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2025 Supreme(Online)(Cal) 5265
CALCUTTA HIGH COURT
Krishna Rao, J
MAHUA BHAUMIK – Appellant
Versus
UNION OF INDIA AND ORS. – Respondent
WPA 27289 / 2025
For the Appellants/Petitioners: Kumarjit Banerjee, Akansha Chowdhury, Subhamoy Karmakar, Sayani Barman
For the Respondents: Amrita Pandey, Subit Majumdar, Sayanwita Auddhya, Dinesh Barman, Suchishmita Ghosh, Sonia Nandy, Sayak Ranjan Ganguly, Srijani Ghosh, Indrani Majumdar, Akshita Singh, Soni Ojha, Sambrita B. Chatterjee, Avishek Guha, Subhajit Das, Sonal Agarwal
Regulatory frameworks for the rehabilitation of smaller business units possess statutory force and bind lending institutions. Failure by lenders to consider restructuring requests in accordance with these mandates constitutes a breach of public duty, allowing for judicial intervention via writ jurisdiction even against private entities.
Headnote:(A) Constitution of India, 1950 - Articles 12 and 226 - Banking Regulation Act, 1949 - Sections 21 and 35-A - Micro, Small and Medium Enterprises Development Act, 2006 - Section 9 - Revival and Rehabilitation of Micro, Small and Medium Enterprises Framework - Statutory guidelines issued by central banking body - Binding nature upon credit-granting institutions - Maintainability of writ petitions against private financial entities - When a private entity is entrusted with statutory functions or duty of public nature, they are amenable to extraordinary writ jurisdiction to enforce compliance. (Paras 14, 17, 19, 20, 21)
(B) Restoration and Rehabilitation - Borrower entitlement - Duty to consider representation - Where a framework issued under statutory authority mandates a mechanism for identifying stressed accounts and formulating corrective action plans, failing to consider a validly placed request for restructuring constitutes a neglect of statutory duty. (Paras 15, 18, 22)
(C) Writ Jurisdiction - Maintainability - Private financial institutions performing functions under regulatory mandates - Performance of public duty - Where a legislative instrument mandates a specific process, the refusal to entertain requests according to that process can be challenged via writ to enforce the duty. (Paras 19, 20, 21)
Facts of the case:
A proprietor operating micro-enterprises availed credit facilities from various lenders. Due to geopolitical instability affecting business turnover and cash flow, the proprietor experienced payment irregularities. Representing the financial stress, the borrower sought a revival and rehabilitation process as per prevailing regulatory guidelines. However, lenders failed to acknowledge these requests, instead proceeding with loan recalls and initiating recovery or arbitration measures without addressing the restructuring plea.
Findings of Court:
The regulatory notifications regarding the revival of micro-enterprises have statutory force and create binding obligations on all lending institutions. Dismissing the argument that private financial bodies are exempt from constitutional scrutiny, the court determined that the failure to implement mandatory regulatory restructuring mechanisms constitutes a breach of public duty, rendering the writ petition maintainable.
Issues: Whether writ applications are maintainable against private financial entities regarding the enforcement of regulatory rehabilitation frameworks; whether lenders are statutorily obligated to consider restructuring requests from stressed micro-enterprise borrowers.
Ratio Decidendi: The court reasoned that institutional guidelines issued under banking and enterprise legislation function with statutory force. Consequently, when such guidelines impose positive obligations on lenders to facilitate the revival of small-scale business units, these lenders are discharging a public function. Thus, failure to adhere to the mandated process warrants judicial intervention under writ jurisdiction to compel performance of the statutory duty.
Result: Writ application allowed. Respondents are directed to consider the representation in accordance with the regulatory framework, with an interim stay on loan classification and recovery actions.
Hearing Concluded On : 12.12.2025
Judgment on : 16.12.2025
Krishna Rao, J.:
1. The petitioner has filed the present writ application praying for a direction upon the respondents for consideration of the representations submitted by the petitioner for initiation of revival and rehabilitation process in respect of her loan accounts in accordance with the Reserve Bank of India’s Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises Notification dated 17th March, 2016.
2. The petitioner is the sole proprietor of its two concerns, namely, (i) M/s. Reliance Roadlines and (ii) M/s. Reliable Roadlines. Both the firms of the petitioner registered as “Micro Enterprises”. The petitioner has availed various Credit Facilities from the respondent nos. 3 to 14 for the purpose of its business.
3. Mr. Kumarjit Banerjee, Learned Advocate representing the petitioner submits that due to severe political turmoil and civil unrest in early 2024 at Bangladesh had a crippling effect on cross-border trade. Due to which the business of the petitioner suffered a sharp declined in turnover. Due to the political instability resulted in substantial delays in receivables from several export-linked customers, creating a severe cash flow mismatch and the petitioner has suffered severe financial loss, due to which causing temporary irregularities in the payment of Equated Monthly Installments (EMIs) towards the loans availed by the petitioner from the respondents.
4. Mr. Banerjee submits that the respondent no. 2 has issued a Notification dated 29th May, 2015 for the primary purpose of providing timely support to financially viable MSMEs that are facing temporary financial stress. He submits that the Framework mandates that lenders/ borrowers identify such ‘stressed accounts’ at an early stage and formulate a ‘Corrective Action Plan’ (CAP) to revive the MSMEs, even before the accounts are classified as Non-Performing Assets (NPAs). He submits that the Notification dated 29th May, 2015 and subsequent instructions/directions issued by the Central Government and the Reserve Bank of India (RBI) vide communication dated 17th March, 2016 are in force and are binding to all the financial Institutions.
5. Mr. Banerjee submits that in compliance with the aforesaid notification and instructions, the petitioner approached the respondents requesting restructuring the loan accounts. He submits that inspite of receipt of the request of the petitioner for restructuring the respective loan accounts of the petitioner, the respondent nos. 3 to 14 failed to consider the request of the petitioner. He submits that the respondent nos. 6, 9 and 12 instead of initiating process for revival and rehabilitation as per the notification and instructions, have issued loan recall letters and their recovery agents started resorting the coercive action against the petitioner.
6. Mr. Banerjee submits that the respondent nos. 10 and 11 in violation of the notification and instructions, not only proceeded to recall the loan but also unilaterally initiated arbitration proceedings. The petitioner had issued a letter to the respondent no. 2 on 4th November, 2025 and the copy of the same was also sent to the respondent nos. 3 to 14 requesting the respondent no. 2 intervene in the matter and to ensure the compliance of the Framework. He submits that inspite of several requests made by the petitioner to the respondents, the respondents failed to consider the request of the petitioner. Accordingly, the petitioner has filed the present application.
7. Mr. Banerjee in support of his case, has relied upon the following judgments:
a. M/s. Pro Knits vs. The Board of Directors of Canara Bank and Ors. reported in 2024 SCC OnLine SC 1864,
b. Shri Shri Swami Samarth Construction and Private Limited vs. the Board of Directors of NKGSB CO-OP. Bank Ltd. and Ors. passed in Writ Petition (Civil) No. 684 of 2025 dated 28th July, 2025,
c. K.K. Saksena vs. International Commission on Irriga
