Calcutta High Court voids SBI's sale of Atibir Industries' loans to CFM ARC
Atibir Industries by the State Bank of India (SBI) to CFM Asset Reconstruction Company.
This decision comes as SBI had categorised the loan as a non-performing asset (NPA) in 2020 when a central bank circular prohibited banks from classifying accounts as NPAs due to the ongoing pandemic.
SBI had sold ₹341 crore of principal loan outstanding from bankrupt Atibir Industries to CFM ARC for ₹250 crore through a Swiss challenge auction in March this year, which will now have to be reversed.
Justice Sabyasachi Bhattacharya in the order on the writ petition filed by Atibir Industries observed that the bank acted hastily in completing the assignment process in favour of CFM ARC.
With the entire remaining tenure shifted, the 90-day period for classifying the account as NPA should have commenced from September 1, 2020.
Therefore, classifying Atibir Industries as NPA from October 16, 2020, was premature and clearly violated the RBI circular for relief during the Covid-19 pandemic, the order said.
A CFM ARC spokesperson did not respond while SBI could not be immediately reached for comment.
Considering the moratorium had been extended until August 31, 2020, the due date for marking the account as overdue was shifted to September 1, 2020.
The bank should have waited for 90 days thereafter, the order said.
SBI has the option to file a special leave petition in the Supreme Court, a lawyer said.
Atibir Industries, incorporated in 2000 and promoted by Santosh Kumar Sarawgi, is a Jharkand-based manufacturer of sponge iron and pig iron according to a Care Ratings report of 2021.
