What this judgment does NOT decide: it does not adjudicate whether the NPA classification was valid, whether the assignment to the asset reconstruction company was lawful, or whose conduct was at fault — the Court expressly passed directions without expressing any opinion on the conduct of the parties. The Rs 125 crore figure is specific to the peculiar facts of this case.
- Case
- Atibir Industries Co. Ltd. v. State Bank of India & Anr.
- Court
- Supreme Court of India
- Decision
- Citation
- 2026 INSC 1156
- Bench
- Surya Kant, CJI; Joymalya Bagchi; V. Mohana
- Judgment by
- V. Mohana
- Case numbers
- SLP (C) Nos. 21029-30 of 2024
- Outcome
- Appeals disposed of with directions under the Court's complete-justice approach; the NPA classification and assignment challenges are not adjudicated on merits, and parallel DRT and NCLT proceedings are disposed of in light of the directions.
What the Court decided
On 26 October 2026, a Bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V. Mohana disposed of appeals by Atibir Industries Co. Ltd. with directions that balance the borrower and the asset reconstruction company: the borrower is to pay a further Rs 125 crore, over and above the Rs 250 crore already paid by the borrower to the respondent under the Court's orders within 12 weeks, and that payment is to act as full and final settlement of all claims of the respondent against the borrower towards the debt.
If the borrower does not adhere to the timeline, the respondents will be at liberty to revive the proceedings against it, and the benefit of the judgment will not be available to the borrower.
The loan, the NPA tag and the assignment
Atibir Industries, which manufactures sponge iron, pig iron and allied products, availed credit facilities including cash credit, term loans and letters of credit from a consortium of banks led by the State Bank of India, secured by hypothecation of current assets, equitable mortgages over factory land, buildings and plots, and personal guarantees of five promoters and corporate guarantees of two group companies.
The borrower challenged the classification of its loan account as a non-performing asset and its subsequent assignment by the State Bank to the respondent asset reconstruction company. The assignment took place on 24 March 2023 for a consideration of Rs 250 crore. Before that, the bank had issued a notice under Section 13(2) of the SARFAESI Act on 8 July 2022, and a one-time settlement of Rs 238 crore was proposed on 7 February 2023, towards which the borrower had paid about Rs 25 crore during the settlement talks.
The borrower contended before the High Court that the classification was contrary to the Reserve Bank of India's master circular on asset classification and its COVID-19 relief circulars, that any default would have commenced only from 1 December 2020, and that without a valid classification the loan could not have been transferred as a stressed loan. The Single Judge of the Calcutta High Court had allowed the writ petition; the Division Bench, by its common judgment dated 25 July 2024 in APO No. 180 of 2023 and APOT No. 393 of 2023, reversed that decision.
What the High Court had held
The Single Judge had allowed the borrower's writ petition. The Division Bench reversed that decision in its 25 July 2024 judgment, which is the judgment under challenge in these appeals. The appeals before the Supreme Court arose out of that common Division Bench judgment in APO No. 180 of 2023 and APOT No. 393 of 2023, filed by the respondents.
The issue before the Supreme Court
The appeals raised whether the borrower's loan account was validly classified as a non-performing asset, whether the assignment of the loan to an asset reconstruction company could stand, and what, if anything, the borrower still owed after the assignment. The borrower also alleged that the asset reconstruction company was funded by an entity controlled by a family holding substantial shares in a competitor, and that the episode was orchestrated to take over its running business; the respondent, as assignee, claimed entitlement to recover whatever the borrower owed, including interest and penal interest.
The Court's reasoning
The Court did not decide the contest on classification or on the parties' conduct. It recorded that the bank had initiated proceedings before the Debt Recovery Tribunal and the National Company Law Tribunal, classified the assets as non-performing with retrospective effect, and issued a Section 13(2) notice despite ongoing one-time settlement communications, and that an e-auction notice of 10 February 2023 placing the loan for transfer came, in the borrower's words, as a bolt from the blue during settlement talks.
Instead of adjudicating those disputes, the Court took a settlement route. Under its order dated 9 December 2024, former Supreme Court judge Justice Anil R. Dave held proceedings between the parties: notices on 25 December 2024, a preliminary meeting on 2 January 2025, a hearing on 11 February 2025, and conclusion on 6 March 2025. The borrower stated it was ready and willing to pay Rs 250 crore along with reasonable interest from the date the respondent had paid that amount; the respondent disagreed, pointing out that as on the assignment date Rs 342 crore was payable towards principal and Rs 112 crore towards interest.
Without expressing any opinion on the conduct of the parties, the Court arrived at the further sum of Rs 125 crore keeping in mind the highest rate of interest at 15 per cent per annum as per Justice Dave's report, and passed directions to do complete justice between the parties.
The operative directions
The borrower is to pay the respondent a further Rs 125 crore, over and above the Rs 250 crore already paid, within 12 weeks from 26 October 2026. That sum acts as full and final settlement of all claims of the respondent against the borrower towards the debt.
On receipt of the sum, the respondents are together, within four weeks, to return the title deeds and release all other securities and guarantees held by them. The proceedings before the National Company Law Tribunal, Kolkata, initiated under Section 7 of the Insolvency and Bankruptcy Code, 2016, and before Debt Recovery Tribunal-1, Kolkata, stand disposed of in light of the directions.
The directions were passed in the peculiar facts and circumstances of the case to balance the interests of both parties. If the borrower does not abide by the direction and timeline, the respondents may revive the proceedings against it, and the benefit of the judgment will not be available to the borrower.
BANTHRY ANALYSISFor law students
This judgment is a study in what courts do when a commercial dispute is too entangled to unwind cleanly. The Court did not pronounce on whether the NPA classification was valid, whether the assignment was lawful, or whose conduct was at fault. Instead it used a mediated figure — built on the highest interest rate in the Dave report — to buy finality: money for release of securities, closure of parallel DRT and NCLT proceedings, and a strict deadline with a revival sanction.
That shape matters for practice. A borrower cannot compel a bank to grant a one-time settlement — the Court itself noted the Meenal Aggarwal rule that no mandamus lies to direct a bank to positively grant an OTS benefit — but a court supervising a settlement can still fix a number both sides must live with. And the revival clause shows why such directions are not soft options: miss the 12 weeks, and the borrower loses the judgment's protection entirely.
READING PROMPTSQuestions for a closer reading
- What are the two limbs of the Court's direction, and what happens if the borrower misses the 12-week deadline?
- Why did the Court fix Rs 125 crore rather than deciding whether the NPA classification or the assignment was valid?
- What did the Court record about the borrower's one-time settlement talks, and what limit applies to compelling a bank to grant an OTS?
