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DIPANKAR DATTA, AUGUSTINE GEORGE MASIH
Shri Shri Swami Samarth Construction & Finance Solution – Appellant
Versus
Board Of Directors Of NKGSB Co-Op. Bank Ltd. – Respondent
JUDGMENT :
(Dipankar Datta, J.)
1. This is a writ petition under Article 32 of the Constitution of India by an enterprise registered under the Micro, Small and Medium Enterprises Development Act, 20061[MSME Act].
2. The petitioning enterprise had executed a loan agreement with the NKGSB Co-operative Bank2[respondent no.2] but had failed in its obligation to repay the loan. In due course, the account of the petitioning enterprise was classified as a non-performing asset3[NPA]. The authorised officer of the respondent no.2 issued a demand notice dated 13th May, 2024 under Section 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 20024[SARFAESI Act], calling upon the petitioning enterprise to repay the dues of the respondent no.2 within 60 days. It does not appear from the writ petition, filed on 14th July, 2025, that the petitioning enterprise objected to classification of its account as NPA as well as issuance of the demand notice on the ground that the action of the respondent no.2 was in violation of Notification5[Notification] dated 29th May, 2015, containing the “FRAMEWORK FOR REVIVAL AND REHABILITATION OF MICRO, SMALL A
The court upheld the shared responsibility of MSMEs and lenders in identifying loan stress, clarifying the application of the Framework for Revival and Rehabilitation of MSMEs.
The court emphasized that banks must adhere to the MSME Framework before classifying an MSME account as NPA and highlighted the responsibility of MSMEs to engage with the process timely.
Borrowers classified as MSMEs must provide verifiable evidence to banks before their accounts are classified as Non-Performing Assets, as protections under MSMED Act and SARFAESI Act apply only when ....
Petitioners did not establish MSME status prior to loan classification as NPA; statutory remedies under SARFAESI Act must be availed instead of writ jurisdiction.
The classification of an account as NPA does not prevent banks from considering MSME revival requests under specific frameworks.
Banks must follow MSME Notification procedures to identify stress in accounts before classifying them as NPAs. Failure to do so legitimizes subsequent enforcement measures under the SARFAESI Act.
A bank must comply with notification provisions for MSME identification before declaring a loan as NPA.
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