Banks must adhere to the Framework for Revival and Rehabilitation of MSMEs before classifying accounts as non-performing assets, obligating both banks and MSMEs to fulfill their respective duties.

JUDGMENT :

Krishna Rao, J.

1. The petitioners have filed the present writ application praying for a Mandamus upon the respondent nos. 1, 2 and 3 to act in terms of the Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises dated 29th May, 2015 and 17th March, 2016 and the Master Direction for Lending to Micro, Small and Medium Enterprises Sector dated 21st July, 2016.

2. The petitioner no.1 is a registered Micro Enterprises, having Registration No. UDYAM-WB-10-0023419. The petitioner no. 1 has availed Cash Credit Facilities of Rs. 4,95,00,000/- from the respondent no.1 bank. The petitioner nos. 4 and 5 are guarantors of the petitioner no.1 of the said Cash Credit Facilities.

3. By a notice dated 24th June, 2025, the respondent no.1 has informed the petitioner no.1 that the cash credit account of the petitioner no.1 is under SMA-2 and will be turned to NPA on 25th June, 2025, due to non-service of interest and requested the petitioner no.1 to immediately pay the overdue amount of Rs. 14,33,608/- (Excluding revenue leakage of Rs. 33,365/-) and to regularize the account.

4. On 26th June, 2025, the respondent no.1 by a notice under Section 13 (2) of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 calling upon the petitioners to discharge the liabilities in full by paying the entire amount of Rs. 5,12,64,234.67 with interest.

5. The petitioner no.1 by a letter dated 13th August, 2025, sent a reply to the notice dated 26th June, 2025, requesting the bank to withdraw the said notice and to follow the provisions of the “Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs)” and the judgment passed by the Hon’ble Supreme Court in the case of M/s. Pro Knits Vs. The Board of Directors of Canara Bank reported in (2024) 10 SCC 292 .

6. On 6th September, 2025, the bank again issued a notice under Section 13 (2) of the SARFAESI Act, 2002, calling upon the petitioners to pay the amount of Rs.5,22,42,577.67 along with interest within 60 days from the date of receipt of the notice. In the said notice, it was also informed by the bank to the petitioners that the earlier notice dated 26th June, 2025, issued under (2) of the SARFAESI Act stands withdrawn.

7. By a reply dated 17th November, 2025, the bank has informed the petitioners that the bank has rightly classified the account of the petitioner no. 1 as NPA by the system itself as per guidelines of the RBI. In the said reply, the bank has also informed the petitioners that the Bank has never received such request from the petitioners for any Corrective Action Plan or restructuring as per the Framework for Revival of Micro, Small and Medium Enterprises.

8. On 28th November, 2025, the petitioner no. 1 has made request to the Zonal Head of the bank for implementation of the MSME. The petitioner no. 1 also made request to the Reserve Bank of India with the request to issue direction upon the bank for implementation of the guidelines.

9. Mr. Chayan Gupta, Learned Advocate representing the petitioners submits that inspite of the representations submitted by the petitioners neither the bank nor the Reserve Bank of India has taken any action in terms of the Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises and on the other hand, the bank is proceeding against the petitioners under the SARFAESI Act.

10. The petitioners have relied upon the judgment in the case of Pro Knits (supra) and submits that prior to declaring the account of MSMEs, the instructions and directions of the