The Calcutta High Court nullifies SBI's sale of the loans to CFM ARC

11 Oct 2023 , 11:37 AM

The State Bank of India (SBI)’s sale of a loan to Atibir Industries to CFM Asset Reconstruction Company was declared illegal by the Calcutta High Court.

This choice was made because SBI had previously classified the loan as an NPA in 2020 when a central bank directive forbade banks from doing so because of the ongoing epidemic.

This year’s March Swiss challenge auction sale by SBI to CFM ARC for Rs 250 crore of the outstanding principal loan from bankrupt Atibir Industries must now be undone.

In the ruling on the writ case submitted by Atibir Industries, Justice Sabyasachi Bhattacharya noted that the bank had proceeded rapidly in completing the assignment process in favour of CFM ARC.

The 90-day window for categorizing the account as NPA should have started on September 1, 2020, with the entire remaining duration now relocated. As a result, the order stated that designating Atibir Industries as an NPA as of October 16, 2020, was premature and obviously in violation of the RBI circular for assistance during the Covid-19 epidemic.

The deadline for declaring the account past due was moved to September 1, 2020 because the embargo was extended to August 31, 2020. The order stated that the bank should have waited 90 days following that.

According to a lawyer, SBI has the option of submitting a special leave plea to the Supreme Court.

According to a 2021 Care Ratings assessment, Santosh Kumar Sarawgi is the owner and promoter of Atibir Industries, a sponge iron and pig iron producer situated in Jharkhand that was founded in 2000.

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