Kerala High Court
M/S. M.D. Esthappan vs Reserve Bank Of India on 24 June, 2025
Author: Anil K. Narendran
Bench: Anil K. Narendran
2025:KER:45278
WA Nos.481 and 484 OF 2025 1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE ANIL K. NARENDRAN
&
THE HONOURABLE MR. JUSTICE MURALEE KRISHNA S.
TUESDAY, THE 24TH DAY OF JUNE 2025 / 3RD ASHADHA, 1947
WA NO. 481 OF 2025
AGAINST THE JUDGMENT DATED 11.03.2025 IN WP(C) NO.45166 OF
2024 OF HIGH COURT OF KERALA
APPELLANTS/PETITIONERS:
1 M/S. M.D. ESTHAPPAN,
REPRESENTED BY ITS SOLE PROPRIETOR, MR. M.D.
ESTHAPPAN, THROUGH POWER ATTORNEY HOLDER MR. BIJI
STEPHEN, HAVING ITS REGISTERED OFFICE ADDRESS AT: PLOT
NO. 434, BARI CO-OPERATIVE COLONY, BOKARO STEEL CITY,
BOKARO, ALSO AT 144, RAILWAY STATION NAGAR, NEAR ST.
JOSEPHS HIGH SCHOOL, ANGAMALY, ERNAKULAM, PIN - 683572
2 MR. M.D. ESTHAPPAN,
AGED 88 YEARS
THROUGH POWER ATTORNEY HOLDER MR. BIJI STEPHEN, S/O.
DEVASSY, 14/306, MOOLAN HOUSE, NH 47, NEAR ST. JOSEPH
HIGH SCHOOL, ANGAMALY, ERNAKULAM, PIN - 683572
BY ADVS.
SMT. MARIA NEDUMPARA
SHRI.SHAMEEM FAYIZ V.P.
RESPONDENTS/RESPONDENTS:
1 RESERVE BANK OF INDIA,
REPRESENTED BY ITS GOVERNOR, SHAHID BAGAT SINGH ROAD,
FORT MUMBAI, PIN - 400001
2 BOARD OF DIRECTORS OF DHANLAXMI BANK LTD.,
REPRESENTED BY ITS CEO & MANAGING DIRECTOR,
2025:KER:45278
WA Nos.481 and 484 OF 2025 2
DHANALAKSHMI BUILDINGS, P.B. NO. 9, NAICKANAL,
THRISSUR, KERALA, PIN - 680001
3 DHANLAXMI BANK LTD.,
REPRESENTED BY ITS CEO & MANAGING DIRECTOR,
DHANALAKSHMI BUILDINGS, P.B. NO. 9, NAICKANAL,
THRISSUR, KERALA, PIN - 680001
4 AUTHORISED OFFICER & CHIEF MANAGER,
DHANLAXMI BANK LTD., REGIONAL OFFICE, DHANALAKSHMI
BUILDINGS, 1ST FLOOR, MARINE DRIVE, KOCHI, KERALA, PIN
- 682031
5 THE CHAIRMAN,
EMPOWERED COMMITTEE ON MSMES, REPRESENTED BY THE
REGIONAL DIRECTORS OF THE RESERVE BANK OF INDIA, RBI
REGIONAL OFFICE, BAKERY JUNCTION, P.B. NO. 6507,
THIRUVANANTHAPURAM, PIN - 695033
6 CHAIRMAN,
STATE LEVEL INTER INSTITUTIONAL COMMITTEE, RBI
REGIONAL OFFICE, BAKERY JUNCTION, P.B. NO. 6507,
THIRUVANANTHAPURAM, PIN - 695033
7 CHAIRMAN,
PRIME MINISTER'S TASK FORCE ON MSMES, PRIME MINISTER'S
OFFICE, SOUTH BLOCK, NEW DELHI, PIN - 110001
8 CHAIRMAN,
WORKING GROUP ON REHABILITATION OF SICK MSMES, RESERVE
BANK OF INDIA, MUMBAI, PIN - 400001
9 BANKING CODES AND STANDARDS BOARD OF INDIA (BCSBI),
WORLD TRADE CENTRE COMPLEX, 6TH FLOOR, CENTRE 1
BUILDING, WORLD TRADE CENTRE COMPLEX, CUFF PARADE,
MUMBAI, PIN - 400005
10 UNION OF INDIA,
REPRESENTED BY SECRETARY, MINISTRY OF MICRO SMALL &
MEDIUM ENTERPRISES, UDYOG BHAWAN, RAFI MARG, NEW
DELHI, PIN - 110001
11 SECRETARY,
DEPT. OF BANKING, MINISTRY OF FINANCIAL SERVICES,
GOVERNMENT OF INDIA, 3RD FLOOR, JEEVAN DEEP BUILDING,
SANSAD MARG, NEW DELHI, PIN - 110001
12 STATE OF KERALA,
REPRESENTED BY ITS CHIEF SECRETARY, GOVERNMENT
2025:KER:45278
WA Nos.481 and 484 OF 2025 3
SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695001
13 GENERAL MANAGER,
DISTRICT INDUSTRIES CENTRE, ERNAKULAM, PIN - 682030
14 GAIL (INDIA) LTD.,
REPRESENTED BY ITS GENERAL MANAGER, KINFRA HI- TECH
PARK, OFF - HMT ROAD, HMT COLONY P.O., KALAMASSERY,
ERNAKULAM, PIN - 683503
15 BHARAT PETROLEUM CORPORATION LTD.,
REPRESENTED BY ITS MANAGING DIRECTOR, KOCHI REFINERY,
AMBALAMUGAL, ERNAKULAM, PIN - 682302
16 COCHIN SMART MISSION LTD.,
REPRESENTED BY ITS MANAGING DIRECTOR, 10TH FLOOR,
REVENUE TOWER, PARK AVENUE, ERNAKULAM, PIN - 682011
17 ADV. ROSHITHA A.U.,
ADVOCATE COMMISSIONER APPOINTED IN M.C. 203/2024 IN
THE FILES OF CJM, ERNAKULAM, DISTRICT BAR ASSOCIATION
ERNAKULAM, PIN - 682011
18 STATION HOUSE OFFICER,
ANKAMALY POLICE STATION, NEAR KSRTC STAND, ANKAMALY
P.O., KOCHI, PIN - 683572
19 ANIL DHIRAJLAL AMBANI,
SEA WIND, CUFF PARADE, MUMBAI, PIN - 400005
20 THE CHAIRMAN,
STATE BANK OF INDIA, CORPORATE CENTER, 16TH FLOOR,
MADAM CAMA ROAD, NARIMAN POINT, MUMBAI, PIN - 400021
BY ADV SHRI.C.DINESH, CGC
SMT.O M SHALEENA, DSGI
SMT. NISHA BOSE, SR. GP,
SRI.C K KARUNAKARAN, SC, DHANALAKSHMI BANK,
SRI.AJITHKRISHNAN, SCC, GAIL
SMT.M.U.VIJAYALAKSHMI, SC, CSML
SRI.JITHESH MENON, SC, SBI
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 12.06.2025,
ALONG WITH WA.484 of 2025, THE COURT ON 24.06.2025 DELIVERED THE
FOLLOWING:
2025:KER:45278
WA Nos.481 and 484 OF 2025 4
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE ANIL K. NARENDRAN
&
THE HONOURABLE MR. JUSTICE MURALEE KRISHNA S.
TUESDAY, THE 24TH DAY OF JUNE 2025 / 3RD ASHADHA, 1947
WA NO. 484 OF 2025
AGAINST THE JUDGMENT DATED 11.03.2025 IN WP(C) NO.46514 OF
2024 OF HIGH COURT OF KERALA
APPELLANTS/PETITIONERS:
1 M/S. M.D. ESTHAPPAN INFRASTRUCTURE PVT. LTD.,
REPRESENTED BY ITS AUTHORIZED REPRESENTATIVE, MR. BIJI
STEPEHEN HAVING ITS REGISTERED ADDRESS AT 144, RAILWAY
STATION NAGAR, NEAR ST. JOSEPH HIGH SCHOOL, ANGAMALY,
ERNAKULAM, PIN - 683572
2 MR. M.D. ESTHAPPAN,
AGED 88 YEARS
MANAGING DIRECTOR OF M.S. M.D. ESTHAPPAN
INFRASTRUCTURE PVT. LTD., THROUGH POWER ATTORNEY
HOLDER MR. BIJI STEPEHEN S/O. DEVASSY, 14/306, MOOLAN
HOUSE, NH 47, NEAR ST. JOSEPH HIGH SCHOOL, ANGAMALY,
ERNAKULAM, PIN - 683572
BY ADVS.
SMT. MARIA NEDUMPARA
SHRI.SHAMEEM FAYIZ V.P.
RESPONDENTS/RESPONDENTS:
1 RESERVE BANK OF INDIA,
REPRESENTED BY ITS GOVERNOR, SHAHID BHAGAT SINGH ROAD,
FORT, MUMBAI, PIN - 400001
2 BOARD OF DIRECTORS OF DHANLAXMI BANK LTD.,
2025:KER:45278
WA Nos.481 and 484 OF 2025 5
REPRESENTED BY ITS CEO & MANAGING DIRECTOR, REGISTERED
OFFICE, DHANALAKSHMI BUILDINGS, P.B NO. 9, NAICKANAL,
THRISSUR, KERALA, PIN - 680001
3 DHANLAXMI BANK LTD.,
REPRESENTED BY ITS CEO & MANAGING DIRECTOR,
DHANALAKSHMI BUILDINGS, P.B. NO. 9, NAICKANAL,
THRISSUR, KERALA, PIN - 680001
4 AUTHORISED OFFICER & CHIEF MANAGER,
DHANLAXMI BANK LTD., REGIONAL OFFICE, DHANALAKSHMI
BUILDINGS, 1ST FLOOR, MARINE DRIVE, KOCHI, KERALA, PIN
- 682031
5 MINISTRY OF MICRO SMALL AND MEDIUM ENTERPRISES,
REPRESENTED BY ITS SECRETARY, UDYOG BHAWAN, RAFI MARG,
NEW DELHI, PIN - 110001
6 UNION OF INDIA,
REPRESENTED BY ITS SECRETARY, DEPARTMENT OF FINANCIAL
SERVICES, MINISTRY OF FINANCE, 3RD FLOOR, JEEVAN DEEP
BUILDING, SANSAD MARG, NEW DELHI, PIN - 110001
7 STATE OF KERALA,
REPRESENTED BY ITS CHIEF SECRETARY, GOVERNMENT
SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695001
8 GENERAL MANAGER,
DISTRICT INDUSTRIES CENTRE, KAKKNADU, ERNAKULAM, PIN -
682030
9 CHAIRMAN,
EMPOWERED COMMITTEE ON MSMES, REGIONAL OFFICE, RESERVE
BANK OF INDIA, BAKERY JUNCTION, P.B. NO.6507,
THIRUVANANTHAPURAM, PIN - 695033
10 CHAIRMAN,
STATE LEVEL INTER-INSTITUTIONAL COMMITTEE, REGIONAL
OFFICE, RESERVE BANK OF INDIA, BAKERY JUNCTION, P.B.
NO. 6507, THIRUVANANTHAPURAM, PIN - 695033
11 GAIL (INDIA) LTD.,
REPRESENTED BY ITS GENERAL MANAGER, KINFRA HI- TECH
PARK, OFF - HMT ROAD, HMT COLONY P.O., KALAMASSERY,
ERNAKULAM, PIN - 680533
12 BHARAT PETROLEUM CORPORATION LTD.,
REPRESENTED BY ITS MANAGING DIRECTOR, KOCHI REFINERY,
AMBALAMUGAL, ERNAKULAM, PIN - 682302
2025:KER:45278
WA Nos.481 and 484 OF 2025 6
13 COCHIN SMART VISION LTD.,
REPRESENTED BY ITS MANAGING DIRECTOR, 10TH FLOOR,
REVENUE TOWER, PARK AVENUE, ERNAKULAM, PIN - 682011
BY ADV SHRI.C.DINESH, CGC
SMT.O M SHALEENA, DSGI
SMT. NISHA BOSE, SR. GP,
SRI.C K KARUNAKARAN, SC, DHANALAKSHMI BANK,
SRI.AJITHKRISHNAN, SCC, GAIL
SMT.M.U.VIJAYALAKSHMI, SC, CSML
SRI.JITHESH MENON, SC, SBI
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 12.06.2025,
ALONG WITH WA.481 OF 2025, THE COURT ON 24.06.2025 DELIVERED THE
FOLLOWING:
2025:KER:45278
WA Nos.481 and 484 OF 2025 7
"C.R"
JUDGMENT
Anil K. Narendran, J.
These writ appeals filed under Section 5(i) of the Kerala High
Court Act, 1958, arise out of the common judgment dated
11.03.2025 of the learned Single Judge in W.P.(C)Nos.45166 of
2024 and 46514 of 2024. The 1st appellant in W.A.No.481 of 2025,
arising out of W.P.(C)No.45166 of 2024, is M/s.M.D. Esthappan, a
sole proprietorship concern, and the 2nd appellant M.D. Esthappan
is the sole proprietor of the said concern. The 1 st appellant in
W.A.No.484 of 2025, arising out of W.P.(C)No.46514 of 2024, is
M/s.M.D. Esthappan Infrastructure Pvt. Ltd., a company
incorporated under the Companies Act, 1956, and the 2 nd
appellant M.D. Esthappan is the Managing Director of the said
company.
