Supreme Court flags ‘casual’ big-ticket lending by banks, says small borrowers face ‘borderline harassment’

Justices Ahsanuddin Amanullah and R Mahadevan said they cannot shut their eyes to the conduct of the SBI.

The Supreme Court dismissed the plea of the Haryana-based company that defaulted on an Rs 8.09-crore SBI loan within months of availing it.

“It is coming to the notice of the court that the banks in general, including the 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 Supreme Court bench said on May 19.

Supreme Court questions banking practices

• We cannot shut our eyes to the conduct of the SBI, the Supreme Court stated.
• In the present case, we find that there has been negligence on the part of the SBI and its officials in granting/sanctioning a huge loan of Rs 8,09,00,000 to the company, for the reason that the petitioners could not even start repaying and defaulted at the very first instance.
• 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.
• Whilst recording our displeasure at such workings, we leave it for a more fit case where specific orders may be called for against such practices of the banks in general, including the SBI.
• Lest we be misunderstood, be it noted that we are in no way suggesting easing of norms and requirements for loan facilities, which is best left to the Reserve Bank of India and the bank(s) concerned, but the procedure so adopted can certainly be made easier and fairer for loan-seekers/applicants and thereafter at the stage of recovery also.
• Further, concerning concessions/incentives, the policy needs to be suitably framed/graded to give the maximum benefit to the persons who are at the lowest rung of the social/financial strata.

Loan turned NPA within months

• According to the order, Bhaskar International Private Limited had availed a loan facility of Rs 8.09 crore from SBI in 2019.
• However, the company failed to repay even a single instalment, leading the bank to classify the account as a non-performing asset (NPA) on July 29, 2019 within roughly five to six months of the loan being granted.
• SBI subsequently initiated recovery proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act.
• The bank approached the district magistrate, Yamuna Nagar, under Section 14 of the Act seeking possession of the secured assets, and an order in its favour was passed on May 29, 2024.
• When the order was allegedly not implemented, SBI moved the Punjab and Haryana High Court through a writ petition.
• On January 16, 2025, the high court directed the authorities concerned to execute the district magistrate’s order and facilitate physical possession of the properties within two months.

Borrowers claimed revival was possible

Appearing for the petitioners, Senior Advocate Nachiketa Joshi argued that the account had been wrongly declared an NPA and contended that the borrowers had already offered to repay the entire principal amount. He further submitted that the company could revive its operations if granted limited assistance and time.

Joshi argued that the bank had not yet taken a final decision on the proposal to repay the principal amount and, therefore, the move to take possession of the company’s assets was arbitrary and premature.

SBI, however, strongly opposed the plea. Senior Advocate Archana Pathak Dave, appearing for the bank, argued that the company had obtained the loan on commercial terms and had defaulted from the very beginning without paying even a single instalment.

She also informed the Supreme Court that the borrowers had already approached the Debts Recovery Tribunal-II (DRT), Chandigarh, challenging the recovery action and seeking interim relief, but no favourable order had been passed.

‘Too little, too late’

The Supreme Court agreed with SBI’s contention and came down heavily on the conduct of the borrowers. “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,” it said.

The court further termed the company’s offer to repay the principal amount in 2025, nearly six years after taking the loan, as “too little too late”.

The judges also took note of the fact that the company had already moved the DRT and sought interim relief there, observing that the petitioners appeared to be attempting parallel remedies instead of pursuing the statutory route consistently.

Limited protection granted

While declining to interfere with the high court’s order and dismissing the special leave petition, the Supreme Court nevertheless granted the borrowers a brief window of protection. The court directed that the status quo on the properties be maintained for two weeks, till June 2, 2026, to allow the petitioners to press for interim relief before the DRT if they had not already done so.

At the same time, the Supreme Court clarified that its observations would neither aid the borrowers on merits nor prejudice SBI’s case before the DRT, the Debts Recovery Appellate Tribunal, or any other forum.