Equity Over Adjudication: Supreme Court Closes the Atibir Industries Debt Battle on Settlement Terms

Some commercial appeals are decided; others are resolved. Atibir Industries Co. Ltd. v. State Bank of India & Anr., 2026 INSC 1156, decided on 26 October 2026 by a Bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V. Mohana (judgment by Mohana, J.), belongs to the second category. Rather than rule on whether the borrower's account was validly classified as an NPA during the COVID-19 moratorium, or whether the bank's assignment of the loan to an asset reconstruction company was lawful, the Court balanced the equities — a running steel plant, its employees, a borrower that had already paid Rs 250 crore, and an assignee's commercial expectations — and imposed closure: a further Rs 125 crore within twelve weeks, in full and final settlement.

The tangle the Court inherited

The appeals reached the Supreme Court from a Calcutta High Court Division Bench judgment of 25 July 2024, which had reversed a Single Judge’s order in the borrower’s writ petition. Behind that lay a familiar post-pandemic pattern. The account of Atibir Industries — a manufacturer of sponge and pig iron with an operating plant and workforce — was classified as a non-performing asset with effect from 16 October 2020. The borrower contended the classification disregarded the Reserve Bank’s COVID-19 moratorium circulars. The lender, meanwhile, pursued every recovery lane open to it: an application before the Debts Recovery Tribunal at Kolkata, a petition under Section 7 of the Insolvency and Bankruptcy Code before the NCLT, and notices under the SARFAESI Act. Then, with the writ still pending, the bank assigned the loan to an asset reconstruction company for Rs 250 crore. The borrower’s one-time settlement offers had gone nowhere.

The questions left open — deliberately

Two substantial questions of banking law were argued: whether the NPA classification could stand against the moratorium circulars, and whether the assignment of the debt, tested against Section 5 of the SARFAESI Act, was valid. The Court answered neither. It said so expressly, leaving both questions open, and chose a different instrument: a quantification exercise entrusted to Justice Anil R. Dave, a former Judge of the Court, to work out what, if anything, remained payable above the Rs 250 crore the borrower had already paid. The report was accepted with one modification. The Court noted candidly what the report recorded on both sides — the borrower had not adhered to all payment schedules, and the assignee had not produced its financial statements or borrowing details.

The operative package

Reading the judgment as precedent — and as practice

Because the legal questions were left open, the judgment settles no doctrine on COVID-era NPA classification or on the mechanics of loan assignments. Its significance is of a different kind. It shows the Supreme Court, in a commercial dispute where every forum had been activated — writ court, DRT, NCLT, SARFAESI — treating fragmentation itself as the problem to be solved. The Court gathered the strands, priced the dispute through a neutral quantification by a retired Judge, and exchanged finality for payment: the borrower buys peace and its securities back; the assignee receives a court-fixed sum promptly rather than a contested recovery slowly; the running business and its employees are spared the terminal uncertainty of insolvency.

For borrowers and lenders litigating parallel recovery proceedings, three practical notes emerge. First, equity follows conduct: the borrower’s substantial payments — Rs 250 crore before the appeal was decided — were the foundation on which equitable relief could be built. A litigant seeking a settlement-shaped outcome must come with performance, not just argument. Second, transparency cuts both ways: the Court pointedly recorded the assignee’s failure to produce its financials, a reminder that an entity resisting equitable adjustment while withholding its own numbers weakens its position. Third, court-imposed settlements carry self-executing sanctions; a default clause reviving all proceedings is now a standard feature, so timelines in such orders are to be treated as absolute.