2. The appellants in W.A.No.481 of 2025 filed W.P.(C)No.
45166 of 2024 challenging the proceedings initiated by the 3 rd
respondent Dhanalaxmi Bank Ltd. under the provisions of the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act),
seeking the following reliefs;
2025:KER:45278
WA Nos.481 and 484 OF 2025 8
(a) To declare that the failure on the part of the Central
Government/RBI to implement the MSMED notification dated
29.5.2015, in particular, to ensure that the Board of Directors
of the Banks/financial institutions in this country, including the
Respondent Bank, constitutes a committee for ‘stressed
micro, small and medium enterprise’ and further to prevent
the Banks and NBFCs from classifying the account of an MSME
as NPA and resorting to recovery under the SARFAESI, RDB
Act, IBC, NI Act, etc. in violation of the prohibition to do so as
contained in Paragraph 1 and 5(4)(iii) of the said notification,
amounts to gross failure on their part to comply with the
statutory duty cast upon them under Sections 35, 35A, 35AA,
36, 36AA of the Banking Regulation Act and Sections 45-IE of
the Reserve Bank of India Act, and Sections 9 and 10 of the
MSMED Act;
(b) To declare that the entire proceedings initiated by the
Respondent Bank as against the petitioner in violation of the
notification dated 29.05.2015, which not a single bank/
financial institution in this country has given effect to, is
rendered void ab initio, still born, and that that alone is the
inevitable consequence because the notification does not
provide for any penal provision for violation thereof, and that
such an inevitable legal consequence is not lost or
extinguished simply because an MSME, which the law
recognizes as predominantly weak and financially illiterate,
had failed to raise such a plea;
(c) To declare that Section 13 of the SARFAESI Act, and
Section 19 of the RDB Act, Sections 7, 9, 10 and 95 of the IBC
are unconstitutional, ultra vires and void and are liable to be
so declared, inasmuch as the said enactments are wholly one-
2025:KER:45278
WA Nos.481 and 484 OF 2025 9
sided, drafted on the grossly erroneous premise that the right
to relief, nay, remedies, arise only at the hands of a banker
as against the borrower and that the enquiry to be conducted
is wholly one-sided, or in the alternative to declare that the
borrower’s right to be an actor/petitioner for the enforcement
of his remedies has to be read into the said Acts;
(d) To issue a writ in the nature of certiorari or any other
appropriate writ or order or direction calling for the entire
records and proceedings at the hands of the Authorised
Officer as well as the Addl. Chief Judicial Magistrate,
Ernakulam, leading to the order dated 27.06.2024 passed by
the Addl. CJM, Ernakulam, as also, the issuance of notice
dated 15.07.2024 by the Advocate Commissioner in
furtherance thereof, and to quash and set aside the same as
being without jurisdiction, in violation of fundamental
principles of judicial procedure and most importantly, being in
violation of Articles 14, 19 and 21 of the Constitution;
(e) To declare that Section 34 of the RDB Act, and Section 34
of the SARFEASI Act and Section 63 of the IBC which bar the
jurisdiction of the Civil Court to entertain and adjudicate the
Petitioner’s/borrower’s plea against the Respondent Bank nay,
bank/financial institution, is unconstitutional and void
inasmuch as the petitioners, victims of the gross breach of
contract, culpable negligence, malicious and tortious action,
so too, violation of the express statutory provisions at the
hands of the respondent Bank, are entitled to institute an
action/suit as against the respondent Bank for the
enforcement of the petitioners’ right as against them;
(f) Declare that the petitioner being an MSME within the
meaning of Sections 7 and 8 of the MSMED Act of 2006, it is
2025:KER:45278
WA Nos.481 and 484 OF 2025 10
entitled to the benefits of the said Act and, in particular, the
notification S.O.1432(E) dated 29.05.2015 issued by the
Central Government under Section 9 of the Act which provides
for a mechanism of resolution of stress of MSMEs, as also, the
circulars and guidelines issued by the Reserve Bank of India
under Section 10 of the MSMED Act and further that no
proceedings for recovery of the amounts due by the MSMEs
to banks/financial institutions, nay, even operational
creditors, shall lie against the petitioner under the SARFAESI
Act, RDB Act, IBC, Negotiable Instruments Act or any other
law, for recovery of the amounts allegedly due, inasmuch as
the MSMED Act being a special law/later law in relation to the
aforesaid enactments, the MSMED Act will prevail over them
and recovery can be made only in accordance with article
5(4)(iii) of the aforesaid notification dated 29.05.2015;
(g) Declare that the MSMED Act in so far as it has not created
a special forum/tribunal to enforce the inter-se rights and
obligations/remedies, which it has created in addition to those
rights/obligations/remedies recognized by the common law,
the jurisdiction of the Civil Court is not ousted, for it is
impossible to oust the jurisdiction of the Civil Court without
providing for an alternative forum/tribunal to adjudicate the
inter se disputes between parties who are governed by the
Act, and further as a corollary thereof, the DRTs, NCLTs
created under the RDB Act 1993 and the Companies Act 2013
are invested of no jurisdiction to adjudicate a dispute arising
out of/involving the MSMED Act;
(h) Declare that the entire recovery steps initiated by
respondent Bank under the SARFAESI Act or any other law, is
without jurisdiction, illegal and void inasmuch as the
2025:KER:45278
WA Nos.481 and 484 OF 2025 11
respondent are not entitled to take recourse to any form of
recovery of the amounts they claim to be due to them from
the petitioner except in the manner permitted by the
‘Committee for Corrective Action Plan’ contemplated in
notification S.O.1432(E) dated 29.05.2015, and further to
issue a writ in the nature of certiorari quashing and setting
aside the entire action taken by the respondent Bank under
Sections 13(2), 13(4) and 14 of the SARFAESI Act/Section 19
of the RDB Act;
(i) Declare that the petitioners are entitled to be compensated
from the respondents No.2 Bank for the loss and injury, which
it has suffered on account of the gross breach of contract and
trust, culpable negligence, and malicious and tortious action
at the hands of the Bank, financial institution and its officers,
which loss and injury far exceeds the very claim of the Bank
as against the petitioners and therefore, no amount is due to
the respondents by the petitioner and further that the
respondents have no enforceable rights as against the
petitioner;
(j) To issue a writ in the nature of mandamus or any other
appropriate writ/order or direction directing Central
Government and the RBI to enforce the notification dated
29.05.2015 in its true letter and spirit and further to direct
the Central Government and the RBI to ensure that recovery
action initiated against the petitioners in violation of the
mandate of the notification is recalled, the clock is put back,
the injustice which the petitioners is made to suffer is
redressed and that the petitioners is compensated in full
measure;
2025:KER:45278
WA Nos.481 and 484 OF 2025 12
(k) To issue a writ in the nature of prohibition restraining and
prohibiting respondent Bank/Financial institution, their
agents, servants, officers, representatives from taking any
action for recovery under the SARFAESI Act, IBC, Arbitration
and Conciliation Act, Recovery of Debts and Bankruptcy Act,
Negotiable Instruments Acts or any other law in respect of the
amounts they falsely claim to be due from the petitioners, in
particular restraining respondent no.4, from dispossessing the
petitioners of their properties;
(l) To issue a writ in the nature of mandamus or any other
appropriate writ/order or direction directing the respondent-
bank to constitute a committee for the resolution of the stress
in the unit of the petitioners Company, an MSME, as
contemplated in paragraph 2 of the notification dated
29.05.2015 issued under the MSMED Act, and further to direct
the Committee to resolve the stress in accordance with the
said notification and such other relevant notifications/
regulations framed by the RBI;
(m) To issue a writ in the nature of mandamus or any other
appropriate writ/order or direction directing respondents to
put the clock back in respect of the entire action initiated
under the SARFAESI Act, in particular, cancel the classification
of the petitioners’ loan accounts as NPA and the demand
notice dated 09.06.2021, putting the petitioners’ properties
to sale and further to make attempts to revive the petitioners’
business as mandated by the notification dated 29.05.2015;
(n) To declare that the various petitions which the petitioner
has instituted does not constitute a Cause of Action Estoppel,
nay, estoppel per rem judicatam/res judicata, not even issue
estoppel, inasmuch as there is no estoppel against statute,
2025:KER:45278
WA Nos.481 and 484 OF 2025 13
does not constitute cause of action estoppel, nay estoppel per
rem judicatam/res judicata, or even issue estoppel inasmuch
as the rights and remedies which the petitioner seeks to
enforce in the instant is based on the notification dated
29.05.2015, and for the added reason that in the previous
proceedings before the High Court of Kerala and other forums
there was never an adjudication on merits;
3. The interim relief sought for in W.P.(C)No.45166 of
2024 reads thus;
For the reasons stated in the above Writ Petition (Civil) and
the affidavit accompanying thereto, it is most humbly prayed
that this Hon’ble Court may be pleased to grant an ad-interim
injunction restraining and prohibiting the respondents, its
agents, servants and privies from proceeding any further in
furtherance of the action initiated under the SARFAESI Act,
RDB Act, or any other law in force, particularly the notice
issued by the Advocate Commissioner dated 15.07.2024.
4. The appellants in W.A.No.484 of 2025, i.e., M/s.M.D.
Esthappan Infrastructure Pvt. Ltd. and its Managing Director have
filed W.P.(C)No.46514 of 2024 seeking the following reliefs;
(i) To declare that the failure on the part of the Central
Government/RBI to implement the MSMED notification dated
29.05.2015, in particular, to ensure that the Board of
Directors of the Banks/financial institutions in this country,
including the respondent Bank, constitutes a committee for
‘stressed micro, small and medium enterprise’ and further to
prevent the Banks and NBFCs from classifying the account of
an MSME as NPA and resorting to recovery under the
2025:KER:45278
WA Nos.481 and 484 OF 2025 14
SARFAESI, RDB Act, IBC, NI Act, etc. in violation of the
prohibition to do so as contained in paragraph 1 and 5(4)(iii)
of the said notification, amounts to gross failure on their part
to comply with the statutory duty cast upon them under
Sections 35, 35A, 35AA, 36, 36AA of the Banking Regulation
Act and Section 45-IE of the Reserve Bank of India Act, and
Sections 9 and 10 of the MSMED Act;
(ii) To issue a writ in the nature of mandamus or any other
appropriate writ/order or direction directing the Central
Government and the RBI to enforce the notification dated
29.05.2015 in its true letter and spirit and further to direct
the Central Government and the RBI to ensure that recovery
action initiated against the petitioners in violation of the
mandate of the notification is recalled, the clock is put back,
the injustice which the petitioners is made to suffer is
redressed and that the petitioners is compensated in full
measure;
(iii) To declare that Section 13 of the SARFAESI Act, and
Section 19 of the RDB Act, Sections 7, 9, 10 and 95 of the
IBC are unconstitutional, ultra vires and void and are liable
to be so declared, inasmuch as the said enactments are
wholly one-sided, drafted on the grossly erroneous premise
that the right to relief, nay, remedies, arise only at the hands
of a banker as against the borrower and that the enquiry to
be conducted is wholly one-sided, or in the alternative to
declare that the borrower’s right to be an actor/petitioner for
the enforcement of his remedies has to be read into the said
Acts;
(iv) To declare that Section 34 of the RDB Act, and Section
34 of the SARFEASI Act and Section 63 of the IBC which bar
2025:KER:45278
WA Nos.481 and 484 OF 2025 15
the jurisdiction of the Civil Court to entertain and adjudicate
the petitioner’s/borrower’s plea against the respondent Bank
nay, bank/financial institution, is unconstitutional and void
inasmuch as the petitioners, victims of the gross breach of
contract, culpable negligence, malicious and tortious action,
so too, violation of the express statutory provisions at the
hands of the respondent Bank, are entitled to institute an
action/suit as against the respondent Bank for the
enforcement of the petitioners’ right as against them;
(v) To issue a writ in the nature of certiorari or any other
appropriate writ or order or direction calling for the entire
records and proceedings at the hands of the Authorised
Officer as well as the Addl. Chief Judicial Magistrate,
Ernakulam, leading to the order dated 27.06.2024 passed by
the Addl. CJM, Ernakulam, in furtherance thereof, and to
quash and set aside the same as being without jurisdiction,
in violation of fundamental principles of judicial procedure
and most importantly, being in violation of Articles 14, 19 and
21 of the Constitution;
(vi) To declare that the 1st petitioner being an MSME within
the meaning of Sections 7 and 8 of the MSMED Act of 2006,
it is entitled to the benefits of the said Act and, in particular,
the notification S.O.1432(E) dated 29.05.2015 issued by the
Central Government under Section 9 of the Act which
provides for a mechanism of resolution of stress of MSMEs,
as also, the circulars and guidelines issued by the Reserve
Bank of India under Section 10 of the MSMED Act and further
that no proceedings for recovery of the amounts due by the
MSMEs to banks/financial institutions, nay, even operational
creditors, shall lie against the petitioner under the SARFAESI
2025:KER:45278
WA Nos.481 and 484 OF 2025 16
Act, RDB Act, IBC, Negotiable Instruments Act or any other
law, for recovery of the amounts allegedly due, inasmuch as
the MSMED Act being a special law/later law in relation to the
aforesaid enactments, the MSMED Act will prevail over them
and recovery can be made only in accordance with article
5(4)(iii) of the aforesaid notification dated 29.05.2015;
(vii) To declare that the MSMED Act in so far as it has not
created a special forum/tribunal to enforce the inter-se rights
and obligations/remedies, which it has created in addition to
those rights/obligations/remedies recognized by the common
law, the jurisdiction of the Civil Court is not ousted, for it is
impossible to oust the jurisdiction of the Civil Court without
providing for an alternative forum/tribunal to adjudicate the
inter se disputes between parties who are governed by the
Act, and further as a corollary thereof, the DRTs, NCLTs
created under the RDB Act 1993 and the Companies Act 2013
are invested of no jurisdiction to adjudicate a dispute arising
out of/involving the MSMED Act;
(viii) To declare that the entire recovery steps initiated by
respondent Bank under the SARFAESI Act or any other law,
is without jurisdiction, illegal and void inasmuch as the
respondent are not entitled to take recourse to any form of
recovery of the amounts they claim to be due to them from
the petitioner except in the manner permitted by the
‘Committee for Corrective Action Plan’ contemplated in
notification S.O.1432(E) dated 29.05.2015, and quash and
set aside the entire action taken by the respondent Bank
under Sections 13(2), 13(4) and 14 of the SARFAESI
Act/Section 19 of the RDB Act;
2025:KER:45278
WA Nos.481 and 484 OF 2025 17
(ix) To declare that the petitioners are entitled to be
compensated from respondents No.2 Bank for the loss and
injury, which it has suffered on account of the gross breach
of contract and trust, culpable negligence, and malicious and
tortious action at the hands of the Bank, financial institution
and its officers, which loss and injury far exceeds the very
claim of the Bank as against the petitioners and therefore, no
amount is due to the respondents by the petitioner and
further that the respondents have no enforceable rights as
against the petitioner;
(x) To award damages of Rs.70 Crores for the loss and
injuries the petitioner was unjustly made to suffer by the
respondent Bank with a further interest at the rate of 12%
per annum from the date of a decree till the date of final
payment thereof;
(xi) To declare that the guidelines and notifications issued by
the Reserve Bank of India from time to time empowering the
bank and financial institutions to declare a borrower as a
willful defaulter is without authority of law, for such a
declaration amounts to a civil death and further that the
petitioners, nay, a borrower is not liable to be declared as a
willful defaulter except by the authority of an Act of
Parliament or statutory instrument having the force of law;
(xii) To declare that the entire recovery proceedings, under
the SARFAESI Act leading to the forceful taking of possession
of the petitioners’ properties and sale thereof, is illegal and
void ab initio, being in violation of express statutory
provisions and vitiated by fraud and further to quash and set
aside the same;
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WA Nos.481 and 484 OF 2025 18
(xiii) To issue a writ in the nature of prohibition restraining
and prohibiting respondent Bank/Financial institution, their
agents, servants, officers, representatives from taking any
action for recovery under the SARFAESI Act, IBC, Arbitration
and Conciliation Act, Recovery of Debts and Bankruptcy Act,
Negotiable Instruments Acts or any other law in respect of
the amounts they falsely claim to be due from the petitioner,
in particular restraining Respondent No.3, from dispossessing
the petitioner of his/his company’s properties;
(xiv) To issue a writ in the nature of mandamus or any other
appropriate writ/order or direction directing respondent No.2,
Board of Directors of the Dhanlaxmi Bank, to constitute a
committee for the resolution of the stress in the unit of the
petitioners Company, an MSME, as contemplated in
paragraph 2 of the notification dated 29.05.2015 issued
under the MSMED Act, and further to direct the Committee
to resolve the stress in accordance with the said notification
and such other relevant notifications/regulations framed by
the RBI;
(xv) To issue a writ in the nature of mandamus or any other
appropriate writ/order or direction directing respondents to
put the clock back in respect of the entire action initiated
under the SARFAESI Act, in particular, cancel the sale notice
dated 25.06.2024, putting the petitioner’s properties to sale
and further to make attempts to revive the petitioner’s
business as mandated by the notification dated 29.05.2015;
(xvi) To declare that the various petitions which the petitioner
has instituted does not constitute a Cause of Action Estoppel,
nay, estoppel per rem judicatam/res judicata, not even issue
estoppel, inasmuch as there is no estoppel against statute,
2025:KER:45278
WA Nos.481 and 484 OF 2025 19
does not constitute cause of action estoppel, nay estoppel per
rem judicatam/res judicata, or even issue estoppel inasmuch
as the rights and remedies which the petitioner seeks to
enforce in the instant is based on the notification dated
29.05.2015, and for the added reason that in the previous
proceedings before the High Court of Kerala and other forums
there was never an adjudication on merits;
(xvii) pass such further and other orders as the nature and
circumstances of the case may require.
5. The interim relief sought for in W.P.(C)No.46514 of
2024 reads thus;
To grant an ad-interim injunction restraining and prohibiting
the respondents, its agents, servants and privies from
proceeding any further in furtherance of the action initiated
under the SARFAESI Act, RDB Act, or any other law in force.
6. The writ petitioners in W.P.(C)No.46514 of 2024 filed
I.A.No.1 of 2025 to amend the writ petition, which was allowed by
the order dated 17.02.2025. Additional reliefs (xviii) to (xx)
incorporated by way of amendment read thus;
(xviii) To declare that the circular dated 17.03.2016
restricting, nay completely taking away, the benefit of the
notification dated 29.05.2015 from MSMEs whose credit limit
exceeds Rs.25 crores, is illegal, ultra vires the MSMED
Act/notification and void to that extent that it takes away
such right;
(xix) To declare that the circulars dated 17.03.2016,
26.06.2020, and 04.06.2021 are liable to be read together,
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WA Nos.481 and 484 OF 2025 20
and that by virtue of the circular dated 04.06.2021, the cap
of Rs.25 crores imposed by the RBI stands altered and
amended;
(xx) Without prejudice to reliefs (a) and (b) above, to issue
a writ in the nature of mandamus or any other appropriate
writ, order or direction, directing the RBI to remove the cap
of Rs.25 crores which it had imposed by circular dated
17.03.2016 or in the alternative to enhance it with
retrospective effect to a minimum of Rs.50 crores, taking into
account the revision of the definition of MSMEs from time to
time enhancing the upper limit manifold time;
7. W.P.(C)No.45166 of 2024 was filed by the appellants in
W.A.No.481 of 2025 invoking the writ jurisdiction of this Court
under Article 226 of the Constitution of India, seeking various
reliefs due to the proceedings initiated by the 3 rd respondent
Dhanalakshmi Bank Ltd., under the provisions of the SARFAESI
Act, by raising a contention that the 1 st appellant, namely, M.D.
