SC Overturns CBI Probe Directive For Seven Banks In Simbhaoli Sugars Loan Matter

The Supreme Court overturned a directive on Monday regarding the Central Bureau of Investigation (CBI) investigating why seven banks provided loans to Simbhaoli Sugars, a company in Uttar Pradesh, despite its history of defaults.

Chief Justice of India Dhananjaya Y Chandrachud, along with justices JB Pardiwala and Manoj Misra, relieved the banks, including State Bank of India, Punjab National Bank, Bank of India, UCO Bank and ICICI Bank, from the investigation. The bench deemed that the Allahabad High Court had overstepped its jurisdiction by ordering a federal probe when the matter before it was distinct.

Simbhaoli Sugars had petitioned the high court last year to annul a letter from SBI, rejecting the company's settlement offer and threatening legal action for loan non-repayment.

In its ruling, the apex court stated, "We overturn the impugned high court order instructing the CBI investigation. However, our decision does not prevent the Reserve Bank of India or any other authority from examining any alleged misconduct or fraud." The court clarified that nullifying the high court's judgment wouldn't independently affect the proceedings involving the company and the banks before the National Company Law Tribunal.

Represented by senior counsel Mukul Rohatgi, Simbhaoli Sugars sought the court's intervention in persuading SBI and other banks to consider their settlement proposal. However, Solicitor General Tushar Mehta, representing SBI, opposed it, citing the outstanding amount of Rs 1,300 crore compared to the proposed Rs 300 settlement.

The bench directed Rohatgi to present all arguments before the company law tribunal and refrained from issuing any directives.

In a 12 December order, the Allahabad High Court had ordered a CBI investigation, expressing shock over how bank officers, in collusion with the company, granted nearly Rs 900 crore of public funds, which were subsequently misappropriated.

The high court emphasised the connivance between unscrupulous businessmen and banks, directing the CBI to probe the sanctioning of loans in violation of central bank guidelines. The order also recommended investigating bank officials who approved these loans and those who failed to take necessary steps for loan recovery.