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IN THE HIGH COURT OF KERALA AT ERNAKULAM
BASANT BALAJI, J
M/S. GENUINE AGRO SPICES – Appellant
Versus
THE BOARD OF DIRECTORS OF BANK OF MAHARASHTRA LTD. – Respondent
WP(C) NO. 41907 OF 2025
Certainly. Based on the provided legal document, here are the key points summarized:
MSME Status and Timely Assertion: Borrowers must proactively assert their MSME status and provide authenticated and verifiable documents before the classification of their account as NPA. Failure to do so at the appropriate stage precludes them from claiming protections under the MSMED Act at a later time (!) (!) (!) .
Obligations of Both Parties: Both banks and MSMEs have reciprocal obligations under the MSMED Act framework. Banks are required to identify incipient stress and verify MSME status, while MSMEs are obliged to produce necessary documentation to substantiate their MSME classification before the account turns NPA (!) (!) .
Consequences of Passivity: If an MSME fails to raise its status or provide proof before the account is classified as NPA, it cannot later challenge recovery proceedings by claiming MSME protections. Participation in the recovery process without objection is deemed acceptance, which limits subsequent claims (!) (!) .
Legality of Simultaneous Proceedings: Initiating recovery under both SARFAESI and RDB Acts concurrently is permissible. These remedies are considered complementary rather than exclusive, and the law permits their simultaneous invocation (!) (!) .
Legal Principles and Jurisdiction: The law mandates that the principles laid down by higher courts, including the Supreme Court, are binding on all subordinate courts and tribunals. This includes the interpretation that remedies under SARFAESI and RDB Acts can be pursued simultaneously and that a belated claim of MSME status after passive participation in proceedings is not valid (!) (!) .
Legal Framework and Procedural Requirements: The framework for MSME revival and rehabilitation necessitates timely and verified disclosures from MSMEs. The failure to do so, especially after the initiation of recovery proceedings, results in the loss of protections under the MSMED Act (!) (!) .
Outcome of the Case: Given the non-assertion of MSME status at the appropriate time and the acceptance of the recovery process, the court dismissed the petition, reaffirming that passive participation and delayed claims are not legally sustainable (!) .
Please let me know if you need further analysis or specific legal advice related to this case.
| Table of Content |
|---|
| 1. establishment and financial status of petitioners. (Para 1 , 2 , 3) |
| 2. arguments against recovery actions without msme benefits. (Para 6 , 7 , 9) |
| 3. clarification of the msme framework and obligations. (Para 8 , 10 , 12) |
| 4. decision on recovery rights under sarfaesi and rdb acts. (Para 11 , 13) |
JUDGMENT
(Dated this the 16th day of January 2026)
The 1st Petitioner, established in 2017, is a registered Medium MSME enterprise engaged in the trading of agricultural produce, including exports. The 2nd and 3rd petitioners are the partners of the 1st Petitioner Firm. The 1st Respondent is the Board of Directors, represented by its chairman, and the 3rd respondent is the Authorized Officer of the 2nd respondent bank. Petitioners availed credit facilities to the tune of Rs. 30 crores from Respondent Nos. 1 to 3 and the said loan facilities were fully secured by mortgaging various collateral securities.
2. It is the case of the Petitioners that their business encountered significant financial stress due to external factors, which led to defaults on their repayment obligations. However, despite the Petitioners’ request seeking benefits under the MSMED Act, 2006 , the Bank denied their requests for rehabilitation and restructuring and bypassed these protective measures by initiating coercive recovery proceedings against the firm.
3. Subsequently, instead of referring the 1st petitioner firm to the Committee of stressed MSME’s to enable them to avail the opportunity of rehabilitation as per the scheme under the MSMED Act, the Respondents issued Ext P14 demand notice dated 24.04.2025 under Section 13(2) of the SARFAESI Act, 2002 , seeking a repayment of Rs. 30,77,13,032.35/-. The 2nd petitioner sent an email on 28.07.2025 to the Bank attaching two documents; one of the documents is issued by the MSME - DEVELOPMENT AND FACILITATION OFFICE dated 23.07.2025, which is in respect of a company by the name Kanjiravelil Traders Pvt. Ltd and others, which have nothing to do with the petitioner enterprise herein. The second document annexed is a letter issued by the SPICES BOARD dated 17.07.2025, which is also concerned with Kanjiravelil Traders Pvt. Ltd and others, and not in respect of the petitioner. Therefore, it is evident that the petitioner enterprise has not replied to the Section 13(2) notice issued by the Bank.
4. The Bank then issued a possession notice dated 16-07-2025, u/s. 13(4) of the SARFAESI Act, 2002 . Thereafter, the respondent bank applied u/s. 14 of the SARFAESI Act, 2002 , to take physical possession of the mortgaged properties, and the Advocate Commissioner appointed by Order dated 19-09-2025 of the Chief Judicial Magistrate, Thrissur, has issued a notice dated 15-10-2025 informing of physical dispossession on 06-10-2025. Aggrieved by the above scenario, the present petition stands filed.
5. Heard the learned counsels appearing for the petitioners as well as the respondents.
6. According to the counsels for the petitioners, 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 MSMED Act, 2006 , by the Central Government and had initiated recovery proceedings against the petitioners without even referring them before the Committee constituted under the framework for rehabilitation for availing benefits as contemplated in the said notification, which is a nullity in the eyes of law. Hence, contended that the entire proceedings done pursuant thereto are liable to be quashed.
7. Further, they maintained that the judgments of the Hon’ble Apex Court in Pro Knits and Shri Shri Swami Samarth, having been rendered per incuriam, are not at all binding on other courts and tribunals. The counsel also challenged the institution of simultaneous proceedings initiated under the SARFAESI Act with that of the suit filed under the RDB Act.
8. As far as obtaining the protection conferred under the revival framework of the MSMED Act is concerned
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