IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE GOPINATH P.

TH MONDAY, THE 17 DAY OF FEBRUARY 2025 / 28TH MAGHA, 1946 WP(C) NO. 37628 OF 2024 PETITIONER:

LEKSHMI CASHEW COMPANY, MADANKAVU, RAILWAY WARD JUNCTION, CHEMMAKAD, KOLLAM REPRESENTED BY ITS PROPRIETOR RAGHU KUMAR, AGED 50 YEARS, S/O. THANKAPPAN PILLAI, 19-3-1-2, B. NO. XI/645, LAKSHMI PEROOR, TKM ENGINEERING COLLEGE P.O, KOTTANKARA, KOLLAM, PIN -691005, PIN -

691601 BY ADVS.

T.R.RAJAN SAJU J PANICKER RESPONDENTS:

1 THE UNION OF INDIA, REPRESENTED BY THE SECRETARY, THE MINISTRY OF MICRO, SMALL & MEDIUM ENTERPRISES (MSME) IN NEW DELHI IS UDYOG BHAWAN, RAFI MARG, NEW DELHI, PIN - 110011

2 THE REGIONAL MANAGER (CHAIRMAN, THE COMMITTEE FOR A CORRECTIVE ACTION PLAN UNDER REVIVAL &

REHABILITATION OF MSME)

INDUSIND BANK LIMITED, VELLAYAMBALAM, SASTHAMANGALAM ROAD, SASTHAMANGALAM P.

O., THIRUVANANTHAPURAM, PIN - 695010

3 INDUSIND BANK LTD., VARINJAM TOWERS, RESIDENCY ROAD, KOLLAM REPRESENTED BY ITS BRANCH MANAGER, PIN -

691001

4 THE AUTHORISED OFFICER & ASSISTANT VICE PRESIDENT M/S INDUSIND BANK LTD, NO: 25, STEEPLE REACH, A BLOCK, THIRD FLOOR, CATHEDRAL ROAD, GOPALAPURAM CHENNAI, PIN - 600096 BY ADV RENJITH.R NAIR THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 17.02.2025, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

P. GOPINATH, J.

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W.P.(C.) No. 37628 of 2024 -------------------------------------

Dated this the 17^th day of February, 2025

JUDGMENT

The petitioners have approached this Court challenging the proceedings initiated against the petitioners under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the SARFAESI Act) to recover amounts due under a loan availed by the petitioners from the respondent bank.

2. The 1st petitioner claims that it is a Micro, Small or Medium Enterprise (hereinafter referred to as ‘the MSME’) entitled to the benefits of the framework for revival and rehabilitation of the MSME’s which has been framed in respect of MSME’s registered as such under the Micro, Small and Medium Enterprises Development Act, 2006 (hereinafter referred to as ‘the MSMED Act’). It is submitted that the Reserve Bank of India (hereinafter referred to as 'the RBI') has issued guidelines directing that the framework for the revival and rehabilitation of the MSME’s issued by the Ministry of Micro Small and Medium Enterprises, shall be implemented by all Banks and Financial institutions falling under the umbrella of the RBI.

3. The learned counsel for the petitioners would submit that the framework is a statutory framework issued in terms of the powers conferred on the Central Government, under the provisions of Section 9 of the MSMED Act. It is submitted that, when a unit is registered as an MSME, the framework mandates that the loan account shall be referred to a committee [known as the Committee for Stressed Micro Small and Medium Enterprises] for implementation of a corrective action plan, which may include rectification and re-structuring; and only if either rectification or restructuring is not possible, can the bank proceed for recovery. It is submitted that the framework contains detailed guidelines for re-structuring/ rectification and any action for recovery without considering the scope of rectification or re-structuring, would be contrary to the statutory framework and the guidelines issued by the RBI. It is submitted that the judgment of the Supreme Court in Pro Knits v. Canara Bank, (2024) 10 SCC 292 deals with a situation where no claim was made by the unit in question that it was an MSME. It is submitted that where the loan itself was granted as an MSME loan, the question of identification or a claim being raised by the borrower that the matter is to be referred to the committee for corrective action plan as noticed above, does not arise. It is submitted that it is clear from the judgment of Pro Knits (s