Borrower to Pay ARC Rs.125 Crore More: Supreme Court

Borrower Must Pay ARC Rs.125 Crore More in Full Settlement; NPA Issues Left Open: Supreme Court

Published: 26 October 2026 · NyayVidhan

The Supreme Court ended a borrower's challenge to SBI's NPA classification and the assignment of its loan to an asset reconstruction company by fixing a further Rs.125 crore, over the Rs.250 crore already paid, as full and final settlement payable within 12 weeks. Acting in equity, it kept open whether the classification, the assignment and the transfer under Section 5 of the SARFAESI Act were valid (paras 40, 42-44).

Key holdings

The validity of the NPA classification, of the assignment to the ARC and of its compliance with Section 5 of the SARFAESI Act is kept open (para 40).

The borrower must pay a further Rs.125 crore over the Rs.250 crore already paid, within 12 weeks, in full and final settlement (para 44).

The sum reflects the report's highest 15% rate, the 18 months since and the ARC's costs; debt value against acquisition value is left undecided (para 42).

On payment, title deeds, securities and guarantees must be released within four weeks; the NCLT and DRT proceedings stand disposed of (para 44).

If the 12-week deadline is missed, the respondents may revive the proceedings and the benefit of the judgment is lost (para 44).

Judgment digest by NyayVidhan: a summary of the court's judgment, not its text. The judgment itself is the authoritative version.

Brief Facts

Atibir Industries, a sponge iron and pig iron maker, borrowed from an SBI-led consortium (paras 3-4). Relying on the RBI's COVID-19 moratorium to 31.08.2020, it disputed SBI's classification of the account, made on 31.03.2021, as NPA from 16.10.2020 (paras 5-6, 11). After DRT, NCLT and SARFAESI steps and rejected one-time settlement offers of up to Rs.238 crores, SBI assigned the loan to an asset reconstruction company for Rs.250 crores on 24.03.2023 (paras 7-12). A Calcutta High Court Single Judge set aside the classification and the assignment; the Division Bench reversed on 25.07.2024 (paras 14-15). Here the borrower paid Rs.250 crores, and former Judge Anil R. Dave assessed any further liability (paras 17-18, 41).

Court's Findings

The Court recorded that the NPA classification was made retrospectively, irrespective of the RBI's COVID-19 circular extending the moratorium to 31.08.2020, after SBI rescheduled the term loan and took payments (para 21). It noted Transcore on the SARFAESI remedy being additional, and ICICI Bank on a bank's power to transfer a debt (paras 24-25). Yet SBI ran DRT, NCLT and SARFAESI proceedings simultaneously, and its e-auction notice amid settlement talks took the borrower by surprise (paras 24, 27). The assignment quickly followed the rejected settlement offer; the borrower's allegation that a business competitor advanced the ARC's funds stood undenied, and the ARC produced neither its financial statements nor its borrowing rate (para 40). Weighing a running concern, its employees and the RBI circulars, the Court kept open the validity of the classification, the assignment and compliance with Section 5 (para 40). Without deciding whether debt value or acquisition value governs, it fixed Rs.125 crore from the report's highest 15% rate, the 18 months since and the ARC's costs, acting in equity to do complete justice (paras 42-43).

Legal Principle

The judgment settles no question of banking law: whether the pandemic-period NPA classification, the assignment to the ARC and its compliance with Section 5 of the SARFAESI Act were valid is expressly left open. In peculiar facts, the Court, acting in equity, fixed a lump sum over the assignment price as full and final settlement (paras 40, 42-43).

NyayVidhan's view · Practice note

Why It Matters

This is a settlement fixed in equity, not a ruling on NPA law. Borrowers who attack a retrospective classification under the RBI's COVID-19 moratorium circulars gain no precedent here, because the Court kept that question, the ARC assignment and Section 5 compliance open (para 40). The judgment does show how such a dispute can be closed: a court-appointed assessor's report, a lump sum that leaves aside whether debt value or acquisition value governs, a fixed deadline and a revival clause (paras 42, 44). The Court also noted that the ARC did not produce its financial statements or borrowing rate (para 40). Borrowers must pay on time or lose the benefit (para 44).

Editorial comment by the NyayVidhan Editorial Desk. It is not part of the Court's judgment and is not legal advice.

Precedents Relied Upon

Small Scale Industrial Manufacturers Association v. Union of India (2021) 8 SCC 511
Referred To Discussed at ¶ 6
Recited from the bank's letter of 05.04.2021 as the judgment that lifted the blanket ban on classifying accounts as NPA, after which the borrower's account was classified NPA retrospectively; not separately discussed.
Transcore v. Union of India and Another (2008) 1 SCC 125
Referred To Discussed at ¶ 24
Noted that the SARFAESI remedy is additional to the remedy under the DRT Act and that withdrawing a pending DRT application is not a pre-condition to using it, before the Court turned to the bank pursuing DRT, NCLT and SARFAESI proceedings simultaneously.
ICICI Bank Limited v. Official Liquidator of APS Star Industries Limited and Others (2010) 10 SCC 1
Referred To Discussed at ¶ 25
Extract noted: a debt is the bank's asset which it may transfer without affecting the borrower's rights, the borrower becoming the assignee's borrower; the Court kept the validity of the assignment in this case open.

View all precedents (4)

Bijnor Urban Cooperative Bank Limited, Bijnor And Others v. Meenal Aggarwal and Others (2023) 2 SCC 805
Referred To Discussed at ¶ 26
Cited by the asset reconstruction company: no mandamus under Article 226 can direct a bank to grant a borrower the benefit of a one-time settlement; noted, not applied.