The principle of res judicata applies where issues have been previously litigated and finalized, barring subsequent attempts to relitigate the same matters.

JUDGMENT

This writ petition is filed by M/s. M.D.Esthappan Infrastructure Pvt. Ltd and M.D. Esthappan contending that they are a duly registered Micro, Small and Medium Enterprise (hereinafter MSME) under the Micro Small Medium Enterprises Development Act , 2006 (hereinafter MSMED Act), and hence entitled to the protection of the revival and rehabilitation framework notified by the Central Government through Notification dated 29.05.2015. They submit that the said framework, having statutory force, obliges all banks and financial institutions to refer stressed MSME accounts to a Committee for corrective measures— rectification, restructuring, and only thereafter recovery.

2. It is contended that the respondent Bank, in gross violation of this mandatory framework, classified the petitioners’ account as a Non- Performing Asset (NPA) and initiated coercive steps under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (hereinafter referred to as 'the SARFAESI Act') without first constituting or referring the matter to the Committee for Stressed MSMEs. The petitioners submit that such action is illegal, arbitrary, and void ab initio, as the statutory precondition to recovery was ignored. They rely on the judgment of the Hon’ble Supreme Court in Pro Knits v. Canara Bank [ (2024) 10 SCC 292 ], wherein it was held that once MSME status is established prior to NPA classification, banks are bound to explore corrective steps under the framework before proceeding with recovery. The petitioners further contend that the Ext.P3 RBI Notification dated 17.03.2016, which restricts the application of the MSME framework to accounts with exposure/loan up to Rs. 25 crores, is ultra vires the parent legislation and cannot override the statutory notification issued by the Central Government. They argue that such an arbitrary cap undermines the objective of the MSMED Act and deprives genuine MSMEs of statutory protection. The denial of the framework’s benefit has caused grave prejudice, financial loss, and reputational injury to the petitioners, defeating the very purpose of the MSMED Act, which recognises MSMEs as the dynamic sector of the Indian economy requiring support for revival and growth.

3. In the statement filed on behalf of respondents 2, 3, and 4, it is contended that the petitioners are guilty of suppression of material facts and have indulged in repeated and frivolous litigation. It is submitted that the writ petition is not maintainable, since Dhanlaxmi Bank Ltd., being a Scheduled Commercial Bank, is not an instrumentality of the State under Article 12 of the Constitution, and further, that writ petitions are not maintainable in matters arising under the SARFAESI Act.

3.1. The respondents submit that the petitioners had earlier challenged the RBI’s Rs. 25 crore cap on restructuring in W.P.(C) No. 4631 of 2025, but, realising that the challenge would not succeed, withdrew it on 07.02.2025 with liberty to amend W.P.(C) No. 46514 of 2024. Accordingly, the petitioners filed I.A. No. 1 of 2025 in W.P.(C) No. 46514 of 2024, seeking to incorporate the said challenge. Though the amendment was allowed, the writ petition itself was dismissed by judgment dated 11.03.2025. The petitioners then preferred W.A. Nos. 481 and 484 of 2025, which were also dismissed by a Division Bench on24.06.2025.

3.2. The respondents further point out that the petitioners approached the Hon’ble Supreme Court in S.L.P. No. 17263 of 2025, which was dis