​The Supreme Court on Monday overturned a directive that the Central Bureau of Investigation (CBI) should look into why seven banks gave Simbhaoli Sugars, an Uttar Pradesh-based company, several loans even though they knew the company had a history of defaults.

The banks let off the hook by a bench headed by Chief Justice of India Dhananjaya Y Chandrachud included the State Bank of India, Punjab National Bank, Bank of India, UCO Bank and ICICI Bank.

The bench, which also comprised justices JB Pardiwala and Manoj Misra, observed that the Allahabad high court exceeded its jurisdiction in ordering a federal probe when the issue before it was completely different.

Simbhaoli Sugars had approached the high court last year with a plea for quashing a letter issued to it by SBI, rejecting the company’s settlement offer and warning it of legal action for not repaying loans, it pointed out.

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“We set aside the impugned high court order directing the CBI investigation. However, we make it clear that our order does not preclude the Reserve Bank of India or any other authority from investigating any alleged act of misdemeanor or fraud,” the top court said in its order on Monday.

The setting aside of the high court judgment would not have any independent bearing on the proceedings involving the company and the banks before the National Company Law Tribunal, it added.

Simbhaoli Sugars, represented by senior counsel Mukul Rohatgi, sought indulgence of the court in persuading SBI and other banks to consider their settlement plan.

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But solicitor general Tushar Mehta, appearing for SBI, objected. “When they have an outstanding of ₹1,300 crore, they cannot offer us ₹300 in settlement,” Mehta said.

The bench asked Rohatgi to make all contentions before the company law tribunal and refrained from issuing any order.

By an order on December 12, the Allahabad high court had ordered a CBI probe, saying the episode shocked the conscience of the court as to how few of the bank officers in connivance of the company advanced almost ₹900 crore of public money and allowed it to siphon it off.

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“This is a shocking case of clear connivance of unscrupulous businessman and banks, wherein the bank officials have knowingly allowed the petitioner to syphon away almost ₹1,300 crore of the public money. Here the banks had advanced hundreds of crores of rupees to the petitioner company knowing the fact that they have already defaulted with the loans taken by other banks previously and been declared NPA (non-performing assets), still the banks went ahead and approved loans running into several hundred crores and the entire loan was disbursed without following the mandatory steps/procedures, which banks are supposed to take before disbursing the loan,” said the high court.

It directed the CBI to investigate all seven banks as to how loans were sanctioned in contravention of the guidelines and circulars issued by the central bank. The high court order further preferred a probe against the officers of the banks who granted such approvals and those who failed to take effective steps to recover the loans.