Esthappan is an enterprise falling under the purview of the Micro,
Small and Medium Enterprises Development Act, 2006 (MSMED
Act) and the notifications issued thereunder and therefore, the
proceedings initiated by the 3rd respondent Bank under the
provisions of the SARFAESI Act, without following the procedure
contemplated in Ext.P2 notification dated 29.05.2015 issued by
the 5th respondent Ministry of Micro, Small and Medium
2025:KER:45278
WA Nos.481 and 484 OF 2025 21
Enterprises and Ext.P3 notification dated 17.03.2016 issued by
the 1st respondent Reserve Bank of India, cannot be sustained in
law. Further, Ext.P2 notification dated 29.05.2015 issued by the
5th respondent Ministry, in exercise of the powers conferred under
Section 9 of the MSMED Act, is binding on the 3 rd respondent
Bank, in view of Ext.P3 notification dated 17.03.2016 issued by
the 1st respondent Reserve Bank of India.
7.1. In W.P.(C)No.45166 of 2024, the document marked as
Ext.P1 is a copy of acknowledgment (Part I) issued by the
Department of Industries, Government of Kerala dated
06.07.2010, wherein it is stated that the 1st appellant has filed a
memorandum expressing its intend to set up an enterprise with
the activity stated therein, which is proposed to commence from
the date mentioned therein. Ext.P2 is the acknowledgement (Part
II) dated 28.10.2010; Ext.P3 is a copy of Udyog Aadhaar
Registration Certificate and Ext.P4 is a copy of Udyam Registration
Certificate issued by the 5th respondent Ministry of Micro, Small
and Medium Enterprises. The document marked as Ext.P5 is a
notification dated 29.05.2015 issued by the 5th respondent
Ministry, in exercise of the powers conferred under Section 9 of
the MSMED Act, to facilitate the promotion and development of
2025:KER:45278
WA Nos.481 and 484 OF 2025 22
Micro, Small and Medium Enterprises (MSMEs). Vide Ext.P5
notification, the 5th respondent Ministry notified the instructions
for the Framework for Revival and Rehabilitation of Micro, Small
and Medium Enterprises. Ext.P6 is a notification dated 17.03.2016
issued by the 1st respondent Reserve Bank of India, enclosing
therewith a copy of Ext.P5 instructions issued by the 5th
respondent Ministry. In Ext.P6, it is stated that, to provide a
simpler and faster mechanism to address the stress in the
accounts of MSMEs and to facilitate the promotion and
development of MSMEs, the 5th respondent Ministry vide Ext.P5
notification dated 29.05.2015 notified a Framework for Revival
and Rehabilitation of Micro, Small and Medium Enterprises.
However, certain changes in the framework have been carried out,
in consultation with the 5th respondent Ministry, to make it
compatible with the existing regulatory guidelines on ‘Income
Recognition, Asset Classification and Provisioning pertaining to
Advances’ issued by the Reserve Bank of India. Accordingly, a
revised framework along with the operating instructions is
furnished in the annexure to Ext.P6 notification, and the Board-
approved policy to operationalise the framework may be put in
place by the Banks, not later than 30.06.2016.
2025:KER:45278
WA Nos.481 and 484 OF 2025 23
7.2. In W.P.(C)No.45166 of 2024, the document marked as
Ext.P7 is a notice dated 16.08.2023 issued to the appellants and
two others, by the 4th respondent Authorised Officer of the 3rd
respondent Bank, invoking the provisions under Section 13(2) of
the SARFAESI Act in respect of the credit facilities availed by the
appellants, wherein it is stated that due to the default in
repayment of the secured loan/financial assistance in violation of
the stipulations in the sanction terms, loan agreements and
security documents, the Bank has classified the said accounts as
Non-Performing Asset (NPA), as defined in clause (o) of Section 2
of the SARFAESI Act, with effect from 31.07.2023. Ext.P8 is a copy
of the objection dated 11.10.2023 of the 1st appellant, under
Section 13(3A) of the SARFAESI Act, to Ext.P7 notice dated
16.08.2023 of the 4th respondent Authorised Officer, wherein it is
stated that the classification of the accounts as NPA, with effect
from 31.07.2023, violates Ext.P5 notification dated 29.05.2015
issued by the 5th respondent Ministry under Section 9 of MSMED
Act and Ext.P6 notification dated 17.03.2016 issued by the 1 st
respondent Reserve Bank of India. The 4th respondent received
Ext.P8 objection on 16.10.2023, to which Ext.P9 reply dated
18.10.2023 was issued, pointing out that the credit facilities
2025:KER:45278
WA Nos.481 and 484 OF 2025 24
availed by the appellants have already been classified as NPA as
on 16.08.2023, by allowing 60 days’ time to close the accounts.
Ext.P8 objection is only to protract the recovery proceedings
initiated by the Bank. On receipt of Ext.P9 reply, the 1 st appellant
submitted Ext.P10 representation dated 25.10.2023.
7.3. In W.P.(C)No.45166 of 2024, the document marked as
Ext.P11 is a copy of possession notice dated 31.10.2023 issued by
the 4th respondent Authorised Officer, wherein it is stated that the
amount that has to be repaid in respect of the loan accounts
comes to Rs.2,02,27,777.88 as on 31.07.2023 for overdraft and
Rs.20,98,242/- as on 09.07.2023 for Guaranteed Emergency
Credit Line (GECL) and interest thereon. On receipt of Ext.P11
possession notice, the 1st appellant submitted Ext.P12 objection
dated 02.11.2023. On receipt of the same, the 4th respondent
Authorised Officer issued Ext.P13 reply dated 03.11.2023,
wherein it is stated that the accounts were classified as NPA on
31.07.2023, strictly following all the norms, the extant guidelines
and after complying with regulatory prescriptions. Since the dues
were not settled, a notice under Section 13(2) of the SARFAESI
Act was issued and after the statutory period of the demand
notice, a possession notice was also issued. Ext.P13 reply was
2025:KER:45278
WA Nos.481 and 484 OF 2025 25
followed by Ext.P14 sale notice dated 25.06.2024 issued by the
4th respondent Authorised Officer. The 3rd respondent Bank filed
Ext.P15 application under Section 14 of the SARFAESI Act before
the Chief Judicial Magistrate Court, Ernakulam, in which the
Additional Chief Magistrate, Ernakulam, passed Ext.P16 order
dated 27.06.2024 in M.C.No.203 of 2024. Pursuant to Ext.P16
order passed by the Chief Judicial Magistrate Court, the Advocate
Commissioner issued Ext.P17 notice dated 15.07.2024.
7.4. The averments in W.P.(C)No.45166 of 2024 would
show that, challenging the proceedings initiated by the 3rd
respondent Bank under the provisions of the SARFAESI Act, the
appellants filed a Securitisation Application before the Debt
Recovery Tribunal-1, Ernakulam, as S.A.No.776 of 2023. They
have also filed Suit No.(ST)18939 of 2024 seeking MSME relief.
The document marked as Ext.P18 is a copy of a notification dated
26.06.2020 issued by the 5th respondent Ministry of Micro, Small
and Medium Enterprises, whereby certain criteria for classifying
an enterprise as Micro, Small and Medium Enterprises and the
form and procedure for filing the memorandum were notified.
Ext.P19 is a copy of the order dated 19.12.2023 of the National
Company Law Tribunal, Mumbai Bench-I in I.A.No.2429 of 2021
2025:KER:45278
WA Nos.481 and 484 OF 2025 26
in C.P.(IB)No.3025 of 2019 in respect of Reliance Projects and
Property Management Services Ltd. Ext.P20 is a copy of the order
dated 17.10.2024 of the National Company Law Tribunal, Mumbai
Bench in I.A.No.1773 of 2024 in C.P.(IB)No.916 (MB) of 2020.
7.5. In W.P.(C)No.45166 of 2024, the learned Standing
Counsel for the 3rd respondent Bank has filed a statement dated
28.01.2025, on behalf of respondents 2 to 4, opposing the reliefs
sought for in this writ petition, producing therewith Exts.R2(a) to
R2(d) documents, wherein it is stated that, the contention of the
writ petitioners that the Bank had failed to abide by Exts.P5 and
P6 notifications and failed to identify the incipient stress in the
account and communicate the same before classifying the
accounts as NPA, is untenable. Ext.R2(a) colly e-mail
communications had been sent on 26.07.2023, 15.07.2023,
14.06.2023, 16.06.2023 and 26.06.2023, whereby the Bank
informed the writ petitioners about the stress identified in various
accounts. The Bank held discussions with the writ petitioners on
the matter of incipient sickness/default and they agreed to take
measures to rectify the default. But they did not take any steps.
Ext.P21 was issued regarding the special restructuring of accounts
due to Covid-19. Ext.P21 does not relate to the restructuring of
2025:KER:45278
WA Nos.481 and 484 OF 2025 27
MSME accounts under Exts.P5 and P6 notifications. This said
benefit was given to the writ petitioners. Even after the accounts
were classified as NPA, the writ petitioners never approached the
Bank or the Committee. They only sought OTS and discussions
were held, as evident from Ext.R2(b) reply dated 27.08.2024 of
the Branch Manager, Angamaly Branch to Ext.R2(c) letter dated
26.08.2024 of the writ petitioners and also Ext.R2(d) reply dated
02.09.2024 of the Branch Manager.
7.6. In W.P.(C)No.45166 of 2024, the writ petitioners have
filed a reply affidavit dated 27.01.2025, producing therewith
Ext.P21 circular dated 04.06.2021 issued by the 1st respondent
Reserve Bank of India regarding revision in the threshold for
aggregate exposure and the document marked as Ext.P22 is a
copy of the order dated 15.05.2023 of the Apex Court in
SLP(C)No.6184 of 2023.
7.7. In W.P.(C)No.45166 of 2024, the 3 rd respondent Bank
has filed a counter affidavit dated 03.01.2025, opposing the reliefs
sought for. The writ petitioners had earlier filed writ petitions and
this is the third round of litigation. The earlier writ petitions were
disposed of, directing the writ petitioners to approach the
statutory authority, and the Securitisation Application filed by the
2025:KER:45278
WA Nos.481 and 484 OF 2025 28
2nd petitioner is pending consideration before the Debt Recovery
Tribunal, Ernakulam. Moreover, they have filed a similar writ
petition before the Bombay High Court seeking identical reliefs
and are attempting to evade the recovery proceedings initiated by
the 3rd respondent Bank. In the counter affidavit, it was
contended, inter alia, that the writ petition is an abuse of the
process of this Court, as the matter is within the jurisdiction of the
Debt Recovery Tribunal and ought to have been agitated before
that Tribunal. In the writ petition, various unconnected parties are
arrayed as the respondents, whose presence in the party array is
unnecessary, and this is merely an attempt by the petitioners to
delay the adjudication of this writ petition. The Bank had been
keeping the writ petitioners informed about the state of their
accounts, from time to time, and that unless the remedial steps
are taken, the accounts are likely to be declared as NPA. One such
e-mail is dated 26.07.2023. The said e-mail has been produced as
Annexure A8 in the Securitisation Application, i.e., S.A.No.776 of
2023, filed before the Debt Recovery Tribunal-1, Ernakulam, and
this aspect had not been brought to the notice of this Court by the
writ petitioners, which amounts to suppression of material facts.
Despite the receipt of the said e-mail, the writ petitioners did not
2025:KER:45278
WA Nos.481 and 484 OF 2025 29
take any remedial action. Consequently, the accounts were
classified as NPA. There is nothing on record to show that Exts.P1
to P4 were ever produced before Bank. Ext.P4 would show that
the Bank details indicated therein are of a different Bank and not
of the 3rd respondent Bank. At no point prior to declaring the
accounts as NPA, the 1st petitioner claimed that it is an MSME and
that it required the benefits under Exts.P5 and P6 notifications.
7.8. In the counter affidavit dated 03.01.2025 filed in
W.P.(C)No.45166 of 2024, the specific stand taken by the 3 rd
respondent Bank is that the writ petitioners have not made any
request for restructuring of the accounts before the accounts were
classified as NPA. In fact, Exts.P5 and P6 are public documents,
and the writ petitioners who had been in business since 1979
ought to have been aware of such notifications. The writ
petitioners have not disclosed the fact that a sister concern
M/s.M.D. Esthappan Infrastructure Pvt. Ltd., which is a family-held
company, has outstanding dues above Rs.36 Crores to the Bank,
and was not entitled to any benefits of Exts.P5 or P6 notifications.
Now, the said company has filed W.P.No.46514 of 2024 before this
Court. Under the Reserve Bank of India notifications/master
circulars, once one account of the borrower becomes NPA,
2025:KER:45278
WA Nos.481 and 484 OF 2025 30
automatically all other accounts relating to such borrower,
guarantors, etc. have to be declared as NPA. As the 1 st petitioner
sole proprietor concern in W.P.(C)No.45166 of 2024 – M/s.M.D.
Esthappan – and the 1st petitioner company in W.P.(C)No.46514 of
2024 – M/s.M.D. Esthappan Infrastructure Pvt. Ltd. – were
operating the business seamlessly, on the account of the said
company being classified as NPA, the account of the sole
proprietor concern was classified as NPA, as the 2nd petitioner in
both the writ petitions, namely, M.D. Esthappan is a guarantor for
both accounts, and the secured assets are common. Apart from
that, on its own, the account of the 1st petitioner in
W.P.(C)No.45166 of 2024 had become NPA due to its incipient
default. The 3rd respondent Bank would contend that Exts.P5 and
P6 notifications in no way supersede the RBI Notification regarding
prudential norms and classification of assets. There is no violation
of any of the statutory norms or the law laid down by the Apex
Court in Pro Knits v. Canara Bank [(2024) 10 SCC 292]. The
writ petitioners are not entitled to any of the reliefs sought for,
and the binding decision of the Division Bench of this Court in P.K.
Krishnakumar v. IndusInd Bank [2024 SCC OnLine Ker
6888] is squarely applicable to the facts of the case on hand.
2025:KER:45278
WA Nos.481 and 484 OF 2025 31
Therefore, there is nothing illegal in classifying the accounts as
NPA.
7.9. In the counter affidavit filed in W.P.(C)No.45166 of
2024, the 3rd respondent Bank pointed out that the 2nd petitioner
had earlier approached this Court challenging the classification of
the accounts of M/s.M.D. Esthappan Infrastructure Pvt. Ltd. as
NPA, by filing W.P.(C)No.38732 of 2023. This Court, by the
judgment in the said writ petition, relegated the 2 nd petitioner
herein to invoke the remedy provided before the statutory forum.
M/s.M.D. Esthappan Infrastructure Pvt. Ltd. filed another writ
petition, i.e., W.P.(C)No.22424 of 2024, when recovery steps were
taken against the secured assets. In that writ petition as well, this
Court found that no relief can be granted to the writ petitioner and
the same was disposed of by relegating the writ petitioner to avail
the statutory remedy provided before the Debt Recovery Tribunal.
In paragraphs 14 to 18 of the counter affidavit, the 3rd respondent
Bank has stated in categorical terms that there is nothing illegal
about the classification of the accounts of the 1st writ petitioner –
M/s.M.D. Esthappan – as NPA. The writ petitioners cannot
prosecute the matter simultaneously before various judicial
forums.
2025:KER:45278
WA Nos.481 and 484 OF 2025 32
7.10. The appellants in W.A.No.481 of 2025 have filed
I.A.No.1 of 2025 seeking an order to accept Ext.P23 sanction note
dated 14.03.2023 issued by the Authorised Signatory in the 3 rd
respondent Bank as an additional document. The appellants have
also filed I.A.No.2 of 2025 to accept Ext.P24 order dated
22.01.2025 of the Additional Chief Judicial Magistrate Court,
Ernakulam in M.C.No.1319 of 2024 and Ext.P25 notice dated
20.02.2025 issued by the Advocate Commissioner.
