Supreme Court Pushes SEBI on Sterling Biotech Settlement
The Supreme Court has directly challenged the Securities and Exchange Board of India (SEBI) to speed up its process for Sterling Biotech Limited (SBL) and its promoters, Chetan and Nitin Sandesara. The court reminded them that all proceedings, including SEBI's, would be dropped if the promoters paid Rs 5,100 crore. The Sandesara brothers met this condition in December 2025. However, SEBI’s lawyer asked for more time, saying talks were ongoing with the Solicitor General. This has made the court impatient, warning of serious action if SEBI delays further. The promoters’ lawyers noted the regulator’s hesitation. This regulatory hold-up is blocking the settlement funds from being released, showing how complicated it is to resolve large financial fraud cases. The Sandesara brothers, once fugitives accused of defrauding Indian banks of billions, have now offered the settlement sum as a final resolution to many criminal cases, including those under the Prevention of Money Laundering Act and the Fugitive Economic Offenders Act.
Lenders Face Huge Shortfall Despite Settlement
A group of 20 secured lenders, led by the State Bank of India, has asked the Supreme Court to release the Rs 5,100 crore settlement funds. The total debt owed by Sterling Biotech and its related companies is a massive Rs 19,283.77 crore. The Rs 5,100 crore settlement, while significant, covers only about 26% of the total dues, leaving lenders with a shortfall of over Rs 14,000 crore. The Enforcement Directorate (ED) had previously seized assets worth Rs 27,757 crore, far more than the settlement amount. The release process is further complicated because six of the 26 secured creditors, including HDFC Bank, have not yet submitted their claims and documents. The court ordered funds to be released immediately to the 20 compliant banks, while holding back the portion for the other six. The court directed on March 25th to release funds for compliant banks and their interest, keeping the rest. This shows the practical difficulties in getting money back.
Context: NPA Recovery Improves, But Big Defaults Remain Challenging
Sterling Biotech's complex recovery situation comes as Indian banking sector trends improve overall. Gross non-performing assets (NPAs) for public sector banks have dropped significantly, from 9.11% in March 2021 to 2.58% by March 2025. The Insolvency and Bankruptcy Code (IBC) has helped increase recovery rates, with about 61.29% of all recoveries coming through its process. However, the Sterling Biotech case, with fugitive promoters and a settlement much lower than the total debt, is tougher than general NPA data suggests. Separately, the Indian pharmaceutical sector is expected to grow by 7-11% in fiscal year 2026, boosted by local demand and European markets. This sector growth, however, doesn't directly cover the large losses banks face in complex fraud cases like Sterling Biotech.
Unresolved Debt and Scrutiny Over SEBI's Role
Lenders' main worry is the large remaining debt. The promoters' settlement resolves criminal issues but leaves banks with a significant amount unrecovered. The Sandesara brothers are accused of setting up a wide network of shell companies to move billions in loans. Their status as fugitives, living abroad despite extradition requests and Red Corner Notices, makes things more complicated. SEBI has acted decisively in other financial fraud cases, like penalizing executives at Seya Industries for misusing funds and falsifying accounts. But its slow action in the Sterling Biotech case raises questions about enforcing its own directives. The Supreme Court has also warned that the relief in this case should not set a precedent, highlighting its unique nature and the court's concern about deterring future economic offenders. Sterling Biotech Limited itself was liquidated and acquired by Perfect Day, Inc. in 2022, adding another layer to the history of asset recovery and outstanding debts. The large gap between the value of assets the ED seized and the settlement amount, combined with the settlement being only a quarter of total dues, means lenders face a tough road to full recovery.