Jammu & Kashmir High Court
Mohd. Basharat vs J&K Bank Ltd. & Ors on 9 May, 2025
Author: Rahul Bharti
Bench: Rahul Bharti
Serial No. 84
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT JAMMU
WP(C) No. 1154/2025
CM No. 2741/2025
Mohd. Basharat
.....Appellant(s)/Petitioner(s)
Through: Mr. R.K. Gupta, Sr. Advocate with
Mr. Udhay Bhaskar, Advocate
Vs
J&K Bank Ltd. & Ors
..... Respondent(s)
Through: Mr. Akash Gupta, Standing Counsel
Mr. Dewakar Sharma, Dy. AG
CORAM: HON‟BLE MR. JUSTICE RAHUL BHARTI, JUDGE
ORDER
(09.05.2025)
01. The petitioner-Mohd. Basharat, is a sole proprietor and
promoter of an industrial enterprise/concern named M/s
S&S Wood Industries, set up in Batote.
02. The petitioner’s said industrial enterprise/concern M/s
S&S Wood Industries came to be registered by the
District Industries Centre, (DIC) Ramban, J&K, vide a
Communication No. DIC/Rbn/793-94 dated
31.03.2021. The petitioner’s industrial
enterprise/concern was to engage itself in the
manufacturing of wood paneling of various categories.
03. Pursuant to its registration with the District Industries
Centre, DIC Ramban, the petitioner also got his said
industrial enterprise/concern registered as a micro
manufacturing enterprise under the aegis of the Micro,
2 WP(C) No. 1154/2023
Small and Medium Enterprises Development (MSMED)
Act, 2006 (in short, ‘the MSMED Act, 2006‘), bearing
registration No. UDYAM-JK-17-0002573 dated
31.05.2022, as is confirmed from annexure-III (page 29
of the paperbook).
04. Being a micro manufacturing enterprise under the
MSMED Act, 2006, the petitioner’s said
enterprise/concern became entitled to all the privileges
and effects meant and reserved in terms of the MSMED
Act, 2006.
05. The case of the petitioner is that as micro enterprise
under the MSMED Act, 2006, the petitioner came to avail
financial assistance in the form of term loan as well as
working capital facility for his said enterprise/concern
from the respondent No. 1-J&K Bank Ltd. At the first
instance, the expected extent of financial assistance did
not come in favour of the petitioner to commission the
industrial activity of his enterprise/concern but
nevertheless the petitioner’s enterprise/concern came to
be financed by the respondent No. 1-J&K Bank on the
basis of which the industrial enterprise/concern came to
be set up and commissioned for the purpose of its
manufacturing business.
06. The petitioner is said to have availed term loan facility of
Rs. 28.78 lacs, working capital of Rs. 15.00 lacs,
additional financial assistance of Rs. 17.22 lacs and Rs.
14.60 lacs, thus, totalling bank investment in the
petitioner’s unit to be Rs. 75.62 lacs.
07. The petitioner’s said loan account is said to have come
under stress and that resulted it into becoming non-
performing asset NPA.
3 WP(C) No. 1154/2023
08. On the record of the present writ petition, there is
correspondence to and fro between the petitioner and
respondent No. 1 communicating and confiding with each
other the state of facts and circumstances in which the
petitioner’s industrial enterprise/concern has come to
suffer setbacks in its business and the corresponding
response from the J&K Bank-respondent No. 1 about the
acts of omission or commission on the part of the
petitioner in conducting the financial assistance rendered
by the respondent No. 1.
09. Be that as it may, the petitioner’s grievance which has
afforded the purported cause of action for him to come
with the present writ petition is that the MSMED Act,
2006 envisages a legal regime meant for nursing and
protecting micro, small and medium enterprises so as to
enable the enterprises not only to work to their full
potential in terms of business and commerce but also in
times of financial distress to earn helping hand from the
stakeholders which includes the financial institutions
financing the business of micro, small and medium
enterprises.
10. In this regard, the petitioner’s submission is that
notification S.O. 1432(E) dated 29.05.2015 issued under
section 9 of the MSMED Act, 2006 read with Reserve
Bank of India‟s framework No. RBI/2015-16/338,
FIDD.MSME & NFS.BC.No.21/06.02.2031/2015-16, dated
17.03.2016 are addressed to all scheduled commercial
Banks to be carried into compliance without any fail. The
regime, set up in terms of S.O. 1432(E) dated 29.05.2015
read with circular No. RBI/2015-16/338, FIDD.MSME &
NFS.BC.No.21/06.02.2031/2015-16, dated 17.03.2016 of
Reserve Bank of India is that every scheduled Bank is
4 WP(C) No. 1154/2023
supposed to set up a committee meant for attending
stressed micro, small and medium enterprises.
