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CASE DETAILS AT A GLANCE
Case Title: Atibir Industries Co. Ltd. v. State Bank of India & Anr.
Court Name: Supreme Court of India
Coram / Judges: Surya Kant, CJI., Joymalya Bagchi, J., and V. Mohana, J. (Author)
Case Number: Civil Appeal Nos. of 2026 (Arising out of SLP (C) Nos. 21029-21030 of 2024)
Neutral Citation: 2026 INSC 1156
Order / Judgment Date: 26.10.2026 (October 26, 2026)

1. Executive Summary: Commercial Prudence Meets Judicial Equity

In a decisive and path-breaking commercial ruling, a three-judge bench of the Supreme Court of India comprising Chief Justice of India Surya Kant, Justice Joymalya Bagchi, and Justice V. Mohana has resolved an acrimonious, multi-forum banking dispute in Atibir Industries Co. Ltd. v. State Bank of India & Anr. (2026 INSC 1156). Delivering the judgment for the Bench, Justice V. Mohana exercised the Supreme Court extraordinary jurisdiction as both a court of law and a court of equity to order a comprehensive, full, and final settlement of an assigned debt originally claimed at ₹453.83 Crores for a total payment of ₹375 Crores, thereby rescuing an operational manufacturing enterprise and protecting the livelihood of thousands of industrial workers.

The litigation originated from the classification of the borrower manufacturing loan accounts as a Non-Performing Asset (NPA) with retrospective effect during the COVID-19 pandemic, followed by rapid, simultaneous enforcement actions initiated by the State Bank of India (SBI) across the Debts Recovery Tribunal (DRT), the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), and under Section 13 of the SARFAESI Act. In March 2023, while settlement proposals were pending and writ proceedings were actively being agitated before the Calcutta High Court, SBI transferred and assigned the entire distressed credit exposure of ₹453.83 Crores to an Asset Reconstruction Company (CFM ARC / Respondent No. 2) for a discounted cash consideration of ₹250 Crores.

Intervening to prevent the closure of a running industrial establishment, the Supreme Court devised a structured resolution pathway. Having recorded the borrower payment of the core ₹250 Crores (representing the ARC entire acquisition cost) and reviewing the comprehensive report of former Supreme Court Judge Justice Anil R. Dave, the Apex Court determined that awarding an additional ₹125 Crores towards return on investment, interest, and litigation costs constituted a just, equitable, and commercial closure. The Court directed the immediate quashing and disposal of all parallel insolvency and recovery proceedings before the NCLT and DRT, and mandated the unconditional release of all mortgaged factory lands, title deeds, plant and machinery, and promoter guarantees upon receipt of the final settlement installment.

2. The Factual Background: Credit Consortium & Industrial Operations

The appellant, Atibir Industries Co. Ltd., is an established manufacturing company engaged in the production of sponge iron, pig iron, and allied metallurgical products, operating substantial industrial manufacturing plants and employing a large workforce. To finance its extensive capital investments and operational activities, the company had availed diverse credit facilities, comprising cash credit lines, term loans, and domestic and foreign letters of credit (LCs), from a consortium of commercial lenders led by the State Bank of India (SBI / Respondent No. 1).

As security for the extensive financial accommodation, the consortium banks held substantial, ranking pari passu security interests, including:

• Hypothecation of Current & Fixed Assets: First charge over the company raw materials, finished stock, receivables, and hypothecation of its specialized plant and machinery.
• Equitable Mortgages: Deposit of title deeds and creation of equitable mortgages over extensive factory land and industrial buildings owned by the borrower, as well as leasehold factory plots and prime commercial real estate owned by two corporate group entities.
• Corporate & Personal Guarantees: Corporate guarantees executed by two group entities and irrevocable personal guarantees furnished by five promoter-directors of the borrower company.

Commencing in early 2019 and escalating into early 2020, severe market volatility in the steel and iron sectors caused operational cash-flow crunches. By letters dated January 18, 2019, and March 17, 2020, SBI informed the borrower of the devolvement of letters of credit and called upon the company to regularize its accounts and submit a revised cash budget. On January 17, 2020, the borrower acknowledged temporary payment bottlenecks and submitted structured debt resolution proposals. In a revised resolution plan submitted on June 11, 2020, the company recorded that against a sanctioned cash credit limit of ₹155 Crores, the outstanding cash credit balance stood at ₹278.56 Crores as of March 31, 2020, and climbed to ₹302 Crores by June 6, 2020.

