the recovery case before the Debts Recovery Tribunal and the insolvency petition before the NCLT in Kolkata. A bench of Chief Justice Surya Kant, Justice Joymalya Bagchi and Justice V. Mohana, in a judgment written by Justice Mohana, did not decide whether SBI was right to classify the account as a non-performing asset with retrospective effect during the pandemic, or whether the assignment was valid. Those questions were kept open; the figure was fixed to bring a years-long fight to a close.
A Rs 155 crore limit, a Rs 302 crore overdraft and a pandemic moratorium
Atibir Industries makes sponge iron, pig iron and allied products. It borrowed from a consortium of banks led by SBI, taking cash credit, term loans and letters of credit. The security ran to hypothecation of current assets and plant and machinery, equitable mortgages over the factory and over land and plots owned by two group companies, personal guarantees from five promoters and corporate guarantees from the two group companies.
The account started slipping before COVID-19. SBI wrote on 18 January 2019 and 17 March 2020 about bills devolving under letters of credit and asked the company to regularise the account. On 17 January 2020 Atibir told the bank it could not pay and undertook to regularise by 22 January 2020. Its revised resolution plan of 11 June 2020 admitted that against a sanctioned cash credit limit of Rs 155 crore, the outstanding stood at Rs 278.56 crore on 31 March 2020 and Rs 302 crore on 6 June 2020. The company blamed the pandemic among other things, and relied on the Reserve Bank of India circulars of 27 March, 17 April and 23 May 2020 that extended the repayment moratorium to 31 August 2020.
On 15 September 2020 SBI rescheduled the term loan, with the first instalment due on 30 September 2020. Atibir paid Rs 21,07,157 on 1 November 2020 and Rs 80 lakh on 11 December 2020.
The classification came on 5 April 2021. SBI’s letter said the account had been irregular since 17 January 2020, that the Supreme Court’s judgment of 23 March 2021 in Small Scale Industrial Manufacturers Association v. Union of India had lifted the blanket ban on NPA classification, and that the account had been classified as NPA on 31 March 2021 with effect from 16 October 2020. The dues it listed were Rs 310.46 crore in the cash credit and seven working capital accounts, Rs 16 crore in the term loan account and Rs 27.05 crore across four funded interest term loan accounts. The bank asked the company to clear the overdues or send a comprehensive resolution plan.
DRT, NCLT and SARFAESI, all at once
SBI recalled the loan on 17 January 2022, demanding Rs 341 crore in principal plus interest and charges. It filed OA No. 260 of 2022 before DRT-I, Kolkata, under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993, for Rs 396,36,17,844. It also filed a petition under Section 7 of the Insolvency and Bankruptcy Code before the NCLT, Kolkata, to put the company into insolvency. That petition is still pending.
Meanwhile Atibir was trying to settle. Through letters dated 25 January, 27 January, 28 February and 23 May 2022 it offered a one-time settlement, raising the figure from Rs 227 crore to Rs 237 crore. SBI accepted none of them. The final offer, Rs 238 crore, came on 7 February 2023. Between 6 February 2021 and 25 January 2023 the company paid SBI about Rs 25 crore.
On 8 July 2022 the bank issued a notice under Section 13(2) of the SARFAESI Act recording the NPA date as 16 October 2020 and demanding Rs 410,26,78,340 with further interest and costs. Atibir did not reply. A Section 13(4) notice followed on 28 October 2022, then was withdrawn on 4 November 2022. On 10 February 2023, three days after the Rs 238 crore OTS offer, SBI published a web notice classifying the account as a stressed loan exposure and putting it up for e-auction to asset reconstruction companies, banks and financial institutions.
Atibir challenged the web notice in WPO No. 428 of 2023 and a single judge deferred the e-auction on 6 March 2023. With talks under way, the company withdrew that petition on 21 March 2023 with liberty to file afresh. Two days later SBI issued a corrigendum bringing the e-auction forward to 24 March 2023. Atibir filed WPO No. 722 of 2023 on 24 March, attacking the web notice, the corrigendum and the NPA classification as contrary to the RBI master circular on asset classification and the COVID-19 relief circular. The same day, SBI assigned the loan to the ARC under an assignment agreement for Rs 250 crore.
The High Court splits: premature NPA, then a borrower-wise reversal
Before the single judge, Atibir argued that the RBI’s moratorium circulars shifted every due date to after 31 August 2020, that the revised schedule of 15 September 2020 required nothing until 30 September 2020 and then only Rs 80 lakh, and that under the asset classification norms a term loan becomes NPA only when an amount stays overdue for more than 90 days. On that arithmetic the earliest default was 1 December 2020, so a classification effective 16 October 2020 could not stand, and without a valid NPA the loan was not a stressed asset that could be sold to an ARC. It also complained that its OTS offers had been brushed aside.