8. W.P.(C)No.46514 of 2024 was filed by the appellants in
W.A.No.484 of 2025, M/s.M.D. Esthappan Infrastructure Pvt. Ltd.
and its Managing Director. In the said writ petition, the writ
petitioners have placed on record Ext.P1 Udyam Registration
Certificate dated 27.03.2021 in the name of M/s.M.D. Esthappan
Infrastructure Pvt. Ltd. The document marked as Ext.P2 is a
notification dated 29.05.2015 issued by the 5th respondent
Ministry, in exercise of the powers conferred under Section 9 of
the MSMED Act, to facilitate the promotion and development of
MSMEs [Ext.P5 in W.P(C)No.45166 of 2024], notifying the
instructions for the Framework for Revival and Rehabilitation of
Micro, Small and Medium Enterprises. Ext.P3 is a notification
dated 17.03.2016 issued by the 1st respondent Reserve Bank of
2025:KER:45278
WA Nos.481 and 484 OF 2025 33
India [Ext.P6 in W.P.(C)No.45166 of 2024], enclosing therewith a
copy of Ext.P2 instructions issued by the 5th respondent Ministry.
The document marked as Ext.P4 is a notice dated 16.08.2023
issued to the appellants and two others, by the 4 th respondent
Authorised Officer of the 3rd respondent Bank, invoking the
provisions under Section 13(2) of the SARFAESI Act in respect of
the credit facilities availed by the appellants, wherein it is stated
that due to the default in repayment of the secured loan/financial
assistance in violation of the stipulations in the sanction terms,
loan agreements and security documents, the Bank has classified
the said accounts as Non-Performing Asset (NPA), as defined in
clause (o) of Section 2 of the SARFAESI Act, with effect from
31.07.2023. Ext.P5 is a copy of the objection dated 11.10.2023 of
the 1st appellant, under Section 13(3A) of the SARFAESI Act, to
Ext.P4 notice dated 16.08.2023 of the 4th respondent Authorised
Officer, wherein it is stated that the classification of the accounts
as NPA, with effect from 31.07.2023, violates Ext.P2 notification
dated 29.05.2015 issued by the 5th respondent Ministry under
Section 9 of MSMED Act and Ext.P3 notification dated 17.03.2016
issued by the 1st respondent Reserve Bank of India. The 4th
respondent received Ext.P5 objection on 16.10.2023, to which
2025:KER:45278
WA Nos.481 and 484 OF 2025 34
Ext.P6 reply dated 18.10.2023 was issued, pointing out that the
credit facilities availed by the appellants have already been
classified as NPA as on 16.08.2023, by allowing 60 days’ time to
close the accounts. Ext.P8 objection is only to protract the
recovery proceedings initiated by the Bank. On receipt of Ext.P6
reply, the 1st appellant submitted Ext.P7 representation dated
25.10.2023.
8.1. In W.P.(C)No.46514 of 2024, the document marked as
Ext.P8 is a copy of possession notice dated 31.10.2023 issued by
the 4th respondent Authorised Officer, wherein it is stated that the
amount that has to be repaid in respect of the loan accounts
comes to Rs.20,18,71,115.16 as on 31.07.2023 for overdraft,
Rs.3,45,50,471.10 as on 23.07.2023 for Guaranteed Emergency
Credit Line (GECL), Rs.3,44,94,251/- as on 01.08.2023 for
Funded Interest Term Loan (FITL), Rs.1,98,54,097/- as on
24.07.2023 for GECL and Rs.7,99,266/- as on 01.08.2023 for
vehicle loan and interest thereon. On receipt of Ext.P8 possession
notice, the 1st appellant submitted Ext.P9 objection dated
02.11.2023. On receipt of the same, the 4th respondent
Authorised Officer issued Ext.P10 reply dated 03.11.2023,
wherein it is stated that the accounts were classified as NPA on
2025:KER:45278
WA Nos.481 and 484 OF 2025 35
31.07.2023, strictly following all the norms, the extant guidelines
and after complying with regulatory prescriptions. Since the dues
were not settled, a notice under Section 13(2) of the SARFAESI
Act was issued and after the statutory period of the demand
notice, a possession notice was also issued. Ext.P10 reply was
followed by Ext.P11 sale notice dated 25.06.2024 issued by the
4th respondent Authorised Officer. The 3rd respondent Bank filed
an application under Section 14 of the SARFAESI Act before the
Chief Judicial Magistrate Court, Ernakulam, as M.C.No.203 of 2024
in which the Additional Chief Magistrate, Ernakulam, passed an
order dated 27.06.2024 [Ext.P16 in W.P.(C)No.45166 of 2024]. To
Ext.P12 lawyer notice dated 29.08.2024 issued on behalf of the
3rd respondent Bank, the writ petitioners, along with other two
guarantors, caused to issue Ext.P13 reply notice dated
06.09.2024. They challenged the classification of the accounts as
NPA, by filing W.P.(C)No.38732 of 2023. This Court, by Ext.P14
judgment dated 27.11.2023 closed the said writ petition, by
relegating them to invoke the remedy provided before the
statutory forum.
8.2. In W.P.(C)No.46514 of 2024, the document marked as
Ext.P15 is a copy of a notification dated 26.06.2020 issued by the
2025:KER:45278
WA Nos.481 and 484 OF 2025 36
5th respondent Ministry of Micro, Small and Medium Enterprises,
whereby certain criteria for classifying an enterprise as Micro,
Small and Medium Enterprises and the form and procedure for
filing the memorandum were notified. Ext.P17 is a copy of the
order dated 11.12.2024 of the High Court Judicature at Bombay,
whereby the writ petition filed by the writ petitioners herein was
dismissed as withdrawn, with liberty to approach this Court, where
the registered office of the 3rd respondent Bank is located. Ext.P18
is a copy of the order dated 19.12.2023 of the National Company
Law Tribunal, Mumbai Bench-I in I.A.No.2429 of 2021 in
C.P.(IB)No.3025 of 2019 in respect of Reliance Projects and
Property Management Services Ltd. Ext.P19 is a copy of the order
dated 12.06.2024 of the National Company Law Tribunal, Mumbai
Bench in I.A.No.807 of 2024 in C.P.(IB)No.917 (MB) of 2020.
Ext.P20 is a copy of the circular dated 04.06.2021 issued by the
1st respondent Reserve Bank of India, wherein it is stated that as
per clause 2 of the circular dated 05.05.2021 on Resolution of
Covid-19 related stress MSMEs, the eligibility conditions for MSME
accounts to be considered for restructuring under the framework,
which inter alia include sub-clause (iii) which states that the
aggregate exposure, including non-fund based facilities, of all
2025:KER:45278
WA Nos.481 and 484 OF 2025 37
lending institutions to the MSME borrower should not exceed
Rs.25 Crore as on 31.03.2021. Based on a review, it has been
decided to enhance the above limit from Rs.25 Crore to Rs.50
Crore. Consequently, clause 2(v) would stand modified as stated
in Ext.P20.
8.3. In W.P.(C)No.46514 of 2024, the learned Standing
Counsel for the 3rd respondent Bank has filed a statement dated
18.01.2025, on behalf of respondents 2 to 4, opposing the reliefs
sought for in this writ petition, adopting the averments in the
counter affidavit filed in W.P.(C)No.45166 of 2024. No documents
were produced by the writ petitioners before the 3rd respondent
Bank, prior to the classification of the accounts as NPA to show
that the 1st petitioner company was registered as MSME. Ext.P1
Udyam Registration Certificate dated 27.03.2021 has been
granted based on the Bank details of the State Bank of India and
not that of the 3rd respondent Bank. The Bank had been keeping
the Company informed about the state of their accounts from time
to time. The company was put on notice that unless remedial steps
are taken, the accounts are likely to be declared as NPA. The writ
petitioners did not take any remedial action and, consequently,
the accounts were classified as NPA on 31.07.2023. Even after
2025:KER:45278
WA Nos.481 and 484 OF 2025 38
classification as NPA, no restructuring proposal has been received.
The writ petitioners approached the Bank for OTS, which was not
acceptable to the Bank, hence it was rejected. The question of
maintainability of the writ petition was also raised in the statement
filed on behalf of respondents 2 to 4.
8.4. In W.P.(C)No.46154 of 2024, the writ petitioners have
filed a reply affidavit dated 16.02.2025, producing therewith
Ext.P21 order dated 31.01.2025 of the High Court of Judicature at
Bombay in Commercial Suit (L)No.38195 of 2024 and Ext.P22
order dated 04.02.2025 of the Additional Sessions Court, Bombay
in Suit (ST)No.18939 of 2024. Along with I.A.Nos.3 of 2024 and
4 of 2024, the writ petitioners have placed on record Ext.P23
sanction notice dated 30.12.2022 issued by the 3rd respondent
Bank [Ext.P23 in W.P.(C)No.45166 of 2024]. Along with I.A.No.5
of 2025, the writ petitioners have produced Ext.P24 order dated
22.01.2025 of the Additional Chief Judicial Magistrate Court,
Ernakulam in M.C.No.1319 of 2024 and Ext.P25 notice dated
20.02.2025 issued by the Advocate Commissioner.
9. After considering the rival contentions, the learned
Single Judge, by a common judgment dated 11.03.2025,
dismissed W.P.(C)Nos.45166 of 2024 and 46514 of 2024 on the
2025:KER:45278
WA Nos.481 and 484 OF 2025 39
ground that the writ petitioners have not made out any case for
the grant of the reliefs sought for in the writ petitions. Identical
issues have already been considered in the judgment dated
17.02.2025 in W.P.(C)No.45285 of 2024. As discernible from the
common judgment dated 11.03.2025 in W.P.(C)Nos.45166 of
2024 and 46514 of 2024, before the learned Single Judge, it was
not disputed that the claims presently raised have not been raised
in any previous litigations and they have been raised for the first
time only after the accounts have been classified as NPA. [see:
para.8, Page 19 of the judgment] Therefore, the learned Single
Judge found that in the light of the law laid down by the Apex
Court in Pro Knits v. Canara Bank [(2024) 10 SCC 292] and
by a Division Bench of this Court in P.K. Krishnakumar v.
IndusInd Bank [2024 SCC OnLine Ker 6888] the writ
petitioners are not entitled to any relief. The law laid down by the
Apex Court in Pro Knits [(2024) 10 SCC 292] is binding on the
High Court in terms of the provisions contained in Article 141 of
the Constitution of India, and the law laid down by the Division
Bench of this Court in P.K. Krishnakumar [2024 SCC OnLine
Ker 6888] is also binding on the learned Single Judge, as held by
a Full Bench of this Court in Raman Gopi v. Kunju Raman
2025:KER:45278
WA Nos.481 and 484 OF 2025 40Uthaman [2011 (4) KLT 458]. The learned Single Judge found
that the writ petitioners cannot have the luxury of conducting
piecemeal litigations where issues are deliberately fragmented
across separate proceedings to gain an unfair advantage, as held
by the Apex Court in Celir LLP v. Sumati Prasad Bafna [2024
SCC OnLine SC 3727]. The writ petitioners, who are the
borrowers, have pursued various proceedings before this Court,
the Bombay High Court, and the Debt Recovery Tribunal. The
learned Single Judge noticed that the writ petitioners/borrowers
do not appear to have raised any claim for the benefit of the
Exts.P2 framework and Ext.P3 guidelines issued by the Reserve
Bank of India [in W.P.(C)No.46514 of 2024] at any earlier stage
before this Court. The learned Single Judge noticed further that
Ext.R2(a) communication dated 28.01.2025 produced along with
the statement filed by the learned Standing Counsel for the 3 rd
respondent Bank in W.P.(C)No.45166 of 2024 indicates that the
Bank had actually informed the writ petitioners that their accounts
are in Special Mention Account (SMA) category and called upon
them to submit proposals. However, no proposals were submitted
by the writ petitioners. At least, when the writ petitioners had
received Ext.R2(a), they should have sought a reference to the
2025:KER:45278
WA Nos.481 and 484 OF 2025 41committee constituted in terms of Ext.P2. In Abdul Nazer v.
Union Bank of India [2023 (5) KHC 543], a learned Single
Judge of this Court held that, on a reading of clause (1) of the
Framework issued under the MSME Act, it can be seen that it is
only an optional framework available to the bank and the
borrower. The said framework in the notification cannot prevail
over the statutory provisions of the SARFAESI Act in the matter of
recovery of loans. As per Section 24 of the MSME Act, only the
provisions of Sections 15 to 23 are given precedence over other
laws. Section 9 or the notifications issued thereunder cannot
prevail over the statutory provisions of the SARFAESI Act. In the
decision of the Apex Court in Kotak Mahindra Bank Limited v.
Girnar Corrugators (P) Ltd. [(2023) 3 SCC 210], it has been
held that the SARFAESI Act will prevail over the MSME Act. In the
impugned judgment, the learned Single Judge noticed that Ext.P2
notification in W.P.(C)No. 46514 of 2024 has been issued in the
exercise of the power conferred by Section 9 of the MSMED Act.
Therefore, the learned Single Judge agreed with the view
expressed by the learned judge in Abdul Nazer [2023 (5) KHC
543]. The learned Single Judge noticed further that Ext.P3
guidelines in W.P.(C)No.46514 of 2024 issued by the Reserve Bank
2025:KER:45278
WA Nos.481 and 484 OF 2025 42of India provide that restructuring of loan accounts with exposure
of above Rs.25 Crore will continue to be governed by the extant
guidelines on Corporate Debt Restructuring (CDR)/Joint Lender’s
Forum (JLF) mechanism. It is not disputed that the liability in the
loan accounts, which are the subject matter of W.P.(C)No.46514
of 2024, are in excess of Rs.25 crore. Therefore, the petitioners in
W.P.(C)No.46514 of 2024 are not entitled to the benefit of Exts.P2
and P3. For all these reasons, the learned Single Judge found that
the writ petitioners are not entitled to any relief in the writ
petitions. The learned Single Judge also found that the question
of issuing notice to the Reserve Bank of India and the Union of
India in the Ministry of Micro, Small, and Medium Enterprises does
not arise as, on the facts of the cases, the legal issue stands
covered against the writ petitioners, as already noticed above.
Therefore, the writ petitions were dismissed by the impugned
common judgment.
10. Challenging the judgment dated 11.03.2025 in
W.P.(C)No.45166 of 2024, the appellants-writ petitioners have
filed W.A.No.481 of 2025. The judgment in W.P.(C)No.46514 of
2024 is under challenge in W.A.No.484 of 2025.
2025:KER:45278
WA Nos.481 and 484 OF 2025 43
11. On 12.03.2025, when W.A.No.481 of 2025 came up for
admission, a Division Bench of this Court directed the Registry to
place the matter for consideration before the Division Bench
headed by the Hon’ble Chief Justice, on 20.03.2025. The learned
Standing Counsel for the 3rd respondent Dhanlaxmi Bank
undertook that nothing would happen in the meanwhile. On
24.03.2025, when W.A.No.484 of 2025 came up for consideration,
it was ordered to be listed on 27.03.2025, along with W.A.No.481
of 2025.
12. On 10.04.2025, when W.A.No.481 of 2025 came up for
consideration along with W.A.No.484 of 2025, the learned counsel
for the appellants-writ petitioners contended that the decision of
the Division Bench in P.K. Krishnakumar v. IndusInd Bank
[2024 SCC OnLine Ker 6888] was rendered in different facts.
On 22.05.2025, when the writ appeals came up for consideration,
it was ordered that the undertaking recorded in W.A.No.481 of
2025 shall continue till 05.06.2025. Thereafter, it was ordered to
be continued till 12.06.2025.
13. On 12.06.2025, we heard detailed arguments of the
learned counsel for the appellants-writ petitioners and the learned
2025:KER:45278
WA Nos.481 and 484 OF 2025 44
Standing Counsel for Dhanlaxmi Bank for respondents 2 to 4 and
the writ appeals were reserved for judgment.
14. The learned counsel for the appellants-writ petitioners
contended that the writ petitioners-borrowers are entitled to the
benefits under Ext.P2 framework for revival and rehabilitation of
Micro, Small and Medium enterprises and that Ext.P2 is binding on
the 3rd respondent Bank in terms of Ext.P3 circular dated
17.03.2016 issued by the 1st respondent Reserve Bank of India.
