The applicability of MSME protections under the RBI circulars is limited to scheduled commercial banks, not non-banking financial companies, and prior judgments are binding irrespective of claims of per incuriam.

JUDGMENT :

ANIL K. NARENDRAN, J.

1. The appellants are the petitioners in W.P.(C)No.42521 of 2025. The 1^st appellant, namely, Immaculate Agro Spices Pvt. Ltd., is a company engaged in the trading of agricultural produce (spices), having Ext.P1 Udyam registration certificate dated 03.10.2020 issued by the 14^th respondent Ministry of Micro, Small and Medium Enterprises. The 2^nd appellant is the Managing Director, and the 3^rd appellant is the Director of the 1^st appellant company. The appellants-petitioners filed W.P.(C)No.42521 of 2025 before this Court on 12.11.2025, invoking the extraordinary jurisdiction under Article 226 of the Constitution of India, seeking the following reliefs:

“a) To declare that the notification dated 29.05.2015, in unmistakable terms, declares that the MSME-borrower has no obligation to make an application for resolution of stress and, on the contrary, that banks and financial institutions are duty-bound to identify incipient stress based on the illustrative signs indicated in Annexure-I to the RBI Circular dated 17.03.2016 and further, that in any case where the bank has failed to identify incipient stress, it is duty-bound to classify the account as SMA-1 if the default is more than 31 days and as SMA-2 if the default is more than 61 days, and thereafter shall constitute a Committee and make a reference to that Committee for resolution of stress; and further, that the Committee is empowered to permit recovery in terms of Para 5(3)(iv) if the resolution of stress is not feasible; and

b) In furtherance of prayer (a) above, to declare that the judgments of the Supreme Court in Pro Knits v. Canara Bank and others, (2024) 10 SCC 292 and Shree Shree Swami Samarth Construction and another v. The Board of Directors of NKGSB Co-op Bank & others, 2025 SCC OnLine SC 1566 were rendered per incuriam and sub silentio and will not bind the courts and tribunals in this country under Article 141 of the Constitution, inasmuch as - (i) in Pro Knits, the Court had, contrary to the letter and spirit of the notification, observed that if the MSME had allowed its account to be classified as NPA and for recovery action to be initiated, having failed to bring to the notice of the bank that it is an MSME supported by identifiable and verifiable documents, it cannot be allowed to “thwart” the SARFAESI action at a later stage; and (ii) in Shree Shree Swami Samarth, the Court observed that if the MSME had not even replied to the notice under Section 13(2) and claimed protection as an MSME supported by an affidavit, the recovery action cannot thereafter be challenged - which, to repeat, are contrary to the very letter as well as the spirit of the notification and have created a scenario where the said judgments have been instrumental in denying the benefit of the notification to MSMEs across the country.

c) To declare that the entire proceedings initiated by the respondent against the petitioners under Sections 13(2), 13(4) and 14 of the SARFAESI Act, are unconstitutional, illegal and void, being in violation of Paragraph 5(4)(iii) of the notification dated 29.05.2015 under the MSMED Act and without jurisdiction for more than one reason;

d) to declare that the loss and injuries suffered by the petitioners being far in excess of the claim of the Bank as against the petitioners, the petitioners are entitled to compensation and damages which they are entitled to seek in the very same proceedings the Bank has instituted against them;

e) to declare that insofar as the MSMED Act and the notification dated 29.05.2015 creates certain obligations and burden as against the Bank and certain rights and protection in favour of