SBI replied that the company had never challenged the NPA declaration and that a bank can transfer loans even when they are neither in default nor stressed. The ARC said assignment is a matter of commercial wisdom best left to a large nationalised bank, and a borrower in default of more than Rs 342 crore had no standing to unwind it.
The single judge sided with Atibir. With the moratorium running to 31 August 2020, the due date moved to 1 September 2020, and the bank had to wait 90 days after that under the RBI Master Circular of 1 July 2015. The classification effective 16 October 2020 was premature. The single judge set aside the NPA declaration, the assignment, the web notice and the corrigenda, and quashed everything done under them.
SBI and the ARC appealed. On 25 July 2024 the Division Bench allowed both appeals, APO No. 180 of 2023 and APOT No. 393 of 2023. It accepted an argument not made before the single judge: asset classification is borrower-wise, not account-wise, so a default in the cash credit account made the whole borrower NPA even if the term loan alone might not have been. It also held that SBI had sold the asset under Section 5 of the SARFAESI Act rather than taking a Section 13(4) measure, so the relevant date for NPA or special mention status was the date of the web notice, 10 February 2023, not the date in the Section 13(2) notice, and Atibir had not rebutted the presumption that the account was NPA then. The writ petition was dismissed.
The Supreme Court turns the appeal into a payment schedule
When the special leave petitions came up on 17 September 2024, the Court gave Atibir a short time to take instructions on discharging a substantial part of the liability quickly. On 20 September 2024 the company tabled a schedule: Rs 25 crore by 25 September 2024, then Rs 50 crore on or before the last day of each of October, November, December 2024 and January 2025, and Rs 25 crore by 28 February 2025, totalling Rs 250 crore. The Court accepted the schedule as just and fair, to save a running industry, but not Rs 250 crore as the total liability. Anything above that could be fixed by a judicial or quasi-judicial forum, subject to the Court’s own intervention. Dr Abhishek Manu Singhvi and Shyam Divan, senior counsel for the ARC, sought a week for instructions. Status quo was ordered.
On 9 December 2024, acting on Dr Singhvi’s suggestion, the Court appointed Justice Anil R. Dave, a former judge of the Supreme Court, to adjudicate the claim for interest and any other liability above Rs 250 crore. It left the issues to the parties, asked for a report at the earliest and directed Atibir to pay his fee.
The schedule did not run smoothly. On 27 January 2025 the Court noted that Justice Dave had been unable to start because the ARC was late filing its claim, and recorded that the first three instalments had been paid, the fourth missed and the fifth fallen due. Atibir handed over cheques for Rs 10 crore, accepted without prejudice. Further payments were recorded in February, March and May 2025. On 15 July 2025 the Court recorded that the report had come in and that the ARC had received the full Rs 250 crore. On 13 January 2026 it added that once the liability to the assignee of SBI, CFM ARC, is discharged, the new lender, Kaventer Capital Limited, will have a similar charge on the property already mortgaged to SBI. The parties argued the report on 7 October 2026 and filed written submissions on 9 October.
By then the case had narrowed. The judgment records that submissions before the Supreme Court were confined almost entirely to Justice Dave’s report and one question: did Atibir owe the ARC anything above Rs 250 crore?
Debt value or acquisition value: what Justice Dave found
Justice Dave issued notices on 25 December 2024 and held a preliminary meeting on 2 January 2025. SBI stayed away throughout. The hearing was on 11 February 2025 and closed on 6 March 2025.
Atibir offered Rs 250 crore plus reasonable interest from the date the ARC paid SBI, and proposed 7.5 per cent. It also said the Rs 250 crore was not the ARC’s own money but came from CFMARC Vinimay Private Limited, a company controlled by the Patwari family, which held substantial shares in Rashmi Metaliks Limited, a competitor in the same business, and that the family had orchestrated the episode to take over a running plant. Before the Supreme Court the company put more detail on the allegation: the money came from CIMMCO Vinimay Private Limited in nearly 250 instalments from its ICICI Bank account to the ARC’s account with Union Bank of India, and Rashmi Metaliks Limited is controlled by Sajjan Kumar Patwari and his sons, who also control the funding company.
The ARC’s answer was that an assignee recovers everything the borrower owed, principal, interest and penal interest: Rs 342 crore principal and Rs 112 crore interest on the assignment date. How it funded the purchase was irrelevant to Atibir’s liability. Justice Dave’s report put the total debt on 24 March 2023 at about Rs 453.83 crore, of which roughly Rs 341.95 crore was principal and Rs 111.88 crore interest, all of it assigned for Rs 250 crore.