The decision of the Apex Court in Pro Knits [(2024) 10 SCC
292] and the decision of the Division Bench in P.K.
Krishnakumar [2024 SCC OnLine Ker 6888] have no
application to the facts of the cases on hand. The contention to
that effect raised by the writ petitioners were not adverted to by
the learned Single Judge in the correct perspective. Other legal
contentions raised by the writ petitioners were also not properly
considered by the learned Single Judge. The learned counsel
would point out that the judgment of the Division Bench in P.K.
Krishnakumar [2024 SCC OnLine Ker 6888] is under
challenge before the Apex Court in SLP(C)No.29302 of 2024,
which is pending consideration. The common judgment of the
learned Single Judge dated 28.02.2025 in W.P.(C)Nos.39257 of
2025:KER:45278
WA Nos.481 and 484 OF 2025 45
2024 and 7991 of 2025 is under challenge in SLP(C)Nos.10896 of
2025 and 12783 of 2025, which are pending consideration before
the Apex Court.
15. Per contra, the learned Standing Counsel for
Dhanlaxmi Bank for respondents 2 to 4 would contend that the
issue raised in the writ petitions are covered by the decision of the
Apex Court in Pro Knits [(2024) 10 SCC 292] and the decision
of the Division Bench in P.K. Krishnakumar [2024 SCC OnLine
Ker 6888]. Therefore, the learned Single Judge cannot be found
fault with, in dismissing the writ petitions, for the reasons stated
in the impugned judgment, relying on the law laid down in the
said decisions. After considering the pleadings and materials on
record, the learned Single Judge rightly found that it was not
disputed that the claims presently raised by the writ petitioners
have not been raised in any previous litigations and that they have
been raised for the first time only after the accounts have been
classified as NPA.
16. In paragraphs 3 and 4 of the impugned judgment dated
11.03.2025, the learned Single Judge has referred to the
contentions advanced by the learned counsel for the writ
2025:KER:45278
WA Nos.481 and 484 OF 2025 46
petitioners. Paragraphs 3 and 4 of the impugned judgment read
thus;
“3. Sri. Mathews J. Nedumpara, the learned counsel
appearing for the petitioners would submit that the
borrowers are entitled to the benefits of the framework for
revival and rehabilitation of Micro, Small and Medium
Enterprises as contained in the notification produced as
Ext.P2 in W.P.(C)No.46514 of 2024. It is submitted that
Ext.P2 is binding on the Bank in terms of Ext.P3 Circular
dated 17.03.2016 issued by the RBI. It is submitted that,
when a unit is registered as MSME, Ext.P2 requires that the
loan account shall be referred to a committee known as the
Committee for Stressed Micro, Small and Medium
Enterprises for the implementation of a corrective action
plan which may include rectification and restructuring and
only when rectification or restructuring is not possible, can
the Bank proceed for recovery. It is submitted that the
framework contains detailed guidelines for
restructuring/rectification and any action for recovery
without considering the scope of rectification or
restructuring would be contrary to the statutory framework
and the guidelines issued by the RBI.
4. It is submitted that the judgment of the Supreme Court
in Pro Knits v. Canara Bank [(2024) 10 SCC 292] deals
with the situation where no claim was made by the unit in
question that it was an MSME. It is submitted that where
the Bank does not dispute that the borrower is an MSME,
the question of identification upon a claim being raised by
the borrower that the matter is to be referred to the
2025:KER:45278
WA Nos.481 and 484 OF 2025 47Committee for a corrective action plan as noticed above
does not arise. It is submitted that it is clear from the
judgment in Pro Knits (supra), especially paragraph No.16
thereof that where there are materials already before the
Bank which show that the borrower is to be classified as an
MSME, the failure of the Bank to refer the issue for
consideration of the Committee is clearly illegal and contrary
to the circulars issued by the RBI. It is submitted that the
judgment of the Division Bench of this Court in P.K.
Krishnakumar v. IndusInd Bank [2024 SCC OnLine
Ker 6888] does not lay down the correct law and cannot
be treated as a binding precedent. It is submitted that the
judgment of the Supreme Court in Zee Telefilms Ltd. v.
Union of India [(2005) 4 SCC 649] is the authority for
the proposition that no judgment should be read as a
statute. It is submitted that the recent judgment of the
Supreme Court in NBCC (India) Ltd. v. The State of
West Bengal [2025 SCC OnLine SC 73] establishes that
MSMEs are the backbone of the economy and provide
employment to 62% of the country’s workforce, contribute
30% to India’s GDP and account for around 45% of India’s
total exports. It is submitted that it is in this background
that the framework for revival and rehabilitation of MSMEs
has been conceived and, therefore, the rights conferred on
the borrowers under the provisions of the framework should
not be denied to them. It is submitted that the petitioners
are entitled to a direction that all proceedings under the
SARFAESI Act shall remain suspended till action in terms of
the Ext.P2 framework is taken by the respondent Bank. The
learned counsel also refers to the reliefs sought in both the
2025:KER:45278
WA Nos.481 and 484 OF 2025 48writ petitions and states that the matter should not be
decided without issuing notice to the various authorities,
including the RBI and the Union of India in the Ministry of
Micro, Small and Medium Enterprises.”
17. In paragraphs 5 and 6 of the impugned judgment dated
11.03.2025, the learned Single Judge has referred to the
contentions advanced by the learned Standing Counsel for the 3rd
respondent Bank. Paragraphs 5 and 6 of the impugned judgment
read thus;
“5. Sri. C.K. Karunakaran, the learned counsel appearing for
the respondent Bank, vehemently opposes the grant of any
relief to the petitioners. It is submitted that the issue raised
in these writ petitions is squarely covered against the
petitioners by the judgment of the Supreme Court in Pro
Knits (supra) as also the judgment of the Division Bench of
this Court in P.K. Krishnakumar (supra). It is submitted
that a reading of the judgment of the Supreme Court in Pro
Knits (supra) will indicate beyond doubt that a claim for
restructuring, etc., in terms of Ext.P2 framework will arise
only if such claim is made by the borrower prior to the
declaration of the account as ‘Non-Performing Asset’ (NPA).
It is submitted that, in the facts of the present case, no such
claim was made by the borrowers. The learned counsel
appearing for the respondent Bank referred to Ext.R2(a)
communication dated 28.01.2025 produced along with the
statement filed in W.P.(C)No.45166 of 2024 to contend that
the Bank had actually communicated to the borrowers in
2025:KER:45278
WA Nos.481 and 484 OF 2025 49these cases that they are in Special Mention Account (SMA)
category and calling upon the borrowers to submit a detailed
action plan in respect of the points mentioned in the
communication. It is submitted that the borrowers failed to
submit any action plan and therefore, the Bank was forced
to initiate proceedings under the SARFAESI Act against the
borrowers. It is submitted that, having failed to submit any
action plan pursuant to the communication issued by the
Bank before the account turned into a ‘NPA’ status, the
borrowers cannot now contend that they are entitled to be
considered in terms of Ext.P2. It is submitted that the
borrowers in these cases had conducted previous litigations
before this Court as is evident from Ext.P14 judgment in
W.P.(C)No.38732 of 2023. It is submitted that the Managing
Director of M/s.M.D. Esthappan Infrastructure Pvt. Ltd had
filed W.P.(C)No.22424 of 2024 before this Court. It is
submitted that the very same group has also filed
W.P.(C)No.35456 of 2024 before the High Court of Bombay
and has also approached the Debt Recovery Tribunal by
invoking Section 17 of the SARFAESI Act. It is submitted
that the borrowers had also initiated proceedings by filing a
civil suit as S.T. No.18939 of 2024 before the High Court of
Bombay. It is submitted that in the earlier round of
litigations conducted before this Court, the borrowers had
no case that they were entitled to the benefits of Exts.P2
and P3. It is submitted that in such circumstances, the issue
is clearly covered against the petitioners by the judgment of
the Division Bench of this Court in P.K. Krishnakumar
(supra).
2025:KER:45278
WA Nos.481 and 484 OF 2025 50
6. The learned counsel appearing for the respondent Bank
also submits that the petitioners in W.P.(C)No.46514 of
2024 are also not entitled to the benefit of Exts.P2 and P3
as it is clear from a reading of Ext.P3 guidelines issued by
the RBI that where the loan exposure is above Rs.25 crores,
the same will continue to be governed by the guidelines for
Corporate Debt Restructuring (CDR)/Joint Lenders’ Forum
(JLF) mechanism and not by Ext.P2 framework. It is
submitted that the liability of the petitioners in
W.P.(C)No.46514 of 2024 is in excess of Rs.25 crores. The
learned counsel for the respondent Bank also placed reliance
on the judgment of the Supreme Court in Celir LLP v.
Sumati Prasad Bafna [2024 SCC OnLine SC 3727] to
contend that the petitioners are not entitled to conduct
piecemeal litigations where issues are deliberately
fragmented across separate proceedings to gain an unfair
advantage. It is submitted that the issues raised by the
petitioners are also covered against the petitioners by the
judgment of this Court in W.P.(C)No.45285 of 2024, where
the very same contentions had been considered and
rejected following the law laid down in P.K. Krishnakumar
(supra).”
18. A reading of the impugned judgment dated 11.03.2025
of the learned Single Judge would show that though various reliefs
including declaratory reliefs were sought for in the writ petitions,
the arguments advanced by the learned counsel for the writ
petitioners were confined to the contentions referred to in
2025:KER:45278
WA Nos.481 and 484 OF 2025 51
paragraphs 3 and 4 of that judgment. The learned Single Judge
considered the said contentions with reference to the rival
contentions raised by the learned Standing Counsel for the 3 rd
respondent Bank, which were noted in paragraphs 5 and 6 of the
impugned judgment, and dismissed the writ petitions, after taking
note of the law laid down in the decisions referred to therein.
19. As already noticed hereinbefore, in W.P.(C)No.45166 of
2024, the document marked as Ext.P7 is a notice dated
16.08.2023 issued to the appellants and two others, by the 4 th
respondent Authorised Officer of the 3 rd respondent Bank,
invoking the provisions under Section 13(2) of the SARFAESI Act
in respect of the credit facilities availed by the appellants, wherein
it is stated that due to the default in repayment of the secured
loan/financial assistance in violation of the stipulations in the
sanction terms, loan agreements and security documents, the
Bank has classified the said accounts as Non-Performing Asset
(NPA), as defined in clause (o) of Section 2 of the SARFAESI Act,
with effect from 31.07.2023. Ext.P8 is a copy of the objection
dated 11.10.2023 of the 1st appellant, under Section 13(3A) of the
SARFAESI Act, to Ext.P7 notice dated 16.08.2023 of the 4 th
respondent Authorised Officer, wherein it is stated that the
2025:KER:45278
WA Nos.481 and 484 OF 2025 52
classification of the accounts as NPA, with effect from 31.07.2023,
violates Ext.P5 notification dated 29.05.2015 issued by the 5 th
respondent Ministry under Section 9 of MSMED Act and Ext.P6
notification dated 17.03.2016 issued by the 1st respondent
Reserve Bank of India. The 4th respondent received Ext.P8
objection on 16.10.2023, to which Ext.P9 reply dated 18.10.2023
was issued, pointing out that the credit facilities availed by the
appellants have already been classified as NPA as on 16.08.2023,
by allowing 60 days’ time to close the accounts. Ext.P8 objection
is only to protract the recovery proceedings initiated by the Bank.
On receipt of Ext.P9 reply, the 1st appellant submitted Ext.P10
representation dated 25.10.2023. Similarly, in W.P.(C)No.46514
of 2024 the document marked as Ext.P4 is a notice dated
16.08.2023 issued to the appellants and two others, by the 4 th
respondent Authorised Officer of the 3 rd respondent Bank,
invoking the provisions under Section 13(2) of the SARFAESI Act
in respect of the credit facilities availed by the appellants, wherein
it is stated that due to the default in repayment of the secured
loan/financial assistance in violation of the stipulations in the
sanction terms, loan agreements and security documents, the
Bank has classified the said accounts as Non-Performing Asset
2025:KER:45278
WA Nos.481 and 484 OF 2025 53
(NPA), as defined in clause (o) of Section 2 of the SARFAESI Act,
with effect from 31.07.2023. Ext.P5 is a copy of the objection
dated 11.10.2023 of the 1st appellant, under Section 13(3A) of the
SARFAESI Act, to Ext.P4 notice dated 16.08.2023 of the 4 th
respondent Authorised Officer, wherein it is stated that the
classification of the accounts as NPA, with effect from 31.07.2023,
violates Ext.P2 notification dated 29.05.2015 issued by the 5 th
respondent Ministry under Section 9 of MSMED Act and Ext.P3
notification dated 17.03.2016 issued by the 1st respondent
Reserve Bank of India. The 4th respondent received Ext.P5
objection on 16.10.2023, to which Ext.P6 reply dated 18.10.2023
was issued, pointing out that the credit facilities availed by the
appellants have already been classified as NPA as on 16.08.2023,
by allowing 60 days’ time to close the accounts. Ext.P8 objection
is only to protract the recovery proceedings initiated by the Bank.
On receipt of Ext.P6 reply, the 1st appellant submitted Ext.P7
representation dated 25.10.2023. In the impugned judgment, the
learned Single Judge noticed that Ext.R2(a) communication dated
28.01.2025 produced along with the statement filed by the
learned Standing Counsel for the 3rd respondent Bank in
W.P.(C)No.45166 of 2024 indicates that the Bank had actually
2025:KER:45278
WA Nos.481 and 484 OF 2025 54
informed the writ petitioners that their accounts are in Special
Mention Account (SMA) category and called upon them to submit
proposals. However, no proposals were submitted by the writ
petitioners.
20. In Kotak Mahindra Bank Ltd. v. Girnar
Corrugators (P) Ltd. [(2023) 3 SCC 210], a Two-Judge Bench
of the Apex Court was dealing with a case in which the Civil Appeal
filed by the appellant- secured creditor arose out of the judgment
of a Division Bench of the High Court of Madhya Pradesh at Indore
dated 11.08.2017 in W.A.No.248 of 2017, by which the Division
Bench allowed the said writ appeal preferred by the 1st respondent
therein and set aside the judgment passed by the learned Single
Judge, by holding that the Micro, Small and Medium Enterprises
Development Act, 2006 (MSMED Act) will prevail over the
Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (SARFAESI Act).
20.1. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210],
before the Apex Court, it was contended that there is no
repugnancy between the provisions of the SARFAESI Act and
the MSMED Act. The non-obstante clause in the MSMED Act, i.e.,
Section 24, provides that provisions under Sections 15 to 23 shall
2025:KER:45278
WA Nos.481 and 484 OF 2025 55
have effect notwithstanding anything inconsistent therewith
contained in any other law for the time being in force. Sections 15
to 23 of the MSMED Act only provide for a special mechanism for
adjudication of the dispute, along with enforcing certain other
contractual and business terms on the parties, such as the time
limit for payments and interest in case of delayed payments. It
was contended that the scheme of Sections 15 to 23 of the MSMED
Act clearly shows that there is no express ‘priority’ envisaged for
payments under the said Act over the dues of secured creditors or
any taxes or cesses payable to the Central Government or the
State Government or the local authority, as the case may be. In
sharp contrast to this, the scheme of the SARFAESI Act, including
in Section 26E thereof, leaves no room for doubt that the
legislature has expressly and unambiguously provided for a legal
framework exclusively on the issue of ‘priority’ of payment of dues.
In case of certain other legislations, there is an express provision
in the SARFAESI Act providing how the dues thereunder may
either have a charge over the property or have ‘priority over other
dues. Reference was made to the provisions of the Maharashtra
Value Added Tax Act, 2002; the Employees’ Provident Funds and
Miscellaneous Provisions Act, 1952; the Kerala General Sales Tax
2025:KER:45278
WA Nos.481 and 484 OF 2025 56
Act, 1963; the Workmen’s Compensation Act, 1923; the Central
Excise Act, 1944; the Enforcement of Security Interest and
Recovery of Debts Laws and Miscellaneous Provisions
(Amendment) Act, 2016; etc. In the absence of such express
provisions, there can be no basis to ignore the specific scheme of
the SARFAESI Act, in comparison to such specific scheme under
the MSMED Act, with regard to ‘priority’ of payments. Any such
‘priority’ over and above the dues of secured creditors or
Government dues has to be expressly and unambiguously
provided for and cannot be read by implication. Therefore, it was
contended that there is no conflict between the two schemes, i.e.,
the MSMED Act and the SARFAESI Act, as far as the specific
subject of ‘priority’ is concerned. Further, Section 26E of
the SARFAESI Act, being subsequently inserted vide an
amendment of the year 2016, the non-obstante clause in Section
26E of the said Act shall prevail over the provisions of
the MSMED Act. Reliance was placed on the decision of the Apex
Court in Bank of India v. Ketan Parekh [(2008) 8 SCC 148].