3. The Pandemic Disruption, RBI Moratorium & Disputed NPA Declaration

In late March 2020, the onset of the nationwide COVID-19 pandemic severely impaired industrial manufacturing, supply chains, and market realizations. In response to the macro-economic emergency, the Reserve Bank of India (RBI) issued landmark regulatory packages vide circulars dated March 27, 2020, April 17, 2020, and May 23, 2020, announcing an across-the-board moratorium on term loan installments and working capital interest spanning the period from March 1, 2020, to August 31, 2020, while freezing the asset classification asset degradation countdown.

Recognizing the operational distress, SBI issued a letter dated September 15, 2020, revising the borrower term loan repayment schedule and fixing the first revised installment due date as September 30, 2020. In compliance, the borrower deposited ₹21,07,157 on November 1, 2020, and an additional ₹80 Lakhs on December 11, 2020.

However, following the Supreme Court judgment in Small Scale Industrial Manufacturers Association v. Union of India [(2021) 8 SCC 511], which lifted the interim judicial embargo on declaring loan accounts as NPAs, SBI addressed a communication dated April 5, 2021, informing the borrower that its account had been classified as an NPA on March 31, 2021, with retrospective effect from October 16, 2020. The bank claimed total outstanding liabilities of ₹310.46 Crores in the cash credit and working capital accounts, ₹16 Crores in term loans, and ₹27.05 Crores in funded interest term loan accounts.

4. Multi-Track Enforcement: Simultaneous DRT, NCLT & SARFAESI Actions

Rather than pursuing a single recovery mechanism, SBI initiated simultaneous recovery proceedings across multiple judicial and quasi-judicial forums:

1. Loan Recall Notice: On January 17, 2022, SBI recalled the entire credit facility, demanding immediate liquidation of ₹341 Crores towards principal together with accrued interest and penal levies.
2. Debts Recovery Tribunal (DRT) Proceedings: SBI instituted Original Application No. 260 of 2022 before Debts Recovery Tribunal-I, Kolkata under Section 19 of the Recovery of Debts and Bankruptcy Act, 1993, claiming an aggregate sum of ₹396,36,17,844.
3. Insolvency Petition (NCLT): Simultaneously, SBI filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal (NCLT), Kolkata, seeking the initiation of Corporate Insolvency Resolution Process (CIRP) against the borrower.
4. SARFAESI Statutory Notices: On July 8, 2022, SBI issued a statutory demand notice under Section 13(2) of the SARFAESI Act, demanding payment of ₹410,26,78,340. A subsequent possession notice issued under Section 13(4) on October 28, 2022, was abruptly withdrawn by the bank on November 4, 2022.

Throughout this period, active negotiations for a One-Time Settlement (OTS) were underway. The borrower submitted successive written OTS offers: ₹227 Crores on January 25, 2022, ₹237 Crores on November 22, 2022, and a revised final proposal of ₹238 Crores on February 7, 2023. Between February 6, 2021, and January 25, 2023, the borrower deposited approximately ₹25 Crores in cash with SBI as an earnest demonstration of bona fides.

5. Stressed Asset E-Auction and Debt Assignment to CFM ARC for ₹250 Crores

Despite receiving ₹25 Crores during settlement negotiations, SBI published a web notice on February 10, 2023, declaring the borrower entire loan exposure as a stressed financial asset and inviting competitive bids for its immediate transfer to Asset Reconstruction Companies (ARCs) via e-auction. The borrower challenged the e-auction notice by filing WPO No. 428 of 2023 before the Calcutta High Court. On March 6, 2023, the High Court passed an interim order staying the e-auction. On March 21, 2023, upon indications of settlement discussions, the writ petition was withdrawn with liberty to file afresh.