He took the ARC’s side on the law of assignment but not on the number. Since SBI had assigned its right to recover, the Rs 453.83 crore pre-assignment figure was not the measure. The ARC’s investment was Rs 250 crore paid on 24 March 2023, and it deserved a reasonable return on that. He rejected 7.5 per cent: the assignment was a business transaction and the ARC was entitled to a profit, and Atibir itself had been paying SBI 9.9 per cent on working capital and 13.9 per cent on the term loan. The ARC appeared to have borrowed to fund the purchase, but did not disclose the rate. He asked for its financial statements to gauge its normal rate of return; it declined to produce them. “I have to simply do some guesswork”, the report says.
With chartered accountant Sudhir K. Jain, he computed the return on the outstanding balance after crediting Atibir’s payments up to 1 March 2025: Rs 57,74,13,699 at 13 per cent, Rs 62,18,30,137 at 14 per cent and Rs 66,62,46,575 at 15 per cent, each in addition to the roughly Rs 100 crore of the Rs 250 crore still unpaid on that date. He suggested Rs 50 lakh towards costs, no expense details having been given, so that Atibir could carry on its business and the ARC could get a reasonable return.
Both sides attack the report
Atibir filed its suggestions by affidavit on 28 July 2025. It said the acquisition was contrary to RBI guidelines, that the ARC’s bona fides were seriously in doubt, and that no commercial return was justified on funds that were not the ARC’s own. If anything had to be paid above Rs 250 crore, it should be capped at 7.5 per cent, which the company said was aligned with the prevailing marginal cost of funds based lending rate; anything higher would hand the ARC an undue benefit.
The ARC called Atibir a habitual chronic defaulter that had misused the Court’s indulgence, missed timelines and sought deferment of instalments. It said the report had travelled beyond its terms of reference, ignored the statutory and commercial framework in which ARCs operate and erased the distinction between the debt value and the acquisition value. The exercise of fixing a reasonable compensation on acquisition value was, it argued, contrary to settled law. It asked that no further indulgence be shown and, in the alternative, that the matter be remanded for a confined determination of the total liability under the contractual documents.
Why the Court fixed Rs 125 crore and decided nothing else
The bench set out the law the ARC relied on: Transcore v. Union of India (2008), which treats SARFAESI as an additional remedy alongside a pending DRT case; ICICI Bank Limited v. Official Liquidator of APS Star Industries Limited (2010), which holds that a bank owns the debt in a borrower’s account and can transfer it, the borrower simply becoming the assignee’s borrower; and Bijnor Urban Cooperative Bank Limited v. Meenal Aggarwal (2023), where the Court held that no mandamus can compel a bank to grant an OTS.
But the conduct of the bank weighed with it. SBI had gone to the DRT and the NCLT, then classified the asset as NPA with retrospective effect, then issued the Section 13(2) notice while OTS communications were passing between the parties, issued and withdrew the Section 13(4) notice, received a Rs 238 crore OTS offer on 7 February 2023, and three days later put the loan up for sale. Atibir had paid about Rs 25 crore during the OTS talks. The e-auction notice, the Court said, “came as a bolt out of the blue for the Appellant”. The assignment followed in quick succession, by what the bench called a quick somersault, immediately after the OTS was rejected.
The Court also recorded that the ARC had never denied Atibir’s allegation that the purchase money came from a business competitor, that it had not produced its financial statements despite Justice Dave’s request, and that it had not disclosed the rate at which it borrowed the Rs 250 crore. Against that stood Atibir’s own missed instalments and the extensions it had needed.
Three issues were expressly left undecided: whether the NPA classification was valid, whether the assignment was valid given the doubt over the classification, and whether the transfer complied with Section 5 of the SARFAESI Act. The Court also declined to say whether compensation should be computed on debt value or acquisition value, and expressed no opinion on the conduct of the parties. In what it called the peculiar facts of the case, with a running concern and employees whose livelihood was at stake, and with the RBI’s pandemic circulars in view, it chose an order in the interest of justice and equity that balanced both sides.
The number it chose was Rs 125 crore over and above the Rs 250 crore. The bench explained how it got there: it took the highest rate in Justice Dave’s report, 15 per cent, allowed for the fact that more than 18 months had passed since the report, and added the ARC’s costs and expenses. It accepted the report with that modification and recorded its gratitude to Justice Dave for the time-consuming exercise. The Court described itself as “not only the Court of law but also a Court of equity”, granting relief to do complete justice between the parties.
Order
The appeals were disposed of with five directions. Atibir Industries must pay the ARC a further Rs 125 crore, over the Rs 250 crore already paid, within 12 weeks of 26 October 2026. That sum is full and final settlement of all the ARC’s claims against the company on the debt. On receipt, SBI and the ARC must together, within four weeks, return the title deeds and release all other securities and guarantees they hold. The Section 7 petition before the NCLT, Kolkata, and the proceedings before DRT-I, Kolkata, stand disposed of. The timeline is strict: if Atibir fails to pay Rs 125 crore within 12 weeks, the respondents may revive their proceedings and the benefit of the judgment will not be available to the company. Pending applications were disposed of.