It was the case of the 1st respondent that in view of Section 24 of
the MSMED Act, which provides that the provisions of Sections 15
to 23 of the said Act would have overriding effect and shall have
2025:KER:45278
WA Nos.481 and 484 OF 2025 57
effect notwithstanding anything inconsistent therewith contained
in any other law for the time being in force, and since
the MSMED Act being a later enactment than the SARFAESI Act,
the MSMED Act would prevail over the MSMED Act.
20.2. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210],
after considering the rival contentions, the Apex Court noticed that
the short question which requires consideration is whether
the MSMED Act would prevail over the SARFAESI Act and whether
recovery proceedings/recoveries under the MSMED Act would
prevail over the recoveries made/recovery proceedings under the
provisions of the SARFAESI Act. The Apex Court found that
Sections 15 to 23 of the MSMED Act only provide for a special
mechanism for adjudication of the dispute, along with enforcing
certain other contractual and business terms on the parties, such
as the time limit for payments and interest in case of delayed
payments. In the entire MSMED Act, there is no specific express
provision giving ‘priority’ for payments under the said Act over the
dues of the secured creditors or any taxes or cesses payable to
the Central Government or the State Government or the local
authority, as the case may be. In sharp contrast to this, Section
26E of the SARFAESI Act, which has been inserted vide
2025:KER:45278
WA Nos.481 and 484 OF 2025 58
Amendment Act of 2016, it provides that notwithstanding anything
inconsistent therewith contained in any other law for the time
being in force, after the registration of security interest, the debts
due to any secured creditor shall be paid in ‘priority’ over all other
debts and all revenue taxes and cesses and other rates payable to
the Central Government or the State Government or local
authority. However, the priority to secured creditors in payment of
debt as per Section 26E of the SARFAESI Act shall be subject to
the provisions of the Insolvency and Bankruptcy Code (IBC).
Therefore, such dues vis-à-vis dues under the MSMED Act, as per
the decree or order passed by the Facilitation Council, debts due
to the secured creditor shall have a priority in view of Section 26E
of the SARFAESI Act, which is a later enactment in point of time
than the MSMED Act.
20.3. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210],
the Apex Court noticed that Section 26E of the SARFAESI Act,
which was inserted in 2016, also has a non-obstante clause. If the
two enactments have competing non-obstante provisions and
nothing repugnant, then the non-obstante clause of the
subsequent statute would prevail over the earlier enactments. As
per the settled position of law, if the legislature confers the later
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enactment with a non-obstante clause, it means the legislature
wanted the subsequent/later enactment to prevail. Thus, a
‘priority’ conferred/provided under Section 26E of
the SARFAESI Act would prevail over the recovery mechanism of
the MSMED Act. It has to be considered along with the fact that
under the provisions of the MSMED Act, more particularly Sections
15 to 23, no ‘priority’ is provided with respect to the dues under
the said Act, like Section 26E of the SARFAESI Act. Sections 15 to
23 of the MSMED Act provide a special mechanism for adjudication
of disputes and to adjudicate and resolve the disputes between
the supplier and buyer-micro or small enterprise. The said Act
does not provide any priority over the debt dues of the secured
creditor akin to Section 26E of the SARFAESI Act. At the most, the
decree/order/award passed by the Facilitation Council shall be
executed as such and the micro or small enterprise in whose
favour the award or decree has been passed by the Facilitation
Council shall be entitled to execute the same like other
debts/creditors. Therefore, considering the provisions of Sections
15 to 23, read with Section 24 of the MSMED Act and the
provisions of the SARFAESI Act, as such, there is no repugnancy
between the two enactments, viz. the SARFAESI Act and
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the MSMED Act. As such, there is no conflict between the two
schemes, i.e., the MSMED Act and the SARFAESI Act, as far as the
specific subject of ‘priority’ is concerned. The SARFAESI Act has
been enacted to regulate securitisation and reconstruction of
financial assets and enforcement of security interests and to
provide for a central database of security interests created on
property rights, and for matters connected therewith or incidental
thereto. The SARFAESI Act has been enacted to provide a specific
mechanism/provision for the financial assets and security
interests. It is a special legislation for the enforcement of security
interests created in favour of the secured creditor-financial
institution. Therefore, in absence of any specific provision for
priority of the dues under the MSMED Act, if dues under the said
Act would prevail over the SARFAESI Act, as contended by the 1st
respondent, then in that case, not only the object and purpose of
special enactment, i.e., the SARFAESI Act would be frustrated,
even the later enactment by way of insertion of Section 26E of
the SARFAESI Act would be frustrated. If the submission on behalf
of 1st respondent is accepted, then in that case, Section 26E of
the SARFAESI Act would become nugatory and would become
otiose and/or redundant. Any other contrary view would be
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defeating the provision of Section 26E of the SARFAESI Act and
also the object and purpose of the said Act.
20.4. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210],
on the facts of the case on hand, the Apex Court noticed that the
Naib Tahsildar was not at all justified in not taking possession of
the secured assets/properties as per order dated 24.09.2014
passed by the District Magistrate under Section 14 of
the SARFAESI Act. The order passed by the Naib Tahsildar refusing
to take possession of the secured assets/properties despite the
order passed under Section 14 of the SARFAESI Act on the ground
that recovery certificates issued by the 1st respondent for recovery
of the orders passed by the Facilitation Council are pending, is
wholly without jurisdiction. Under Section 14 of the SARFAESI Act,
the District Magistrate or the Chief Metropolitan Magistrate, as the
case may be, is required to assist the secured creditor in getting
the possession of the secured assets. Under Section 14 of
the SARFAESI Act, neither the District Magistrate nor the
Metropolitan Magistrate would have any jurisdiction to adjudicate
and/or decide the dispute even between the secured creditor and
the debtor. If any person is aggrieved by the steps under Section
13(4)/order passed under Section 14, then the aggrieved person
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has to approach the Debt Recovery Tribunal by way of
appeal/application under Section 17 of the SARFAESI Act.
Therefore, the order passed by the Naib Tahsildar refusing to take
possession pursuant to the order passed by the District Magistrate
under Section 14 of the SARFAESI Act was wholly without
jurisdiction and, therefore, the same was liable to be set aside. In
the result, the Apex Court set aside the judgment dated
11.08.2017 in W.A.No.248 of 2017 of the Division Bench of the
High Court of Madhya Pradesh at Indore and restored the
judgment by the learned Single Judge. The Apex Court held that
so far as recoveries under the SARFAESI Act with respect to the
secured assets would prevail over the recoveries under
the MSMED Act to recover the amount under the award/decree
passed by the Facilitation Council. As rightly observed by the
learned Single Judge, if the 1st respondent is aggrieved by the
order passed by the District Magistrate under Section 14 of
the SARFAESI Act, it will be open for him to initiate proceedings
under Section 17 of the SARFAESI Act, which will be considered in
accordance with law and on its merits and subject to Section 17
and other provisions of the SARFAESI Act.
21. In Pro Knits v. Canara Bank [(2024) 10 SCC 292],
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a Two-Judge Bench of the Apex Court was dealing with a batch of
Civil Appeals in which the appellants, who claim themselves to be
the Micro, Small and Medium Enterprises (MSMEs) registered
under the MSMED Act, have challenged the common judgment
dated 11.01.2024 passed by the High Court of Judicature at
Bombay in W.P.(L)No.20100 of 2023 and connected matters,
whereby the High Court dismissed the said writ petitions by
holding that the Banks/Non-Banking Financial Companies (NBFCs)
are not obliged to adopt the restructuring process as contemplated
in the Notification dated 29.05.2015 issued by the Ministry of
Micro, Small and Medium Enterprises, on its own without there
being any application by the petitioners/MSMEs. The High Court,
without expressing any opinion on the merits or the factual
aspects of the writ petitions, granted leave to the appellant-writ
petitioners to agitate the other issues by adopting alternative
remedies as may be available to them under the law.
21.1. In Pro Knits [(2024) 10 SCC 292], before the Apex
Court, the bone of contention raised by the learned counsel for the
appellants was that the respondent Banks could not have classified
the loan accounts of the appellants, who were the MSMEs, as non-
performing assets (NPAs), without following the procedure laid
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down in the Instructions for Framework for Revival and
Rehabilitation of MSMEs issued vide the Notification dated
29.05.2015 by the Ministry of Micro, Small and Medium
Enterprises, in exercise of the powers conferred under Section 9
of the MSMED Act. According to the learned counsel, it was
incumbent on the part of the respondent Banks/NBFCs to identify
incipient stress in the account by creating three sub-categories as
mentioned in the said notification and to explore various options
to resolve the stress in the account as contemplated in the said
notification. Further, the said notification and the subsequent
instructions/directions issued by the Central Government and the
Reserve Bank of India are for the purpose of facilitating the
promotion and development and enhancing the competitiveness
of MSMEs and, therefore, it was mandatory on the part of the
respondent Banks/NBFCs to follow the same. Non-observance of
the mandatory instructions contained in the said notification has
rendered all the subsequent actions taken by the respondent
Banks/NBFCs under the SARFAESI Act illegal and void ab initio.
Per contra, the learned counsel for the respondent Banks/NBFCs
contended that the High Court has rightly not considered the
process or procedure laid down in the notification dated
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29.05.2015 as mandatory, inasmuch as the provisions contained
in the SARFAESI Act override the provisions of the other Acts
including the MSMED Act, as per Section 35 of the said Act. The
learned counsel for the respondent Banks/NBFCs pointed out that
the appellants concerned had not applied to the respondent
Banks/NBFCs to avail the benefit of the said notification at the
relevant time and respondent Banks/NBFCs have already initiated
and in certain cases concluded the proceedings undertaken under
the SARFAESI Act, after following the due process of law. The
process of restructuring as contemplated in the said notification
and classification of borrower’s account as NPA are two
independent subjects and, therefore, it cannot be interpreted that
unless the procedure under the said notification for restructuring
is adopted, the appellants’ accounts could not have been classified
as NPAs. According to them, the instructions issued under Section
9 of the MSMED Act are mere directory and not mandatory nor do
they have any statutory force.
21.2. In Pro Knits [(2024) 10 SCC 292], before delving
into the issue involved in the appeals as to whether the notification
dated 29.05.2015 issued by the Central Government in exercise
of the powers conferred under Section 9 of the MSMED Act, as
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revised from time to time, is mandatory or directory, the Apex
Court had a glance over the relevant provisions of the MSMED Act.
The Apex Court noticed that the very object and purpose of
the MSMED Act is to provide for facilitating the promotion and
development and enhancing the competitiveness of Micro, Small
and Medium Enterprises and for matters connected therewith and
incidental thereto. Section 9 of the said Act empowers the Central
Government to take measures for the purpose of facilitating such
promotion and development and enhancing the competitiveness
of MSMEs by specifying the programmes, guidelines or
instructions as it may deem fit, by issuing notifications. Section 10
of the said Act states that the policies and practices in respect of
the credit to the Micro, Small and Medium Enterprises shall be
progressive and such as may be specified in the guidelines or
instructions issued by Reserve Bank, from time to time, to ensure
timely and smooth flow of credit to such enterprises, minimise the
incidence of sickness among and enhance the competitiveness of
such enterprises. Section 21 of the Banking Regulation Act, 1949,
empowers the Reserve Bank of India to control advances by
banking companies. The said section inter alia provides that where
the Reserve Bank is satisfied that it is necessary or expedient in
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the public interest or in the interest of the depositors or banking
policy so to do, it may determine the policy in relation to advances
to be followed by banking companies generally or by any company
in particular and when the policy has been so determined, all
banking companies or the banking company concerned, as the
case may be, shall be bound to follow the policy as so
determined. Sub-section (3) of Section 21 states that every
banking company shall be bound to comply with any directions
given to it under the said section. Section 35A of the said Act deals
with the power of the Reserve Bank to give directions. As per sub-
section (1) of Section 35A, where the Reserve Bank is satisfied
that in the public interest; or in the interest of banking policy; or
to prevent the affairs of any banking company being conducted in
a manner detrimental to the interests of the depositors or in a
manner prejudicial to the interests of the banking company; or to
secure the proper management of any banking company
generally, it is necessary to issue directions to banking companies
generally or to any banking company in particular, it may, from
time to time, issue such directions as it deems fit, and the banking
companies or the banking company, as the case may be, shall be
bound to comply with such directions. Thus, Section 21 read with
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Section 35A makes it clear that the directions issued by the
Reserve Bank of India to the banking companies are binding on
them and they are bound to comply with such directions.
21.3. In Pro Knits [(2024) 10 SCC 292], the Apex Court
noticed that the whole controversy in the appeals centered around
the notification dated 29.05.2015 issued by the Central
Government, in exercise of the powers conferred by Section 9 of
the MSMED Act, which contains the instructions for the Framework
for Revival and Rehabilitation of MSMEs. The Apex Court extracted
the relevant portion of the said notification in para.10 of the
judgment. The Apex Court noticed that the Reserve Bank of India,
in order to make the framework contained in the notification dated
29.05.2015 compatible with the existing regulatory guidelines on
‘Income Recognition, Asset Classification and provisioning
pertaining to Advances’ issued to the banks, made certain changes
in the said framework, in consultation with the Central
Government and issued revised framework along with the
operating instructions, vide the communication dated 17.03.2016
addressed to all the scheduled commercial banks. In exercise of
the powers conferred by Sections 21 and 35A of the Banking
Regulation Act, the Reserve Bank of India, after having being
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satisfied that it was necessary and expedient in the public interest
to do so, issued the master direction, i.e., the Reserve Bank of
India [Lending to Micro, Small and Medium Enterprises (MSME)
Sector] Directions, 2016, vide the notification dated 21.07.2016.
The said directions have been made applicable to every scheduled
commercial bank, excluding the Regional Rural Banks (RRBs)
licensed to operate in India by the Reserve Bank of India. Amongst
the other directions, direction 4 contained in Chapter IV pertained
to the common guidelines/instructions for lending to the MSME
sector. While advising all the scheduled commercial banks to follow
the guidelines/instructions pertaining to MSMEs, it was directed in
Direction 4.8 that the Ministry of Micro, Small and Medium
Enterprises, Government of India, vide their Gazette Notification
dated 29.05.2015 notified ‘Framework for Revival and
Rehabilitation of Micro, Small and Medium Enterprises’ to provide
a simpler and faster mechanism to address the stress in the
accounts of MSMEs and to facilitate the promotion and
development of MSMEs. The Reserve Bank was advised to issue
necessary instructions to banks for the effective implementation
and monitoring of the said framework. After carrying out certain
changes in the captioned framework, in consultation with the
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Government of India, Ministry of MSME, so as to make it
compatible with the existing regulatory guidelines on Income
Recognition, Asset Classification and provisioning pertaining to
Advances issued to banks by the Reserve Bank of India, the
guidelines on the captioned framework along with operating
instructions were issued to banks on 17.03.2016. The revival and
rehabilitation of MSME units having loan limits up to Rs.25 crores
would be undertaken under this framework. Banks were required
to put in place their own Board-approved policy to operationalise
the framework not later than 30.06.2016. The revised framework
supersedes the earlier ‘Guidelines on Rehabilitation of Sick Micro
and Small Enterprises’ issued vide circular dated 01.11.2012,
except those relating to reliefs and concessions for rehabilitation
of potentially viable units and One Time Settlement, mentioned in
the said circular. The salient features of the framework are that
before a loan account of an MSME turns into a Non-Performing
Asset (NPA), banks or creditors should identify incipient stress in
the account by creating three sub-categories under the Special
Mention Account (SMA) category as given in the Framework; any
MSME borrower may also voluntarily initiate proceedings under
this Framework; committee approach to be adopted for deciding
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corrective action plan; time lines have been fixed for taking
various decisions under the Framework. In view of the above, the
Apex Court held that the instructions for the Framework for
Revival and Rehabilitation of Micro, Small and Medium Enterprises
as notified by the Central Government, vide the notification dated
29.05.2015, in exercise of the powers conferred under Section 9
of the MSMED Act, as revised by the RBI Notification dated
17.03.2016, and the master directions, i.e., the Reserve Bank of
India [Lending to Micro, Small and Medium Enterprises (MSEM)
Sector] Directions, 2016, issued by the Reserve Bank of India, in
exercise of the powers conferred by Sections 21 and 35A of the
Banking Regulation Act, having statutory force, are binding on all
scheduled commercial banks, licensed to operate in India by the
Reserve Bank of India, as stated in the said directions. It cannot
be gainsaid that the Banking Regulation Act basically seeks to
regulate banking business and mandates a statutory,
comprehensive and formal structure of banking regulation and
supervision in India.
