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IN THE HIGH COURT OF KERALA AT ERNAKULAM
BASANT BALAJI TH, J
M/S. SARK SPICE PRODUCTS PVT. LTD. – Appellant
Versus
RESERVE BANK OF INDIA – Respondent
WP(C) NO. 32181 OF 2025
The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, particularly Section 9, empowers notifications establishing frameworks for revival and rehabilitation of MSMEs, including identification of incipient stress in accounts before classification as non-performing assets (NPAs).[judgement_act_referred] (!) (!) [6][18][23]
A key development underscores complementary obligations: while banks must identify stress using authenticated, verifiable MSME registration materials, MSMEs bear a duty to proactively notify banks with supporting documents (e.g., affidavits) prior to NPA classification to access benefits. (!) (!) (!) (!) (!) [19][21][22][23]
MSMEs cannot belatedly claim protections after NPA declaration, Section 13(2) SARFAESI notice issuance, or initiation of recovery proceedings, as this constitutes misuse of process; timely assertion is mandatory, harmonizing MSMED frameworks with SARFAESI enforcement.[6] (!) [18] (!) [19] (!) [20] (!) (!) (!) [21][22][23][25]
This aligns MSMED revival mechanisms with debt recovery statutes, permitting simultaneous proceedings under SARFAESI and RDB Acts without election of remedies.[judgement_act_referred][14][17]
Failure to substantiate MSME status at critical pre-NPA stages precludes later relief, emphasizing vigilance and clean hands in litigation. (!) [23][24][25]
| Table of Content |
|---|
| 1. overview of case and procedural background. (Para 1 , 2 , 3 , 4) |
| 2. petitioners argue against bank's actions. (Para 6) |
| 3. respondents challenge writ maintainability. (Para 7) |
| 4. history of previous petitions and outcomes. (Para 8 , 9) |
| 5. legal standards and principles governing res judicata. (Para 10) |
| 6. abuse of process in filing repetitive petitions. (Para 11 , 12) |
| 7. legality of concurrent proceedings under sarfaesi and rdb acts. (Para 13 , 14 , 15) |
| 8. obligation of msmes under the revival framework. (Para 16 , 17 , 18 , 19) |
| 9. msme guidelines and their implications on npa classification. (Para 20 , 21 , 22) |
| 10. conclusion barring relief claims due to previous litigations. (Para 23 , 24 , 25) |
JUDGMENT
(Dated this the 18th day of December 2025)
The first petitioner is a registered Private Limited Company, under the MSMED Act, 2006, and the second petitioner is the Chairman and Managing Director of the first petitioner. The Respondent nos.2 and 3 Bank offered certain loan facilities to the petitioners. The 4th respondent is the Authorized Officer of the 2nd respondent Bank.
2. According to the petitioners, the Bank initiated proceedings under Sec.19 of the Recovery of Debts and Bankruptcy Act, 1993 (the RDDB Act,1993), after declaring the account of the petitioners as NPA and the issuance of demand notice dated 09.06.2021. After issuance of sec.13(2) notice under the SARFAESI Act, 2002 the respondent Bank issued a notice dated 01.09.2022, under sec.13(4), taking symbolic possession of the properties of the borrowers and guarantors. The fourth respondent thereafter issued a notice dated 06.09.2022 to the petitioners, for sale by public-auction.
3. Subsequently, the Bank obtained an order for taking possession of the properties under section 14 of the SARFAESI Act, 2002 , from the Chief Judicial Magistrate, Alappuzha, in CMP No. 3996/2022 in M.C. No.745/2022. The respondent Bank also instituted O.A. No.242/2021 before DRT-II, Ernakulam, against the petitioners. Following the proceedings under the RDDB Act, 1993, the bank commenced SARFAESI proceedings. This constrained the petitioners to institute S.A. No.77/2023 before DRT-II, Ernakulam, challenging the SARFAESI proceedings initiated by the Bank, which is still pending. The application for stay along with the SA has been dismissed by the Tribunal.
4. In the meanwhile, the National Company Law Tribunal, Kochi Bench (NCLT) has passed orders in the petitions filed by the respondent bank under section 95, IBC, against the Directors of the petitioner No.1, excluding the 2ndpetitioner. The first petitioner then approached the hon’ble Apex court under Article 32 of the Constitution of India, since the respondent Bank parallelly invoked SARFAESI, while the O.A. instituted by them is pending before the DRT. The Hon’ble Apex court relegated the petitioner to approach this court, and hence the present petition.
5. Heard the learned counsel for the petitioners as well as the learned counsel for the respondents.
6. The contentions raised by the petitioners is that 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 Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 (the SMED Act, 2006), by the Central Government as well as in violation of the circular dated 17.03.2016 issued by the Reserve Bank of India (RBI), wherein the accounts of the petitioners were classified as NPA, and therefore the proceedings initiated thereafter by the Bank are nullity and liable to be quashed. They further disputed the legality of the proceedings initiated under the SARFAESI Act simultaneously with that of the suit filed under the RDB Act,1993, without withdrawing the same.
7. The learned counsel for the respondents disputed the maintainability of the writ petition on the grounds of availability of alternative remedy and maintained that the very institution of this writ petition is therefore barred by
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