The principle of res judicata prohibits re-agitating issues conclusively adjudicated in prior litigation, ensuring that a matter resolved by a competent court remains binding in subsequent proceedings on the same parties.

JUDGMENT

The writ petition is filed challenging Exhibit P4 auction notice dated 10.03.2025, by which the respondent-bank proposed to sell the gold ornaments pledged by the 1st petitioner, alleging that such action is illegal and violative of the protections available under the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter MSMED Act, 2006), and the notifications issued thereunder.

2. The 2nd petitioner, a registered Micro Enterprise engaged in the manufacture of rubber and plastic products, holds Ext. P1 Udyam Registration dated 16.04.2021 under the MSMED Act, 2006. The 1st petitioner, his wife and guarantor, pledged her gold ornaments to secure credit facilities. The 2nd petitioner had earlier challenged the said recovery by filing W.P.(C) No. 39257 of 2024, against which SLP No. 10986 of 2025 is presently pending before the Hon’ble Supreme Court. 2.1. The respondent bank, ignoring the statutory protections under the MSMED Act and Exts. P2 and P3 notifications, issued Ext. P4 proposing an online auction of the 1st petitioner’s pledged gold, rejecting her request to renew or clear the loan. The said action, undertaken without following the prescribed MSME recovery framework, is illegal and void ab initio.

2.2. The petitioners contend that under the 2015 MSME Notification and the subsequent RBI circulars, the bank was obligated to identify stress, constitute a Committee for Stressed MSMEs, and consider rectification or restructuring before initiating recovery. The 2020 Notification further broadened MSME eligibility and reaffirmed these safeguards, under which the 1st petitioner duly obtained Udyam registration.

2.3. The petitioners further allege that the bank’s actions constitute fraud upon a registered MSME and amount to a mala fide abuse of power, causing irreparable harm. The arbitrary branding of borrowers as “wilful defaulters” through mere executive circulars, without statutory sanction, is unconstitutional and has grave civil consequences. Such coercive and unilateral recovery, bypassing the MSME framework, violates the guarantees under Articles 14, 19, 21, and 300A of the Constitution.

2.4. It is further emphasised that the RBI and the Union Government have failed to ensure implementation of the 2015 Notification, reducing it to a dead letter and enabling banks to bypass the mandatory rehabilitation framework intended to safeguard MSMEs. This abdication of statutory duty has defeated the legislative policy of revival and survival of small enterprises.

2.5. The petitioners further argue that the doctrine of res judicata is not intended to deny a litigant what is due to them without an adjudication on the merits of a right, statutory, equitable, or common law, but is founded on public policy. It means that even an erroneous decision of a competent court, rendered after observing natural justice and settled principles of law, must stand in the larger public interest to prevent endless litigation. Citing Minerva Mills v. Union of India ( AIR 1980 SC 1789 ), it is submitted that the doctrine applies only where parties had a fair opportunity to present their rival contentions and the matter was fully adjudicated. The principle, evolved by Roman jurists like Ulpian, Modestinus, Gaius, Papinian, and Paulus, rests on the maxims res judicata pro veritate accipitur (a judicial decision must be accepted as true), interest reipublicae ut sit finis litium (it is in the State’s interest that there be an end to litigation), and nemo debet bis vexari pro una et eadem causa (no one should be vexed twice for the same cause).

2.6. It further argues that for the doctrine of res judicata to