Banks are lenient with big borrowers, harsh with common people: Supreme Court slams SBI while refusing relief to defaulting company

In a significant order dealing with recovery proceedings under the SARFAESI Act, the Supreme Court of India refused to interfere with action initiated by the State Bank of India against a company that had defaulted on an Rs.8.09 crore loan almost immediately after availing it.At the same time, the Court made strong remarks about the functioning of banks and observed that while large borrowers are often granted huge loans casually, ordinary people seeking small loans are subjected to far stricter scrutiny and cumbersome procedures, which in some cases may even amount to “borderline harassment.”The matter was heard by a Bench of Justice Ahsanuddin Amanullah and Justice R. Mahadevan in a Special Leave Petition filed by M/s Bhaskar International Private Limited and others against SBI. M/s Bhaskar International Private Limited v. State Bank of IndiaHow the Dispute Reached the Supreme CourtThe dispute arose out of a loan transaction entered into in 2019.According to the record, SBI had sanctioned a loan of Rs.8.09 crore to the petitioner company. However, within barely five to six months, the account was declared a Non-Performing Asset (NPA) on 29.07.2019 after the borrowers failed to repay instalments.SBI then filed a suit under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for possession of the secured assets. An application under Section 14 of the SARFAESI Act was filed before the District Magistrate, Yamuna Nagar, who passed an order on 29.05.2024 permitting assistance for taking physical possession of the mortgaged properties.Later, SBI approached the Punjab and Haryana High Court seeking implementation of the District Magistrate’s order. The High Court directed the authorities to execute the order and assist the bank in taking physical possession of the properties, preferably within two months.Challenging that direction, the borrowers moved the Supreme Court.Borrowers Claimed They Wanted to Repay the Principal AmountSenior advocate Nachiketa Joshi, appearing for the petitioners, argued that the account had been declared NPA in a completely arbitrary manner and contrary to SBI’s own policy framework.It was submitted that the borrowers had already offered to repay the entire principal amount and that the proposal was still pending consideration before the bank. The petitioners further claimed that the industrial unit could still be revived if some support and time were granted. They said that restarting the operations would not only benefit the company but also would be helpful for the economy and would keep the business going.The Court was urged to intervene and stop SBI from taking coercive possession action while the settlement proposal remained undecided.SBI Opposed the PleaAppearing for SBI, senior advocate Archana Pathak Dave opposed the petition and pointed out that the borrowers had not repaid even a single instalment after availing the loan. The bank also informed the Court that the borrowers have already approached the Debts Recovery Tribunal-II (DRT-II), Chandigarh and had filed a securitisation case challenging the bank's possession order.SBI pointed out that although interim relief had been sought before the DRT, no protective order had been passed in favour of the borrowers till date.According to the bank, the petitioners were attempting to pursue multiple remedies simultaneously while delaying lawful recovery proceedings.After hearing both sides, the Supreme Court made it clear that it was not impressed by the conduct of the borrowers.The Bench noted that the borrowers defaulted on the first instalment of the loan, which is over Rs.8 crore, and went on to default on any further instalment. The Court observed:“Immediately or soon thereafter, after availing a loan of Rs.8,09,00,000/-, defaulting on the very first instalment and ever since, not repaying even a single farthing to the respondent no.1-SBI, cannot be glossed over.”The Court also found the offer made by the borrowers to repay the principal amount after nearly six years to be unconvincing.The Bench remarked:“The offer to repay the principal amount in the year 2025 i.e., after about six years from availing the loan facility is, in our humble yet considered view, frankly, too little too late.”The Court further noted that once the borrowers had already chosen to approach the DRT and invoke statutory remedies there, they could not simultaneously attempt to secure overlapping reliefs before different forums.According to the Bench, the petitioners ought to have pursued one consistent legal remedy instead of attempting parallel proceedings.Court Then Turned Towards SBI’s ConductEven while refusing relief to the borrowers, the Supreme Court did not let SBI completely escape scrutiny.The Court observed that the facts of the case themselves raised concerns regarding the manner in which large loans are sanctioned by banks.The Bench noted that if a borrower defaults immediately after obtaining such a huge loan, it raises obvious questions about whether proper assessment of repayment capacity was undertaken before sanctioning the facility.The Court observed:“Tentatively, this is a clear indicator that a proper assessment was not made of the capacity of the borrower(s)-petitioners to repay the loan by the concerned officials of SBI.”The Bench then made broader remarks regarding banking practices in general.In one of the strongest observations in the order, the Court said:“It is coming to the notice of the Court that the banks in general, including respondent no.1-SBI is casual in granting loans of huge amounts to bigger entities but at the same time, very demanding apropos small loans where ordinary people come for personal requirement(s), yet subjecting them to more stringent conditions and a tedious process, which may amount to, in certain cases, borderline harassment.”The remarks of the Court showed that it was worried about the "mischief" that appeared to be being done by the corporate borrowers in comparison to the ordinary man or woman seeking a loan from the banks. Court Clarifies It Is Not Asking for Easier Loan NormsThe Bench clarified that it was not suggesting dilution of banking norms or financial safeguards. The Court stated that framing lending policies is best left to the Reserve Bank of India and the banks concerned. However, the Bench stressed that procedures adopted by banks could certainly be made “easier and fairer” for ordinary applicants and borrowers.The Court also noted that concessions and incentives should be designed to reach those at the lowest social and financial levels, first. The Bench requested SBI’s senior counsel to convey the Court’s concerns to the appropriate authorities within the bank.Ultimately, the Supreme Court refused to interfere with the High Court’s order directing implementation of the possession proceedings. However, as a final indulgence, the Court granted the borrowers limited protection for two weeks so that they could pursue interim relief before the Debts Recovery Tribunal.The Bench directed maintenance of status quo over the secured properties till 02.06.2026.The Court also clarified that its observations would neither help the borrowers on merits nor prejudice SBI before the DRT, Debts Recovery Appellate Tribunal, or any other forum.With these directions and observations, Special Leave Petition was dismissed.Petition for Special Leave to Appeal (Civil) No.3313/2025M/S BHASKAR INTERNATIONAL PRIVATE LIMITED & ORS. VERSUS STATE BANK OF INDIA & ORS.For Petitioners Mr. Nachiketa Joshi, Sr. Adv. Mr. Amit Sharma, Adv. Mr. Sai Shashank, Adv. Mr. Sandeep Singh, AoR Mr. S. Prasada Rao, Adv. Mr. Madhuraj Singh Inda, Adv.For Respondent(s) Mrs. Archana Pathak Dave, Sr. Adv. Mr. Siddharth Sangal, AoR Ms. Richa Mishra, Adv. Ms. Mrinalini Tandon, Adv. Ms. Kashish Tewatia, Adv. Mr. Samar Vijay Singh, AoR Ms. Sabarni Som, Adv. Mr. Aman Dev Sharma, Adv. Mr. Gaj Singh, Adv. Mr. Pushkar Sharma, Adv. Mr. Sachin Sharma, Adv.(The author of this article, Vatsal Chandra is a Delhi-based Advocate practicing before the courts of Delhi NCR.)