Two days later, on March 23, 2023, SBI issued an urgent corrigendum advancing the e-auction date to March 24, 2023. On that very day, the borrower filed WPO No. 722 of 2023 before the Calcutta High Court challenging the arbitrary advancement and the underlying NPA classification. Notwithstanding the filing of the writ petition, SBI finalized the assignment and executed an Assignment Agreement under Section 5 of the SARFAESI Act on March 24, 2023, assigning the entire loan portfolio (carrying total ledger dues of ₹453.83 Crores) to Respondent No. 2 (CFM Asset Reconstruction Company) for a cash consideration of ₹250 Crores.

6. The Calcutta High Court Battle: Single Judge vs. Division Bench

The legal duel before the Calcutta High Court produced conflicting rulings on fundamental principles of banking regulation and asset assignment:

A. The Single Judge Ruling: Quashing NPA and Assignment

The learned Single Judge of the Calcutta High Court allowed the borrower writ petition (WPO No. 722 of 2023). The Single Judge held that by virtue of the mandatory RBI COVID-19 circulars, the repayment due date was deferred until August 31, 2020. Under RBI Master Circular on Prudential Norms on Income Recognition, Asset Classification and Provisioning (IRAC Norms), an account can only be designated an NPA if an installment remains overdue for a continuous period of 90 days. Because the moratorium ended on August 31, 2020, the 90-day clock could commence only from September 1, 2020, making December 1, 2020, the earliest possible legal NPA date. Consequently, the bank retrospective declaration of NPA with effect from October 16, 2020, was held to be illegal, premature, and void. As a necessary corollary, because the account was not a lawful NPA, its characterization as a stressed asset and its assignment to the ARC under Section 5 of the SARFAESI Act were quashed and set aside.

B. The Division Bench Reversal: Borrower-Wise Classification Upheld

On intra-court appeals preferred by SBI and CFM ARC (APO No. 180 of 2023 and APOT No. 393 of 2023), the Division Bench reversed the Single Judge on July 25, 2024. The Division Bench held that:

• Asset Classification is Borrower-Wise: In accordance with established RBI regulations, NPA classification attaches to the borrower as an entirety rather than to individual loan accounts. Even if the term loan benefited from the extended schedule, persistent defaults in the cash credit account rendered the borrower entire exposure an NPA.
• Independence of Section 5 SARFAESI: A secured creditor has an independent statutory power under Section 5 of the SARFAESI Act to transfer stressed or non-performing assets to ARCs. Such an assignment does not constitute a coercive recovery measure under Section 13(4) and is not dependent on complying with the pre-requisites of Section 13(2) or Section 13(3A).
• Relevant Date for Assignment: The critical date to test whether an asset is transferable as a stressed loan exposure is the date of the web notice (February 10, 2023), at which point substantial defaults were undeniable.

7. The Supreme Court Intervention & Appointment of Former Judge Anil R. Dave

When the special leave petitions came before the Supreme Court on September 17 and September 20, 2024, the Bench recognized that the borrower was an operational industrial concern employing thousands of workers whose livelihoods were placed in acute jeopardy by insolvency and liquidation. To prevent economic destruction while securing creditor recovery, the Supreme Court accepted the company undertaking to pay ₹250 Crores in structured installments:

• ₹25 Crores upfront on or before September 25, 2024;
• ₹50 Crores on or before October 31, 2024;
• ₹50 Crores on or before November 30, 2024;
• ₹50 Crores on or before December 31, 2024;
• ₹50 Crores on or before January 31, 2025; and
• ₹25 Crores on or before February 28, 2025.

On December 9, 2024, after recording that the borrower had paid the initial ₹125 Crores in strict adherence to its schedule, the Supreme Court resolved to appoint Hon'ble Mr. Justice Anil R. Dave, former Judge of the Supreme Court of India, to adjudicate the outstanding claim for interest, returns, and any liability over and above ₹250 Crores.

8. The Findings of the Justice Anil R. Dave Report: Debt Value vs. Acquisition Value

Justice Anil R. Dave conducted extensive hearings and submitted a detailed report dated July 9, 2025. The report illuminated crucial legal and commercial aspects:

A. Pre-Assignment Dues Cease to Apply to the ARC

Justice Dave held that once SBI executed the assignment agreement transferring the debt to CFM ARC for ₹250 Crores, the bank ceased to have any claim against the borrower under the doctrine affirmed in ICICI Bank Ltd. v. Official Liquidator of APS Star Industries Ltd. [(2010) 10 SCC 1]. Consequently, the pre-assignment book liability of ₹453.83 Crores could no longer be used as the measure to satisfy the ARC. The ARC actual capital outlay was ₹250 Crores, and it was entitled to a reasonable commercial return on its invested capital.

