The Supreme Court has directed Atibir Industries Co. Ltd. to pay an additional ₹125 crore to an asset reconstruction company (ARC) to achieve a full and final settlement of its loan dispute with the State Bank of India (SBI), while leaving open the legal questions concerning the classification of its loan account as a non-performing asset (NPA) and the subsequent assignment of the debt.
A bench of Chief Justice of India Surya Kant and Justices Joymalya Bagchi and V. Mohana passed the order in appeals challenging a Calcutta High Court Division Bench judgment that had reversed a Single Judge's decision setting aside SBI's NPA classification and consequential assignment-related actions.
“…in the peculiar circumstances of the case without going into any legal issues or whether the compensation amount will have to be calculated on the basis of the debt value or the acquisition value etc. and without expressing any opinion on the conduct of the parties, this Court directs that a sum of Rs.125 crores over and above a sum of Rs.250 crores will have to be paid by the Appellant to 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.”, the Court ordered.
The Appellant, Atibir Industries, had availed credit facilities from a consortium of banks led by SBI. SBI classified its loan account as an NPA with effect from October 16, 2020, and subsequently assigned the debt to the ARC on March 24, 2023, for ₹250 crores.
The company challenged the NPA classification, contending that it was premature in view of the Reserve Bank of India's COVID-19-related moratorium measures, which extended the repayment moratorium until August 31, 2020. It also questioned the validity of the debt assignment.
The Calcutta High Court's Single Judge accepted the challenge and set aside the NPA classification and consequential actions. However, the Division Bench reversed that decision.
Before the Supreme Court, the parties' submissions primarily focused on the report submitted by Justice Dave and whether the ARC was entitled to receive any amount beyond the ₹250 crore already paid by Atibir Industries.
Taking into account the report, the time elapsed and the need to balance the parties' interests, the judgment authored by Justice Mohana directed the company to pay an additional ₹125 crore within 12 weeks. The total payment of ₹375 crore would constitute full and final settlement of all claims relating to the assigned debt with the SBI.
Upon receipt of the entire amount, the respondents must return the company's title deeds and release its securities and guarantees within four weeks. The Court also directed that the pending proceedings before the National Company Law Tribunal under Section 7 of the Insolvency and Bankruptcy Code, 2016, and the recovery proceedings before the Debt Recovery Tribunal stand disposed of in light of its directions.
The Court clarified that if Atibir Industries fails to pay the additional ₹125 crore within 12 weeks, the respondents would be at liberty to revive the proceedings, and the company would not be entitled to the benefit of the settlement order.
“it is directed that the Appellant shall strictly adhere to the timelines as specified above i.e., 12 weeks from today for effecting the payment of Rs.125 crores to the Respondent No.2. 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.”, the Court said.
Appearance:
For Petitioner(s) :Mr. Narender Hooda, Sr. Adv. Mr. Arijit Bardhan, Adv. Mr. Amit Kumar Singh, Adv. Ms. Rashmi Singh- 2132, AOR Mr. Yuvraj Nandal, Adv. Ms. Pallvi Hooda, Adv. Ms. Archana, Adv.
For Respondent(s) :Dr. Abhishek Manu Singhvi, Sr. Adv. Mr. Kunal Vajani, Adv. Mr. Kartikey Bhatt, Adv. Mr. Tanish Arora, Adv. Mr. Siddharth Seem, Adv. Mr. Kunal Mimani, AOR Mr. Sanjay Kapur- 1202, AOR Mr. Surya Prakash, Adv. Mr. Kartikey Kaushik, Adv. 1 Ms. Shristi Kundu, Adv. Ms. Shubhra Kapur, Adv. Ms. Mahima Kapur, Adv.