21.4. In Pro Knits [(2024) 10 SCC 292], the Apex Court
found that Sections 21 and 35A of the Banking Regulation Act
empower the Reserve Bank of India to frame the policy and give
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directions to the banking companies in relation to the advances to
be followed by the banking companies. Such directions are to be
read as a supplement to the provisions of the Banking Regulation
Act and accordingly are required to be construed as having
statutory force and are mandatory. As transpiring from the said
instructions/directions, the entire exercise as contained in the
Framework for Revival and Rehabilitation of MSMEs is required to
be carried out by the banking companies before the accounts of
MSMEs turn into a Non-Performing Asset. It is true that the
security interest created in favour of any bank or secured creditor
may be enforced by such creditor in accordance with the
provisions contained in Chapter III of the SARFAESI Act, and that
as per Section 35 of the SARFAESI Act, the provisions of the said
Act have the effect, notwithstanding anything inconsistent
therewith contained in any other law for the time being in force or
any instrument having effect by virtue of any such law. However,
pertinently the whole process of enforcement of security interest
as contained in Chapter III of the SARFAESI Act, could be initiated
only when the borrower makes any default in repayment of
secured debt or any instalment thereof, and his account in respect
of such debt is classified by the secured creditor as non-
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performing asset, in view of Section 13(2) of the said Act. What is
contemplated in the Framework for Revival and Rehabilitation of
MSMEs contained in the instructions/Directions stated
hereinabove, is required to be followed prior to the classification
of the borrower’s account (in the instant case MSMEs loan
account), as Non-Performing Assets. The said Instructions
contained in the Notification dated 29.05.2015 as part of
measures taken for facilitating the promotion and development of
MSMEs issued by the Central Government in exercise of powers
conferred under Section 9 of the MSMED Act, followed by the
directions issued by the Reserve Bank of India in exercise of the
powers conferred under Sections 21 and 35A of the Banking
Regulation Act, the banking companies though may be secured
creditors as per the definition contained in Section 2(zd) of
the SARFAESI Act, are bound to follow the same, before
classifying the loan account of MSME as Non-Performing Assets.
The Apex Court noticed that under the “Framework for Revival and
Rehabilitation of MSMEs”, the banks or creditors are required to
identify the incipient stress in the account of the Micro, Small and
Medium Enterprises, before their accounts turn into Non-
Performing assets, by creating three sub-categories under the
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“Special Mention Account” category, however, while creating such
sub-categories, the banks must have some authenticated and
verifiable material with them as produced by the MSME concerned
to show that loan account is of a Micro, Small and Medium
Enterprise, classified and registered as such under
the MSMED Act. Framework for Revival and Rehabilitation of
MSMEs also enables the Micro, Small or Medium Enterprise to
voluntarily initiate the proceedings under the said framework, by
filing an application along with the affidavit of an authorised
person. Therefore, the stage of identification of incipient stress in
the loan account of MSMEs and categorisation under the Special
Mention Account category, before the loan account of MSME turns
into Non-Performing Asset is a very crucial stage, and therefore it
would be incumbent on the part of the MSME concerned also to
produce authenticated and verifiable documents/material for
substantiating its claim of being MSME, before its account is
classified as Non-Performing Asset. If that is not done, and once
the account is classified as a Non-Performing Asset, the banks,
i.e., the secured creditors, would be entitled to take recourse to
Chapter III of the SARFAESI Act for the enforcement of the
security interest.
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21.5. In Pro Knits [(2024) 10 SCC 292], the Apex Court
noticed that sufficient safeguards have been provided under
Chapter III of the SARFAESI Act for safeguarding the interest of
the defaulters-borrowers for giving them opportunities to
discharge their debt. However, if at the stage of classification of
the loan account of the borrower as Non-Performing Asset, the
borrower does not bring to the notice of the bank/creditor
concerned that it is a Micro, Small or Medium Enterprise under
the MSMED Act and if such an enterprise allows the entire process
for enforcement of security interest under the SARFAESI Act to be
over, or it having challenged such action of the bank/creditor
concerned in the court of law/tribunal and having failed, such an
enterprise could not be permitted to misuse the process of law for
thwarting the actions taken under the SARFAESI Act by raising the
plea of being an MSME at a belated stage. Suffice it to say, when
it is mandatory or obligatory on the part of the Banks to follow the
instructions/directions issued by the Central Government and the
Reserve Bank of India with regard to the Framework for Revival
and Rehabilitation of MSMEs, it would be equally incumbent on the
part of the MSMEs concerned to be vigilant enough to follow the
process laid down under the said framework, and bring to the
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notice of the Banks concerned, by producing authenticated and
verifiable documents/material to show its eligibility to get the
benefit of the said framework. In that view of the matter, the Apex
Court held that the findings recorded by the High Court in the
impugned judgment that the banks are not obliged to adopt the
restructuring process on its own or that the framework contained
in the notification dated 29.05.2015, as revised from time to time
could not be said to be mandatory in nature, are highly erroneous
and cannot be countenanced. The instructions/directions issued
by the Central Government under Section 9 of the MSMED Act and
by the Reserve Bank of India under Section 21 and Section 35A
have statutory force and are binding on all the banking companies.
Therefore, the Apex Court set aside the impugned judgment of the
High Court [A. Navinchandra Steels (P) Ltd. v. Union of India,
(2024) 246 Comp Cas 402]. Since, it has been submitted by the
learned counsel for the respondent Banks that in all the cases, the
proceedings under the SARFAESI Act have already been
concluded and the possession of the respective premises of the
petitioners has already been taken over, the Apex Court did not
remanded the matters to the High Court for deciding the writ
petitions afresh. However, since the High Court has not dealt with
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the other issues based on the factual aspects of the writ petitions,
the Apex Court clarified that it would be open for the appellants to
take recourse to any remedy as may be legally available to them
for agitating the issues not decided by the High Court in the
impugned judgment and the appeals were allowed to the above
extent.
22. In P.K. Krishnakumar v. IndusInd Bank [2024
SCC OnLine Ker 6888], a Division Bench of this Court was
dealing with a writ appeal filed by the petitioners in W.P.(C)No.
41576 of 2023 challenging the judgment of the learned Single
Judge dated 24.10.2024 in that writ petition, which was one filed
by them seeking nine reliefs, including various declarations
primarily concerning the action of the respondent Bank in
proceeding under Section 14 of the SARFAESI Act. The main
contention was based on the claimed status of the appellant
enterprise as a Micro, Small and Medium Enterprise (MSME). The
appellants had approached the respondent Bank for financial
assistance. They were granted financial assistance, by way of a
loan against property, working capital for a sum of
Rs.1,25,01,220/- and another loan account of Rs.24,00,000/-. As
per the terms and conditions of the loan agreement, the appellants
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were liable to repay the loan amounts along with interest. The
Bank proceeded against the appellants since they failed and
neglected to pay the dues. The accounts became Non-Performing
Assets on 06.1.2022. Pursuant thereto, the Authorised Officer of
the respondent Bank issued notice to the appellants on
04.04.2022, under Section 13(2) of the SARFAESI Act calling
upon them to make payment of a sum of Rs.1,54,92,422/- with
interest, within a period of 60 days, failing which the respondent
Bank would proceed under the SARFAESI Act. However, no
amount was paid. The respondent Bank, thereafter, moved the
Additional Chief Judicial Magistrate, Ernakulam, under
Section 14 of the SARFAESI Act to seek possession of the secured
asset. The Magistrate Court passed an order on 03.03.2023 under
Section 14 of the SARFAESI Act. An Advocate Commissioner was
appointed, who issued notice to the Appellants on 24.04.2023
stating that the physical possession of the secured asset would be
taken on 06.05.2023 or thereafter. The appellants filed W.P.(C)No.
15055 of 2023, which was disposed of on 04.09.2023. Thereafter,
the appellants filed W.P.(C)No.31724 of 2023 for consideration of
their representation for One Time Settlement. The said writ
petition was disposed of on 16.10.2023, directing the respondent
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WA Nos.481 and 484 OF 2025 79
Bank to consider their representation and protecting their
possession for a week. No amount was paid, and a third writ
petition, i.e. W.P.(C)No. 41576 of 2023, came to be filed raising
various grounds based on the provisions of the MSMED Act and
the notification issued thereunder. The learned Single Judge
considered the contentions and following the decision of the Apex
Court in Pro Knits [(2024) 10 SCC 292] that a framework under
the notification issued under the MSMED Act also enables the
MSME to initiate proceedings voluntarily, and it would be
incumbent on the part of MSME, at the stage of identification of
incipient stress, to produce an authenticated and verifiable
document, observed that the appellants failed to do so and
thereafter they cannot be heard to raise such contentions. The
learned Single Judge found that the conduct of the appellants was
nothing but an attempt to postpone and stall the recovery
proceedings and dismissed the writ petition. Feeling aggrieved,
the appellants filed W.A.No.1728 of 2024 under Section 5(i) of the
Kerala High Court Act, 1958.
22.1. In P.K. Krishnakumar [2024 SCC OnLine Ker
6888], before the Division Bench, it was contended that, though
it is correct that the appellants have not raised the ground of the
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enterprise being an MSME at an early stage and in the earlier
round of writ petitions, the appellants cannot be estopped from
raising legal contentions which go to the root of the case. There
can be no estoppel against a statute. Also, the doctrine of res
judicata can only be applied to disputed questions of fact and
evidence and not to legal position, as it is a basic position that
there can be no estoppel against law. The Ministry of Micro, Small
and Medium Enterprises, in pursuance of the power under Section
9 of the MSMED Act, has issued a notification dated 29.05.2015
laying down the framework for the revival and rehabilitation of
MSME. Under clause (1)(2), the MSME may voluntarily initiate
proceedings if it apprehends the failure of its business or its
inability. There is no mandate for the MSME, and it is a voluntary
action. On the other hand, the framework mandates banks and
creditors to adhere to clause (1) with respect to the identification
of incipient stress. Therefore, merely because the MSME did not
raise the ground with respect to the notification at the time of
identification cannot result in estoppel. In fact, it is a failure of
duty of the banks and creditors to adhere to the notification and
considering the beneficial objective of the notifications, the MSME
should be permitted to raise the ground at any time of the
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proceedings. A Committee constituted under the notification
performs judicial functions, as seen from the nature of its power.
Therefore, an elaborate methodology has been laid down. The
Reserve Bank of India has also issued certain guidelines for the
revival of MSMEs. Therefore, these guidelines should have been
adhered to. Though the appellants are educated, they were not
aware of these intrinsic positions of law and, therefore, merely
because the appellants failed to point out the status of MSME, it
cannot be held against them. Even assuming that the appellants
have not repaid the amount and equitable considerations may be
against them, the statutory protection available to the appellants
cannot be taken away. Therefore, the impugned judgment and the
action taken by the respondent Bank under the SARFAESI
Act ought to be set aside. Per contra, the learned counsel for the
respondent Bank submitted that nothing stopped the appellant
enterprise from advancing an argument based on its alleged status
as an MSME at the inception and in the two writ petitions filed by
them. In fact, the appellants had sought repayment by way of
installments, and now this is the third attempt on some grounds
to stall the recovery proceedings. The learned counsel submitted
that the law laid down by the Apex Court in Pro Knits [(2024)
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10 SCC 292] is clear and the learned Single Judge was not in
error in following the same.
22.2. In P.K. Krishnakumar [2024 SCC OnLine Ker
6888], after considering the rival contentions, the Division Bench
noticed that the Apex Court in Pro Knits [(2024) 10 SCC 292]
had examined the scheme of MSMED Act in conjunction with the
SARFAESI Act and had accepted the contention of the MSMEs that
they could have a special status as regards recovery of loans.
However, after concluding so, the Apex Court observed thus;
“16. We may hasten to add that under the “Framework for
Revival and Rehabilitation of MSMEs”, the banks or creditors
are required to identify the incipient stress in the account of
the Micro, Small and Medium Enterprises, before their
accounts turn into non-performing assets, by creating three
sub-categories under the “Special Mention Account”
Category, however, while creating such sub-categories, the
Banks must have some authenticated and verifiable material
with them as produced by the concerned MSME to show that
loan account is of a Micro, Small and Medium Enterprise,
classified and registered as such under the MSMED Act. The
said Framework also enables the Micro, Small or Medium
Enterprise to voluntarily initiate the proceedings under the
said Framework, by filing an application along with the
affidavit of an authorised person. Therefore, the stage of
identification of incipient stress in the loan account of
MSMEs and categorisation under the Special Mention
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Account category, before the loan account of MSME turns
into NPA is a very crucial stage, and therefore it would be
incumbent on the part of the concerned MSME also to
produce authenticated and verifiable documents/material
for substantiating its claim of being MSME, before its
account is classified as NPA. If that is not done, and once
the account is classified as NPA, the banks, i.e., secured
creditors would be entitled to take the recourse to Chapter
III of the SARFAESI Act for the enforcement of the security
interest.
17. It is also pertinent to note that sufficient safeguards
have been provided under the said Chapter for safeguarding
the interest of the Defaulters-Borrowers for giving them
opportunities to discharge their debt. However, if at the
stage of classification of the loan account of the borrower as
NPA, the borrower does not bring to the notice of the
concerned bank/creditor that it is a Micro, Small or Medium
Enterprise under the MSMED Act and if such an Enterprise
allows the entire process for enforcement of security
interest under the SARFAESI Act to be over, or it having
challenged such action of the concerned bank/creditor in the
court of law/tribunal and having failed, such an Enterprise
could not be permitted to misuse the process of law for
thwarting the actions taken under the SARFAESI Act by
raising the plea of being an MSME at a belated stage. Suffice
it to say, when it is mandatory or obligatory on the part of
the Banks to follow the Instructions/Directions issued by the
Central Government and the Reserve Bank of India with
regard to the Framework for Revival and Rehabilitation of
MSMEs, it would be equally incumbent on the part of the
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concerned MSMEs to be vigilant enough to follow the
process laid down under the said Framework, and bring to
the notice of the concerned Banks, by producing
authenticated and verifiable documents/material to show its
eligibility to get the benefit of the said Framework.”
(emphasis originally supplied)
The Apex Court, therefore, has laid down the position of law that
if, at the stage of classification of the loan account, the borrower
does not bring to the notice of the Bank that it is an MSME and
allow the entire process to go through, then it will be precluded
from raising it at the belated stage. This dicta is very clear and is
binding.
22.3. In P.K. Krishnakumar [2024 SCC OnLine Ker
6888], the Division Bench noticed that the appellants are mixing
up several issues which have different connotations, such as res
judicata, estoppel, waiver and acquiescence. The waiver and
acquiescence will stand on a completely different footing than an
estoppel. If a party knowingly permits a certain state of affairs to
go through, the concept of waiver and acquiescence also comes
into play. On the facts of the case on hand, the Division Bench
noticed that the appellants permitted the state of affairs to prevail,
including that of seeking repayment by installments, and
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therefore, clearly benefited from the delay, which has enured to
their benefit, whereby they have been able to retain the amount
instead of repaying the same. The observations of the Apex Court
in paragraph 17 of the decision in Pro Knits [(2024) 10 SCC
292] lay down the principle that the borrowers have to be diligent,
and if they knowingly permit the state of affairs to continue, they
will be precluded from raising the challenge. The case is not only
of estoppel, as argued, but of acquiescence and waiver as well.
The appellants have sidestepped this aspect of the matter and
have focused entirely on the principle of estoppel. Even otherwise,
the clear dicta of the Apex Court in Pro Knits [(2024) 10 SCC
292] leaves no room to accept the contention raised by the
appellants.
