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.

JUDGMENT :

Basant Balaji, J.

The 1st petitioner is an MSME enterprise engaged in the manufacture of food products which availed loan facilities from Respondent Banks 2,5 and 8. Due to the default in repayment, respondent banks initiated recovery proceedings under the SARFAESI Act . The 3^rd respondent issued Ext P6 demand notice dated 25.06.2025 under section 13(2) of the Act demanding payment of the amounts due, pursuant to which symbolic possession of the secured assets was taken through Ext.Nos.P7 and P8 possession notices dated 12.09.2025 and 19.09.2025 respectively. Ext.P9 demand notice dated 05.05.2025 was issued by the 6^th respondent to the petitioners under section 13(2), followed by the issuance of Ext.P10 recall notice dated 28.10.2025 by the 9^th respondent. Aggrieved by the commencement of these coercive recovery proceedings, petitioners approached this Court.

2. The counsel for the petitioners submits that they do not wish to press the prayer (b) and accordingly, the permission sought for is granted. The counsel also seeks permission to delete the Attorney General from the party array, which is also permitted by this Court.

3. According to the counsels for 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. The counsel appearing for the 3rd respondent had filed a preliminary objection challenging the maintainability of the present writ petition filed under Article 226 of the Constitution of India , as there is an efficacious statutory remedy available to the petitioner under section 17 to challenge SARFAESI proceedings initiated by the Bank. The counsel has relied on the decisions laid down by the hon’ble Supreme court in United Bank of India v. Satyawati Tondon (2010) 8 SCC 110 , Authorized Officer, State Bank of Travancore v. Mathew K.C (2018) 3 SCC 85 and in Phoenix ARC Pvt Limited v. Vishwa Bharati Vidya Mandir (2022) 5 SCC 345 wherein, it was categorically held that High Courts, in the exercise of its discretionary jurisdiction under Article 226, should refrain from entertaining writ petitions challenging SARFAESI actions, save for exceptional circumstances involving a total lack of jurisdiction or violation of fundamental rights.

5. The counsel submits further that the petitioner relies on an MSME certificate of the year 2020, whereas the loan in question was availed in the year 2022. It is not discernible as to whether the MSME certificate produced before this Court was valid or subsisting as on the date of sanction of the said loan. No documents substantiating this point has been made available by the petitioners in this Court.

6. Heard counsel appearing for the petitioners as well as the respondents.

7. As far as obtaining the protection conferred under the revival framework of MSMED Act is concerned, the petitioners herein failed to adhere to the guidelines as held by the hon'ble Supreme Court in Pro Knits v. Canara Bank reported in (2024) 10 SCC 292 ]. Relevant paragraphs of th