Failure to assert MSME status prior to NPA classification precludes later claims for protection under the MSMED Act in SARFAESI proceedings.

JUDGMENT :

Basant Balaji, J.

The case of the petitioners is that the 1st petitioner is a woman MSME entrepreneur engaged in the trade of various products, namely LSON Trade links, which is a registered MSME. The 2^nd petitioner is her husband, who also runs a registered MSME unit by the name M/s. Ashok Rubber Factory, engaged in the manufacture of molded rubber pads and plastic pipes. Due to the inability to repay the loan facilities availed from the respondent Bank, default occurred, and the account of the 2^nd petitioner was classified as NPA.

2. Subsequently, the Respondents issued Ext.P3 demand notice dated 24.04.2024 under Section 13(2) of the SARFAESI Act, 2002 seeking a repayment of Rs.68,55,524.98/-. The petitioner addressed the Bank by letter dated 04.06.2024 explaining the financial difficulties seeking flexible accommodation proposing a repayment plan for closing the said loan.

3. The Bank then issued Ext.P5 letter dated 15.06.2024 rejecting the claim raised by the petitioner. Thereafter, the respondent bank resorted to section 14 of the SARFAESI Act, 2002 and initiated recovery proceedings. Aggrieved by the above scenario, the present petition stands filed.

4. 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.

5. Further, they contended that the judgments of the hon’ble Apex Court in Pro Knits v. Canara Bank [2024) 10 SCC 292] and Shri Shri Swami Samarth Construction & Finance Solution and Ors. v. The Board of Directors of NKGSB Co-op. Bank Ltd. and Ors. (2025 SCC Online Sc 1566), having been rendered per incuriam, is not at all binding on other courts and tribunals under Art.141 of the Constitution of India. The counsel also challenged the legality of simultaneous proceedings initiated under the SARFAESI Act with that of the suit filed under the RDB Act.

6. The counsel for the respondent Nos.1 to 3 through their counter affidavit primarily contends the maintainability of the writ petition under Article 226 of the Constitution of India. It is submitted that the petitioners have produced Ext.Nos.P3, P21 demand notices and Ext.Nos.P22, P23 auction notices issued by the respondents to them with respect to various loan facilities extended, however, numerous writ petitions stand already filed challenging the same. Hence, prayed that the present petition is devoid of any merits without a cause of action to invoke the jurisdiction of Art 226 of the Constitution of India. It also attracts the bar under the principles of res judicata as well as constructive res judicata taking into note the earlier litigations instituted and the judgments binding the petitioners, warranting the dismissal of the present writ petition.

7. Heard the counsel on both sides.

8. 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