Back
IN THE HIGH COURT OF KERALA AT ERNAKULAM
NITIN JAMDAR, C.J., S.MANU, J.
P.K.Krishnakumar, Managing Partner, M/s. Powerplus Power - Appellant
Versus
Induslnd Bank - Respondents
WA No. 1728 of 2024
Decided on : 07-11-2024
(A) Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 - Section 14 - Micro, Small and Medium Enterprises Development Act, 2006 - The Appellants challenged the dismissal of their writ petition concerning the Respondent Bank's actions under the SARFAESI Act. The Appellants claimed to be MSMEs, but failed to substantiate this claim in previous petitions. The court found that the Appellants' conduct aimed to stall recovery proceedings and upheld the learned Single Judge's dismissal. (Paras 9, 14, 18, 20)
(B) Estoppel - The court emphasized that there can be no estoppel against a statute, but the Appellants' delay in raising their MSME status disqualified them from relief. (Paras 11, 19)
Facts of the case:
The Appellants sought relief against the Bank's actions under the SARFAESI Act after becoming a Non-Performing Asset. The Bank initiated recovery proceedings due to non-payment of dues.
Findings of Court:
The court upheld the dismissal of the writ petition, affirming the obligation of MSMEs to present verifiable documents to substantiate their status at the appropriate time.
Issues: Whether the Appellants could raise their MSME status at a belated stage and the implications of their conduct on their legal standing.
Ratio Decidendi: The court ruled that MSMEs must proactively assert their status to benefit from statutory protections, failing which they are precluded from raising such claims later.
Result: Appeal dismissed.
JUDGMENT :
Nitin Jamdar, C. J.
The Appellants/Original Petitioners have filed this appeal under Section 5 of the Kerala High Court, 1958, challenging the order passed by the learned Single Judge dated 24 October 2024, dismissing W.P.(C) No.41576 of 2023.
2. The Petitioners, by way of the writ petition, had sought nine reliefs, including various declarations primarily concerning the action of the Respondent Bank in proceeding under Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI Act). The main contention of the Appellants is based on the status of the Appellant Enterprise, which they allege is a Micro, Small and Medium Enterprises (MSME).
3. The Appellants approached the Respondent Bank for financial assistance. They were granted financial assistance by way of a loan against property and 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 were liable to repay the loan amounts along with interest.
4. The Bank proceeded against the Appellants since they failed and neglected to pay the dues and became a Non-Performing Asset on 6 Bank issued notice to the Appellants on 4 April 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 Respondents would proceed under the SARFAESI Act. However, no amount was paid.
5. 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 learned Magistrate passed an order on 3 March 2023 under Section 14 of the SARFAESI Act. An Advocate Commissioner was appointed, who issued notice to the Appellants on 24 April 2023 stating that the physical possession of the secured asset would be taken on 6 May 2023 or thereafter.
6. The Petitioners filed W.P.(C) No.15055 of 2023, which was disposed of on 4 September 2023.
7. Thereafter, the Appellants filed another Writ Petition No.31724 of 2023 regarding consideration of their representation for One Time Settlement and the said writ petition was disposed of on 16 October 2023, directing the Bank to consider the representation of the Petitioners and protecting their possession for a week.
8. No amount was paid, and a third petition, present one bearing No.41576 of 2023, came to be filed raising various grounds based on the provisions of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and the notification issued thereunder.
9. The learned Single Judge considered the contentions and following the decision of the Hon’ble Supreme Court in the case of M/s. Pro Knits v. The Board of Directors of Canara Bank & Ors. [Civil Appeal No. 8332 of 2024 dated 01 August 2024] 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 these 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 Petition. Being aggrieved, the Appellants are before us in appeal.
10. We have heard Mr. Mathews J. Nedumpara, the learned counsel for the Appellants and Ms. Anju Mohan, the learned counsel for the Respondent Bank.
11. The contention of the Petitioners briefly are as follows: 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. There can be no estop
MSMEs must timely assert their status to benefit from statutory protections under the SARFAESI Act; failure to do so precludes them from raising claims at a later stage.
The classification of accounts as Non-Performing Assets (NPA) under the SARFAESI Act is valid if MSMEs do not timely assert their status, failing to invoke protections under the MSMED Act's revival f....
MSMEs must raise their status before loan accounts are classified as NPAs; failure to do so precludes later claims for benefits under the SARFAESI Act.
Borrowers classified as MSMEs must assert their status before NPA classification to invoke benefits under the SARFAESI Act; failure to do so precludes subsequent claims.
The court upheld that simultaneous proceedings under the SARFAESI Act and the Recovery of Debts and Bankruptcy Act are permissible, and reiterated principles of res judicata and the responsibilities ....
A registered MSME must disclose its status before NPA classification to invoke protections under relevant frameworks; failure to do so precludes later challenges to recovery actions.
Borrowers classified as MSMEs must assert their status before NPA classification to invoke benefits under the SARFAESI Act; failure to do so precludes subsequent claims.
Borrowers must timely assert MSME status to access protective benefits under the MSMED Act; simultaneous recovery proceedings under SARFAESI and RDB Acts are permissible.
Failure to assert MSME status prior to NPA classification precludes later claims for protection under the MSMED Act in SARFAESI proceedings.
MSMEs must assert their status timely to claim protections under the MSMED Act; failure to do so prior to NPA classification precludes relief from SARFAESI proceedings.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