11. The petitioner reckons that his industrial
enterprise/concern M/s S&S Wood Industries, being a
micro enterprise, is a stressed enterprise and therefore,
was and is meant to be subjected to the treatment
envisaged under S.O. 1432(E) dated 29.05.2015 read with
circular No. RBI/2015-16/338, FIDD.MSME &
NFS.BC.No.21/06.02.2031/2015-16, dated 17.03.2016 of
Reserve Bank of India, but despite repeated urging by the
petitioner unto the respondent No. 1-J&K Bank, the
petitioner’s case has not been recommended to the
committee which is meant to be for the J&K Kashmir
Bank Limited, in terms of S.O. 1432(E) dated
29.05.2015 and instead petitioner has come to be
confronted with impugned Communication No.
JKB/batote/2024-25-358 dated 06.03.2025 which
exposes the petitioner’s account for his micro enterprise
M/s S&S Wood Enterprises again to relapse into NPA
status which would be compounding the financial
distress of the petitioner instead of enabling a revival
thereof.
12. Mr. R.K. Gupta, learned Senior Advocate arguing for the
petitioner draws the attention of this Court to a judgment
of the Hon’ble Supreme Court of India in a case titled
“M/S Pro Knits vs. The Board of Directors of Canara
Bank & Ors.” reported in 2024 INSC 565, dated
01.08.2024 in which the legal regime adverted herein
before has come to be dealt with and holding that the
regime so envisaged and set up under S.O. 1432(E) dated
29.05.2015 read with circular No. RBI/2015-16/338,
FIDD.MSME & NFS.BC.No.21/06.02.2031/2015-16, dated
17.03.2016 of Reserve Bank of India, cannot be bypassed.
5 WP(C) No. 1154/2023
13. In this regard, reference is made to para Nos. 13,14 & 15,
which are reproduced here :-
“13. In view of the above, it is absolutely clear
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 29th
May, 2015 in exercise of the powers conferred
under Section 9 of the MSMED Act, as revised
by the RBI Notification dated 17th March,
2016, and the Master Directions i.e. the
Reserve Bank of India (Lending to Micro, Small
and Medium Enterprises Sector) Directions,
2016, issued by the Reserve Bank of India in
exercise of the powers conferred by Section 21
and 35(A) of the Banking Regulation Act, having
statutory force, are binding to 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 1949 basically seeks to
regulate banking business and mandates a
statutory comprehensive and formal structure
of banking regulation and supervision in India.
Section 21 and Section 35A of the said Act
empower the Reserve Bank of India to frame
the policy and give directions to the banking
companies in relation to the advances to be
followed by the banking companies. Such
directions have got to be read as supplement to
the provisions of the Banking Regulation Act
and accordingly are required to be construed as
having statutory force and mandatory.
6 WP(C) No. 1154/2023
14. 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 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-performing asset, in
view of Section 13(2) of the said Act.
15. 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
7 WP(C) No. 1154/2023
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 RBI in exercise of the powers conferred
under Section 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 NPA.
14. Prima-facie case is made out.
15. Issue notice to the respondents in the main petition and
in the CM as well.
16. Mr. Akash Gupta, learned Standing Counsel accepts
notice on behalf of the respondents No. 1 to 4 and Mr.
Dewakar Sharma, learned Deputy AG, accepts notice on
behalf of the respondents No. 5 and 7.
17. Reply be filed in the main petition and in the CM bearing
No. 2741/2025.
18. Notice to go to respondent No. 6 only.
19. Petitioner to furnish registered postal cover within a
period of seven days for effecting service of the
respondent No. 6.
20. List on 04.07.2025.
8 WP(C) No. 1154/2023
21. In the meantime, operation and implementation of
Communication No. JKB/batote/2024-25-358 dated
06.03.2025 by the respondent No. 4-Branch Manager,
Jammu and Kashmir Bank Ltd. Main Bazar, Batote,
J&K, shall remain in abeyance till next date of hearing.
22. Further, given the fact that the petitioner is entitled to
have his micro enterprise/concern to the protected
treatment in terms of S.O. 1432(E) dated 29.05.2015 read
with Circular No. RBI / 2015-16 /338, FIDD.MSME &
NFS.BC.No.21/06.02.2031/2015-16, dated 17.03.2016 of
Reserve Bank of India, the respondent No. 1-Jammu and
Kashmir Bank Ltd. through its Chairman/Managing
Director, M.A. Road, Srinagar-190001, it is directed not
to classify the petitioner’s loan account as NPA account
till next date of hearing. This direction is, however,
subject to objections from the other side.
(RAHUL BHARTI)
JUDGE
JAMMU
09.05.2025
SUNIL
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