Petitioners did not establish MSME status prior to loan classification as NPA; statutory remedies under SARFAESI Act must be availed instead of writ jurisdiction.

JUDGMENT

(Dated this the 27^th day of February 2026)

The averments in the Writ Petition are as follows: - The 2^nd petitioner is the sole proprietor of the 1^st petitioner, which is engaged in the trading of agricultural products having UDYAM registration certificate issued by the Ministry of Micro, Small & Medium Enterprises (MSME), Government of India. Ext.P1 is the certificate dated 31.10.2020. According to the petitioners, the 1^st petitioner, being an MSME, is entitled to the protection of the notification dated 29.5.2015, which mandates that banks and financial institutions shall identify incipient stress in the account of MSMEs and to make effort towards resolution of stress by classifying as SMA - 0 before there is default in the account.

2. In M/s.Pro Knits v. Board of Directors of Canara Bank [2024 (4) KLT 761 (SC)], the honourable Apex Court has held that the notification dated 29.5.2015 has a statutory force and that banks and financial institutions must follow implementation of MSMEs before the classifying the loan account as NPA. In Shri Shri Swami Samarth Construction & Finance Solution v. Board of Directors of NKGSB Co-op. Bank Ltd., (2025 KHC Online 6647) , it was declared that if at the stage of Section 13(2) notice under the SARFAESI Act , the borrower responded and indicated it as MSME, then the benefit should be extended to it.

3. Respondent Nos.1 and 2 have sanctioned a loan limit of Rs.20 crores on mortgaging various properties. When there was default in remitting the instalment due to the bank, the bank issued notice under Section 13(2) of the SARFAESI Act on 20.5.2025, followed by notice under section 13(4) on 16.8.2025. The authorised officer of the respondent bank along with the Advocate Commissioner, attempted to dispossess the petitioner from the residential building, on the basis of the notice issued by the Advocate Commissioner dated 17.11.2025, pursuant to the order of the CJM, Thrissur dated 14.10.2025 in Crl.M.P.No.10534 of 2025. At this point of time, the petitioners have approached this court with the following reliefs:

a) Issue a writ in the nature of mandamus or any other appropriate writ, order or direction, directing the Ministry of Micro, Small and Medium Enterprises to forthwith consider and expeditiously dispose of the Petitioner's representation dated 12.12.2025 seeking rectification of the error in the Petitioner's MSME Registration Certificate (Exhibit P1), objectively, on merits, and consequently recognize the Petitioner as an MSME from its inception for all statutory and legal purposes;

b) 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;

c) 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 undeniable fundamental principle of law having universal applicati