The SARFAESI Act's provisions need to align with principles of natural justice when affecting MSME borrowers.

JUDGMENT

(Dated this the 20th day of February, 2026)

The petitioner is a guarantor to a loan taken by the 1^st respondent, which is an MSME Enterprise. When the 1^st respondent failed to remit the loan amount due to the respondent bank, the bank initiated proceedings under the SARFAESI Act and notices under Section 13 of the Act were issued. Ext.P10 is the notice issued by the Advocate Commissioner on 05.12.2025 for taking physical possession of the secured asset. The petitioner is aggrieved by Ext.P11 notice memo dated 19.12.2025 issued by the Advocate Commissioner in M.C. No.705/2025 to take physical possession of secured asset.

2. The prayers in this writ petition are as follows:

a) Declare that Section 14 of the SARFAESI Act is unconstitutional and void being violative of Articles 14 and 21 inasmuch as it does not expressly mandate that the principles of natural justice shall be observed which has resulted in the Magistrates passing orders, even against MSME borrowers without noticing the fact that the notification dated 29.5.2015 prohibits banks and financial institutions from classifying the account of an MSME as NPA without constituting a committee upon identification of incipient stress or where a default has occurred, or in the alternative to hold that the obligation to observe the principles of natural justice be read into the statute;

b) to declare that the Defendant Banks/NBFCs are estopped from initiating multiple action under the SARFAESI Act , and RDBF Act/IBC 2016, in respect of the very same cause of action between the very same parties, namely, the instant Plaintiffs and the them, that the invocation of one forum will constitute a bar/ estoppel for initiating any other action or approaching any other forum, ne bis in idem being an undeniable fundamental principle of law having universal application and that the Defendants are duty bound to elect one forum which will constitute a bar in invoking any other forum or in the alternative to declare that Declare that Sections 13 (2), 13(4) and 14 of the SARFAESI Act , 2002 and Section 19 of the Recovery of Debts and Bankruptcy Act , insofar as they permit simultaneous proceedings against a borrower contrary to the first proviso to and Section 13 (10) of the SARFAESI Act , are unconstitutional and void;

c) to declare that the licences granted by the Reserve Bank of India (RBI), in exercise of the powers conferred upon it under the Banking Regulation Act , 1949, the Reserve Bank of India Act , 1934, and the SARFAESI Act , 2002, to the Respondent Banks and financial institutions are liable to be cancelled, inasmuch as not even a single Committee for Resolution of Stress in MSMEs, as mandated by the notification, was ever constituted by any of the Respondent Banks or financial institutions, which amounts to gross and culpable failure on their part to conduct their business and affairs in accordance with law and in a manner grossly detrimental to public interest;

d) Without prejudice to the relief (d) sought above, to direct Respondent No. 14 (Reserve Bank of India) to remove the Managing Director and/or Chief Executive Officer and/or such other officers of the Respondent Banks and financial institutions who are directly responsible for conducting their affairs in gross breach of law—nay, in breach of the notification dated 29.5.2015—and thereby in a manner injurious to public interest.

e) To Direct the Respondent Banks/Financial Institutions to file an affidavit stating on oath whether they have constituted even a single committee as contemplated under the Notification dated 29.05.2015, whether such committee includes a subject expert and a representative of the State Government, and the outcome of the proceedings, if any, undertaken by such committee.

f) To declare that the notificat