The Supreme Court on October 26, brought a long-running loan dispute to an end. It directed Atibir Industries Co. Ltd. to pay a further Rs 125 crore to CFM ARC, the asset reconstruction company that took over its loan from State Bank of India (SBI). A Bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V. Mohana disposed of the appeals.
Background
Atibir, which makes sponge iron and pig iron, had borrowed from a bank consortium led by SBI. SBI classified the account as a Non-Performing Asset (NPA, meaning a loan treated as in default) with effect from 16 October 2020. The company argued that RBI’s COVID-19 moratorium circulars pushed the default date later, so the classification was premature.
SBI approached the Debts Recovery Tribunal and the NCLT, and also issued notices under the SARFAESI Act. On 24 March 2023, while a writ petition was pending, it assigned the loan to CFM ARC for Rs 250 crore. A Single Judge of the Calcutta High Court set aside the classification and the assignment, but a Division Bench reversed that on 25 July 2024. Atibir then came to the Supreme Court.
In September 2024, the Court recorded a payment schedule for Rs 250 crore. It then appointed Justice Anil R. Dave, a former Supreme Court judge, to examine any further liability. His report suggested a return of 13 to 15 percent a year on the Rs 250 crore, plus Rs 50 lakh as costs.
Atibir argued that the funds had come from an entity linked to a business competitor, and that any return should not exceed 7.5 percent. CFM ARC countered that it was entitled to the full debt value, and that the report went beyond its mandate.
The Bench noted that the assignment followed quickly after SBI’s recovery steps and its rejection of the settlement offers. It also observed:
“It is a fact that there has been no denial about the allegations made by the Appellant as against the Respondent No.2 that the funds which have been advanced for taking over the asset from the Respondent No.1 were advanced by a competitor in business.”
The Court kept open the questions of whether the NPA classification and the assignment were valid. It said it was making its order “without going into any legal issues” and without expressing any view on the parties’ conduct. It added:
“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.”
The Court accepted Justice Dave’s report with a modification. It fixed a one-time sum, keeping in mind the 15 percent rate, the 18 months since the report and the costs incurred. It directed:
“The appellant shall pay to the Respondent No.2 a further sum of Rs.125 crores, over and above the sum of Rs.250 crores already paid, within a period of 12 weeks from today.”
The payment will be full and final settlement of CFM ARC’s claims. After receiving it, the respondents must return the title deeds and release all securities and guarantees within four weeks.
The NCLT and DRT proceedings stand disposed of. If Atibir misses the deadline, the respondents may revive proceedings and the benefit of the judgment will not be available to it.
