MSMEs must assert their status timely to avail benefits under relevant frameworks; failing to notify the bank before NPA classification precludes belated claims.

JUDGMENT

(Dated this the 11^th day of December, 2025)

The petitioner company, G.K. Granites, was incorporated on 18.07.1986 and registered as an MSME on 24.03.2021. The 1st respondent sanctioned multiple credit facilities to the petitioner between 2016 and 2022, including a Cash Credit (CCOL) Facility of ₹4.00 Crores, an SIBML-OD Facility of ₹9.50 Crores, and an ECLGS Loan of ₹3.00 Crores. According to the petitioner, a representation was made on 12.06.2024 to the respondent Bank requesting the restructuring of existing facilities and seeking extension of MSME support as per RBI circulars and Master Directions. However, due to non- repayment, the respondent Bank classified the petitioner's loan accounts as a Non-Performing Asset (NPA) on 26.06.2024 and subsequently issued Ext.P5 notice dated 02.08.2024 under Section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), demanding payment of ₹18,07,08,346.23/- as on 2.08.2024.

2. Thereafter, the Bank issued Ext.P6 notice dated 06.12.2024 under Section 13(8) of the SARFAESI Act, proposing the sale of the secured assets. On 24.03.2025, the petitioner submitted a detailed representation proposing a One- Time Settlement (OTS) of ₹17.50 Crores. The Bank accepted this proposal, conditional on the payment of ₹1 Crore by 31.03.2025 and the balance by 30.04.2025. The Petitioner successfully paid the initial ₹1 Crore but failed to remit the balance amount. This non-payment was attributed to procedural delays by the Revenue Department in converting the classification of the mortgaged properties from nilam (wet land) to purayidam (dry land). Consequently, the petitioner filed W.P.(C) No.23587/2025 before this Court, seeking a direction to the Revenue Authorities to expedite the land conversion order. On 02.06.2025, the petitioner sent a letter to the Bank again, requesting a 45-day extension for paying the balance OTS amount. However, the Bank denied the extension and, by Ext.P11 letter dated 30.06.2025, directed the immediate repayment of the outstanding amount.

3. On the same day, 30.06.2025, the respondent Bank issued an E-Auction Sale Notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, proposing to sell the mortgaged properties with a reserve price of ₹22,02,30,000/-. The petitioner contested this, claiming the valuation was very low. In these circumstances, the petitioner filed a second writ petition, W.P.(C) No.27271 of 2025, seeking deferment of the SARFAESI proceedings and permission to pay the outstanding dues in 15 monthly installments. This Court, vide an interim order dated 29.07.2025, directed the petitioner to remit ₹2.5 Crores by 13.08.2025 and another ₹2.5 Crores by 31.08.2025. Since the petitioner failed to comply with this interim order, this High Court dismissed the writ petition on 16.09.2025, noting that the dismissal was without prejudice to the petitioner's right to challenge the secured creditor's measures under the SARFAESI Act before the statutory authority.

4. On 17.10.2025, the respondent Bank issued another E-auction Sale Notice proposing auction of the secured assets on 07.11.2025. According to the petitioner, the Bank’s classification of the petitioner’s account as NPA is without first referring the matter to the Committee for Stressed MSMEs and framing a Corrective Action Plan (CAP) as mandated under the Framework for Revival and Rehabilitation of MSMEs, 2016. Therefore, the petitioner has approached this Court by filing this writ petition for