B. ARC Refusal to Disclose Financial Statements & Hostile Takeover Allegations

The borrower placed serious allegations on record, asserting that CFM ARC ₹250 Crore acquisition funding had not originated from its own balance sheet, but was routed through CIMMCO Vinimay Pvt. Ltd. (controlled by the Patwari family), who were also the controlling promoters of Rashmi Metalics Ltd.—a direct commercial competitor of Atibir Industries. The borrower contended that the assignment was orchestrated as a backdoor hostile takeover of a running sponge iron competitor. Crucially, Justice Dave noted that despite repeated judicial requests, CFM ARC refused to submit its financial statements or disclose the borrowing cost of the ₹250 Crores.

C. Independent Chartered Accountant Calculations

With the assistance of Chartered Accountant Mr. Sudhir K. Jain, Justice Dave computed the reasonable returns on the declining balance of the ₹250 Crore investment (after crediting the installments paid by the borrower from time to time):

• At 13% per annum: Return quantified at ₹57,74,13,699;
• At 14% per annum: Return quantified at ₹62,18,30,137; and
• At 15% per annum: Return quantified at ₹66,62,46,575.

Justice Dave recommended that the Supreme Court consider awarding reasonable compensation within the 13% to 15% bracket together with ₹50 Lakhs towards litigation costs, so that the borrower could continue operating its business while the ARC was adequately rewarded for its financial investment.

9. Final Adjudication: The Supreme Court Landmark Directions

On October 26, 2026, the Supreme Court recorded that the borrower had successfully paid the entire principal sum of ₹250 Crores to CFM ARC. Exercising its constitutional mantle as a court of equity to do complete justice, the Bench declared:

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.

To put an end to years of destructive commercial litigation, the Supreme Court passed the following binding operative directions:

1. Payment of ₹125 Crores in 12 Weeks: The appellant shall pay to Respondent No. 2 (CFM ARC) an additional sum of ₹125 Crores (over and above the ₹250 Crores already paid) within a strict period of 12 weeks from the date of the judgment.
2. Full and Final Discharge: The said cumulative payment of ₹375 Crores shall operate as a full, complete, and final discharge of all debts, claims, and demands of Respondent No. 2 and SBI against the appellant.
3. Release of Title Deeds, Mortgages & Guarantees: Within four weeks of receiving the ₹125 Crores, SBI and CFM ARC shall jointly return all original title deeds, release all equitable mortgages, charges, and hypothecations, and discharge all personal and corporate guarantees.
4. Termination of Insolvency & Recovery Cases: The corporate insolvency proceedings initiated under Section 7 of the IBC before NCLT Kolkata, and the recovery proceedings in OA No. 260 of 2022 before DRT-1 Kolkata, stand finally disposed of.
5. Strict Compliance Clause: If the appellant fails to pay the ₹125 Crores within the 12-week timeframe, the benefit of this judgment shall stand vacated, and the respondents shall be at liberty to revive their statutory recovery proceedings.

10. Strategic Legal Takeaways for Borrowers, Banks, and Asset Reconstruction Companies

The judgment in Atibir Industries provides critical strategic precedents for corporate lending, stressed asset restructuring, and debt litigation in India:

• Equitable Protection for Running Enterprises: The Supreme Court has firmly signaled that operational businesses generating employment and economic output will not be pushed into liquidation or hostile takeovers where the enterprise demonstrates genuine financial capacity to repay the debt assignment value plus reasonable commercial returns.
• Limits on ARC Windfall Claims: While an ARC steps into the shoes of the assignor bank, courts will not allow speculative ARCs to demand massive book debts (such as ₹453 Crores on a ₹250 Crore purchase) when the ARC fails to disclose transparent financial records or when equitable compromise resolves the core capital with handsome returns.
• Primacy of Judicial Closure: By disposing of parallel proceedings in the DRT and NCLT in a single stroke, the Apex Court reinforced that comprehensive multi-forum settlement avoids procedural gridlock and maximizes asset preservation.

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