
The Supreme Court overturned a directive on Monday that required the Central Bureau of Investigation (CBI) to investigate why seven banks provided loans to Simbhaoli Sugars, a company based in Uttar Pradesh, despite knowing about its history of defaults.
The bench, headed by Chief Justice of India Dhananjaya Y Chandrachud, absolved the State Bank of India, Punjab National Bank, Bank of India, UCO Bank, and ICICI Bank from any responsibility. Justices JB Pardiwala and Manoj Misra also served on the bench and stated that the Allahabad High Court had overstepped its jurisdiction by ordering a federal investigation into a matter unrelated to the case before it.
Simbhaoli Sugars had approached the high court last year seeking to have a letter from SBI, which rejected the company’s settlement offer and threatened legal action for non-repayment of loans, quashed.
In its order on Monday, the Supreme Court stated, “We set aside the high court order directing the CBI investigation. However, our order does not prevent the Reserve Bank of India or any other authority from investigating any alleged misconduct or fraud.” The court clarified that its decision to overturn the high court judgment would not affect the proceedings involving the company and the banks before the National Company Law Tribunal.
Simbhaoli Sugars, represented by senior counsel Mukul Rohatgi, requested the court’s intervention in persuading SBI and other banks to consider their settlement plan. However, Solicitor General Tushar Mehta, appearing for SBI, objected to the proposal, stating, “When they owe ₹1,300 crore, they cannot offer us ₹300 in settlement.”
The bench advised Rohatgi to present all arguments before the company law tribunal and refrained from issuing any orders.
On December 12, the Allahabad High Court had ordered a CBI investigation, noting that it was shocked by the connivance of some bank officers and the company, which had led to the misuse of nearly ₹900 crore of public funds.
The high court stated, “This is a shocking case of clear connivance between unscrupulous businessmen and banks, where bank officials knowingly allowed the petitioner to siphon away almost ₹1,300 crore of public money. The banks had extended loans worth hundreds of crores to the petitioner company, despite knowing that they had already defaulted on loans taken from other banks and had been declared non-performing assets. The banks approved loans worth several hundred crores without following the mandatory steps and procedures required before disbursing the loan.”
The high court directed the CBI to investigate all seven banks regarding the sanctioning of loans in violation of guidelines and circulars issued by the central bank. It also called for a probe into the bank officers who approved these loans and those who failed to take effective measures to recover the loans.