22.4. In P.K. Krishnakumar [2024 SCC OnLine Ker
6888], the Division Bench noticed further that, in the earlier two
writ petitions, there is not even a whisper of the appellant
enterprise being an MSME. The argument that the appellants were
not aware of the status of the enterprise as an MSME is too far-
fetched to believe when they had filed two writ petitions through
legal counsel. A lame explanation is given that the appellants were
unaware of their rights, which the Division Bench found entirely
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unacceptable. It is nowhere stated that the appellants are
illiterate. Therefore, the Division Bench concluded that the
attempt of the appellants is only to raise repeated challenges in
the Court to stall the repayment. Before the Division Bench, the
learned counsel for the respondent Bank pointed out that the
appellants paid not a single paisa, and the entire loan amount has
been defalcated.
22.5. In P.K. Krishnakumar [2024 SCC OnLine Ker
6888], the Division Bench found that the appellants’ argument
that the High Court must intervene, no matter how they conducted
themselves, proceeds on a complete misunderstanding of the
nature of writ jurisdiction. There are two separate issues. One,
whether the respondent Bank lacked the authority to proceed.
Second, whether the appellants’ conduct disqualifies or disentitles
them from invoking equity jurisdiction. In cases where a borrower
who qualifies as MSME does not initially raise its status to
challenge the Bank’s recovery proceedings under the SARFAESI
Act but instead participates fully in the process without objection,
cannot later use their MSME status to argue that the proceedings
were without jurisdiction. The power of the High Court under
Article 226 of the Constitution of India is discretionary based on
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the principles of fairness and justice, which include examining the
conduct of the parties involved. When the appellants, by their
actions, accepted the Bank’s authority without objection, the High
Court will refuse to exercise its writ jurisdiction to assist such
appellants, even if there are questions about the jurisdiction of the
Bank. This is because the appellants’ own conduct disqualifies
them from claiming such relief. When the High Court declines to
interfere in such circumstances, it does not mean that the
appellants’ waiver vested the Bank with jurisdiction, assuming it
is inherently lacking; it means that the borrower is not entitled to
invoke writ jurisdiction irrespective of whether the Bank’s actions
are without jurisdiction or not. These two concepts are distinct,
and the distinction is emphasised by the Apex Court in Pro Knits
[(2024) 10 SCC 292]. The Division Bench, therefore, found no
error in the view taken by the learned Single Judge in the
impugned judgment, which follows the law laid down by the Apex
Court in Pro Knits [(2024) 10 SCC 292]. Accordingly, the writ
appeal was dismissed.
23. The learned counsel for the appellants pointed out that
the judgment of the Division Bench of this Court in P.K.
Krishnakumar [2024 SCC OnLine Ker 6888] is already under
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WA Nos.481 and 484 OF 2025 88
challenge before the Apex Court in SLP(C)No.29302 of 2024,
which is pending consideration. Therefore, the learned Single
Judge went wrong in dismissing the writ petitions filed by the
respective borrowers, relying on the decision of the Division Bench
in P.K. Krishnakumar [2024 SCC OnLine Ker 6888]. The
common judgment of the learned Single Judge dated 28.02.2025
in W.P.(C)Nos.39257 of 2024 and 7991 of 2025 is also under
challenge in SLP(C)Nos.10896 of 2025 and 12783 of 2025, which
are pending before the Apex Court.
24. On the aforesaid submission made by the learned
counsel for the appellants, we notice the judgment of a Division
Bench of this Court in Abdu Rahiman v. District Collector,
Malappuram [2009 (4) KHC 283], wherein it was held that
even when a decision of the Division Bench is stayed by the Apex
Court, the learned Single Judge is bound to follow the decision of
the Division Bench, as it continues to be a binding precedent for
the learned Single Judge. The interim order of stay by the Apex
Court only relieves the parties concerned from obeying the
judgment under appeal. In the said decision the Division Bench
has relied on the judgment of the Division Bench in Kannappan
v. Regional Transport Officer [1988 (1) KLT 902] and the
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WA Nos.481 and 484 OF 2025 89
judgment of the Apex Court in Official Liquidator v. Dayanand
[(2008) 10 SCC1]. Therefore, the learned Single Judge cannot
found fault with in dismissing the writ petitions relying on the
decision of the Division Bench of this Court in P.K. Krishnakumar
[2024 SCC OnLine Ker 6888], which was one rendered relying
on the decision of the Apex Court in Pro Knits [(2024) 10 SCC
292].
25. In Pro Knits [(2024) 10 SCC 292] the Apex Court
found that the framework for Revival and Rehabilitation of MSMEs
also enables the Micro, Small or Medium Enterprise to voluntarily
initiate the proceedings under the said framework, by filing an
application along with the affidavit of an authorised person.
Therefore, the stage of identification of incipient stress in the loan
account of MSMEs and categorisation under the Special Mention
Account category, before the loan account of MSME turns into Non-
Performing Asset is a very crucial stage, and therefore it would be
incumbent on the part of the MSME concerned also to produce
authenticated and verifiable documents/material for
substantiating its claim of being MSME, before its account is
classified as Non-Performing Asset. If that is not done, and once
the account is classified as a Non-Performing Asset, the banks,
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WA Nos.481 and 484 OF 2025 90
i.e., the secured creditors, would be entitled to take recourse to
Chapter III of the SARFAESI Act for the enforcement of the
security interest. If at the stage of classification of the loan
account of the borrower as Non-Performing Asset, the borrower
does not bring to the notice of the bank/creditor concerned that it
is a Micro, Small or Medium Enterprise under the MSMED Act and
if such an enterprise allows the entire process for enforcement of
security interest under the SARFAESI Act to be over, or it having
challenged such action of the bank/creditor concerned in the court
of law/tribunal and having failed, such an enterprise could not be
permitted to misuse the process of law for thwarting the actions
taken under the SARFAESI Act by raising the plea of being an
MSME at a belated stage.
26. In P.K. Krishnakumar [2024 SCC OnLine Ker
6888], the specific contention raised before the Division Bench
was that, though it is correct that the appellants have not raised
the ground of the enterprise being an MSME at an early stage and
in the earlier round of writ petitions, the appellants cannot be
estopped from raising legal contentions which go to the root of the
case. In paragraph 14 of the judgment, the Division Bench
extracted paragraphs 16 and 17 of the decision of the Apex Court
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WA Nos.481 and 484 OF 2025 91
in Pro Knits [(2024) 10 SCC 292] and stated in categorical
terms that the dicta laid down by the Apex Court is that if, at the
stage of classification of the loan account, the borrower does not
bring to the notice of the Bank that it is an MSME and allow the
entire process to go through, then it will be precluded from raising
it at the belated stage. In the said decision, the Division Bench
found that the argument of the appellants that the High Court
must intervene, no matter how they conducted themselves,
proceeds on a complete misunderstanding of the nature of the writ
jurisdiction.
27. In the instant case, as stated in the notices dated
16.08.2023 issued by the authorised officer of the 3rd respondent
Bank, which are marked as Ext.P7 in W.P.(C)No.45166 of 2024
and Ext.P4 in W.P.(C)No.46514 of 2024, the borrowers and
guarantors of the respective loan accounts were informed that the
Bank has classified the said accounts as NPA, with effect from
31.07.2023. In the objection dated 11.10.2023 of the respective
borrowers to the notice issued under Section 13(2) of the
SARFAESI Act, which are marked as Ext.P8 in W.P.(C)No.45166 of
2024 and Ext.P5 in W.P.(C)No.46514 of 2024, it was pointed out
that the classification of the loan accounts as NPA, with effect from
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WA Nos.481 and 484 OF 2025 92
31.07.2023 violates Ext.P5 notification dated 29.05.2015 issued
by the 5th respondent Ministry under Section 9 of MSMED Act and
Ext.P6 notification dated 17.03.2016 issued by the 1st respondent
Reserve Bank of India. In paragraph 8 at page 19 of the impugned
judgment dated 11.03.2025, the learned Single Judge noticed that
it was not disputed that the claims presently raised have not been
raised in any previous litigations and they have been raised for the
first time only after the accounts have been classified as NPA.
28. In view of the law laid down by the Apex Court in Pro
Knits [(2024) 10 SCC 292] and that laid down by the Division
Bench of this Court in P.K. Krishnakumar [2024 SCC OnLine
Ker 6888] if, at the stage of classification of the loan accounts as
NPA, the writ petitioners-borrowers do not bring to the notice of
the Bank that it is an MSME and allowed the proceedings under
the SARFAESI Act to go through, then they will be precluded from
raising it at the belated stage. The learned Single Judge, after
taking note of the law laid down in the decisions referred to supra,
arrived at a conclusion that the writ petitioners-borrowers are not
entitled to raise the plea of being an MSME at a belated stage,
having failed to bring to the notice of the 3rd respondent Bank that
it is an MSME before classification of the loan accounts as NPA.
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WA Nos.481 and 484 OF 2025 93
29. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210],
the Apex Court noticed that the order passed by the Naib Tahsildar
refusing to take possession of the secured assets/properties
despite the order passed under Section 14 of the SARFAESI Act on
the ground that recovery certificates issued by the 1st respondent
for recovery of the orders passed by the Facilitation Council are
pending, is wholly without jurisdiction. Under Section 14 of
the SARFAESI Act, neither the District Magistrate nor the
Metropolitan Magistrate would have any jurisdiction to adjudicate
and/or decide the dispute even between the secured creditor and
the debtor. If any person is aggrieved by the steps under Section
13(4)/order passed under Section 14, then the aggrieved person
has to approach the Debt Recovery Tribunal by way of
appeal/application under Section 17 of the SARFAESI Act.
30. In South Indian Bank Ltd. v. Naveen Mathew
Philip [2023 SCC online (SC) 435], in the context of the
challenge made against the notices issued under Section 13(4) of
the SARFAESI Act, the Apex Court reiterated the settled position
of law on the interference of the High Court invoking Article 226
of the Constitution of India in commercial matters, where an
effective and efficacious alternative forum has been constituted
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WA Nos.481 and 484 OF 2025 94
through a statute. In the said decision, the Apex Court took
judicial notice of the fact that certain High Courts continue to
interfere in such matters, leading to a regular supply of cases
before the Apex Court. The Apex Court reiterated that a writ
of certiorari is to be issued over a decision when the court finds
that the process does not conform to the law or the statute. In
other words, courts are not expected to substitute themselves
with the decision-making authority while finding fault with the
process along with the reasons assigned. Such a writ is not
expected to be issued to remedy all violations. When a Tribunal is
constituted, it is expected to go into the issues of fact and law,
including a statutory violation. A question as to whether such a
violation would be over a mandatory prescription as against a
discretionary one is primarily within the domain of the Tribunal.
The issues governing waiver, acquiescence and estoppel are also
primarily within the domain of the Tribunal. The object and
reasons behind the SARFAESI Act are very clear as observed
in Mardia Chemicals Ltd. v. Union of India [(2004) 4 SCC
311]. While it facilitates a faster and smoother mode of
recovery sans any interference from the court, it does provide a
fair mechanism in the form of the Tribunal being manned by a
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WA Nos.481 and 484 OF 2025 95
legally trained mind. The Tribunal is clothed with a wide range of
powers to set aside an illegal order, and thereafter, grant
consequential reliefs, including repossession and payment of
compensation and costs. Section 17(1) of the SARFAESI Act gives
an expansive meaning to the expression ‘any person’, who could
approach the Tribunal.
31. In Naveen Mathew Philip [2023 SCC OnLine (SC)
435] the Apex Court noticed that, in matters under the SARFAESI
Act, approaching the High Court for the consideration of an offer
by the borrower is also frowned upon by the Apex Court. A writ
of mandamus is a prerogative writ. The court cannot exercise the
said power in the absence of any legal right. More circumspection
is required in a financial transaction, particularly when one of the
parties would not come within the purview of Article 12 of
the Constitution of India. When a statute prescribes a particular
mode, an attempt to circumvent that mode shall not be
encouraged by a writ court. A litigant cannot avoid the non-
compliance of approaching the Tribunal, which requires the
prescription of fees, and use the constitutional remedy as an
alternative. In paragraph 17 of the decision, the Apex Court
reiterated the position of law regarding the interference of the
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WA Nos.481 and 484 OF 2025 96
High Courts in matters pertaining to the SARFAESI Act by quoting
its earlier decisions in Federal Bank Ltd. v. Sagar Thomas
[(2003) 10 SCC 733], United Bank of India v. Satyawati
Tondon [(2010) 8 SCC 110], State Bank of Travancore v.
Mathew K.C. [(2018) 3 SCC 85], Phoenix ARC (P) Ltd. v.
Vishwa Bharati Vidya Mandir [(2022) 5 SCC 345] and
Varimadugu Obi Reddy v. B. Sreenivasulu [(2023) 2 SCC
168] wherein the said practice has been deprecated while
requesting the High Courts not to entertain such cases. In
paragraph 18 of the said decision, the Apex Court observed that
the powers conferred under Article 226 of the Constitution of India
are rather wide, but are required to be exercised only in
extraordinary circumstances in matters pertaining to proceedings
and adjudicatory scheme qua a statute, more so in commercial
matters involving a lender and a borrower, when the legislature
has provided for a specific mechanism for appropriate redressal.
32. Though various reliefs, including declaratory reliefs,
(which we have noted hereinbefore at paragraphs 2, 4 and 6),
have been sought for in the respective writ petitions, the
arguments advanced by the learned counsel for the writ
petitioners before the learned Single Judge were confined to that
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WA Nos.481 and 484 OF 2025 97
referred to in paragraphs 3 and 4 of the impugned judgment dated
11.03.2025, (which we have referred to hereinbefore at paragraph
16).
33. The petitioners in W.P.(C)No.46514 of 2024 challenged
the classification of the accounts as NPA, by filing
W.P.(C)No.38732 of 2023. This Court, by Ext.P14 judgment dated
27.11.2023 closed the said writ petition, by relegating them to
invoke the remedy provided before the statutory forum.
Thereafter, the 1st petitioner in W.P.(C)No.46514 of 2024 –
M/s.M.D. Esthappan Infrastructure Pvt. Ltd. – filed W.P.(C)No.
22424 of 2024, when recovery steps were taken against the
secured assets. In that writ petition, this Court found that no relief
can be granted to the writ petitioner and the same was disposed
of by relegating the writ petitioner to avail the statutory remedy
provided before the Debt Recovery Tribunal. The writ petitioners
in W.P.(C)No.46514 of 2024 challenged the proceedings initiated
by the 3rd respondent Bank under the provisions of the SARFAESI
Act, by filing a Securitisation Application before the Debt Recovery
Tribunal-1, Ernakulam, as S.A.No.776 of 2023. The said
Securitisation Application was dismissed as withdrawn on
12.02.2025, with liberty to file fresh Securitisation Application on
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WA Nos.481 and 484 OF 2025 98
the same cause of action, based on a memo filed by the learned
counsel for the applicants that the applicants have approached the
civil court and the High Court invoking their statutory remedy.
34. After considering the rival contentions raised at the Bar,
the learned Single Judge found that the writ petitions are liable to
be dismissed. For the reasons stated hereinbefore, we find that
the learned Single Judge cannot be found fault with in not
entertaining the writ petitions, for the reasons stated in the
impugned judgment.
In the result, these writ appeals fail and are accordingly
dismissed.
Sd/-
ANIL K. NARENDRAN, JUDGE
Sd/-
MURALEE KRISHNA S., JUDGE
AV
After the judgment was pronounced in open Court, the
learned counsel for the appellants-writ petitioners, who appeared
online, sought for stay of the operation of the judgment for two
weeks, to enable the appellants to approach the Apex Court.
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WA Nos.481 and 484 OF 2025 99
For the reasons stated in the judgment, we find that the
appellants are not entitled to such an order of stay. Therefore, the
oral request made by the learned counsel for the appellants is
declined.
Sd/-
ANIL K. NARENDRAN, JUDGE
Sd/-
MURALEE KRISHNA S., JUDGE
AV
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WA Nos.481 and 484 OF 2025 100
APPENDIX OF WA 484/2025
PETITIONER ANNEXURES
Copy Of Judgment CERTIFIED COPY OF THE JUDGMENT IN WPC
46514/2024 DATED 11/03/2025