A borrower classified as an MSME must promptly disclose their status to the banks to receive protective benefits, failing which they cannot contest recovery actions post their NPA classification.

JUDGMENT :

BASANT BALAJI, J.

1. The petitioner, who claims to be an MSME enterprise, engaged in the manufacture of food products has defaulted in repaying the loan facilities availed from the respondents. Respondents, in turn, had initiated recovery proceedings invoking SARFAESI Act. In the meanwhile, the petitioner by Ext P6 representation dated 12.06.2024 sought restructuring of the loan account as pe the RBI Circulars. The 3^rd respondent classified the accounts of the petitioner as NPA on 26.06.2024 and thereafter, issued Ext P7 demand notice dated 2.8.2024 under section 13(2) of the Act, pursuant to which symbolic possession of the mortgaged properties was also taken, issuing possession notices dated 12.9.2025 and 19.9.2025. The 6^th respondent as well as the 9^th respondent had also issued demand notices to the petitioners dated 05.5.2025 and 28.10.2025 respectively.

2. When the Bank issued Ext P8 notice dated 06.12.2024 proposing sale of the secured assets, substantial payments were made by the petitioners along with an OTS proposal. Though Rs.1 Crore was paid, the petitioner failed to pay the balance, and hence, the proposal was rejected by the bank. Thereafter, the Bank issued Ext P9 sale notice dated 17.10.2025, scheduling the auction on 7.11.2025, aggrieved by which, this writ petition stands filed.

3. According to the petitioners, the respondent Bank had acted in violation of the notification dated 29.05.2015, issued in exercise of the powers conferred under Sec.9 of the MSMED Act, 2006, by the Central Government, and had initiated recovery proceedings against the petitioners without even referring them before the Committee constituted under the framework for rehabilitation for availing benefits as contemplated in the said notification, which is a nullity in the eyes of law and hence, the entire proceedings done pursuant thereto is liable to be quashed.

4. Further, they contended that the judgments of the hon’ble Pro Knits Shri Shri Swami Samarth Apex Court in and, having been rendered per incuriam, is not at all binding on other courts and tribunals within the territory of India. They also challenged the legality of simultaneous proceedings initiated under the SARFAESI Act with that of the suit filed under the RDB Act. It is also contended that the secured assets have not been registered by the respondent Bank with CERSAI and the sale proceedings, hence, would be vitiated due to the violation of section 26-D of the SARFAESI Act.

5. The counsel for respondent Nos.1 and 2, through their counter affidavit, contends the very maintainability of the writ petition under Article 226 of the Constitution of India pointing out the statutory efficacious remedy available and absence of extraordinary circumstances warranting the interference of this Court. Taking into note the earlier litigations instituted on identical grounds and contentions as well as the judgments binding the petitioners, the same attracts the bar under the principles of res judicata as well as constructive res judicata, warranting the dismissal of the present writ petition.

6. As regards the additional plea raised in respect of the non-registration of the secured asset under CERSAI, the same would also fail, as the secured assets have been validly registered before the CERSAI portal, as early as on 26.7.2016. Moreover, it is also pertinent to note that in S.A. No. 577/2025 which is pending before the DRT-II, Ernakulam, filed by the petitioner challenging the e-auction proceedings of the bank, there was no such challenge raised reg