The classification of an account as NPA does not prevent banks from considering MSME revival requests under specific frameworks.

O R D E R

The present Writ Petition has been filed by a Proprietorship firm engaged in the business of running a restaurant seeking a Mandamus directing the respondent Bank to consider their representation dated 05.02.2026 by placing the said representation before the appropriate committee for stressed/ distressed Micro, Small and Medium Enterprises (MSMEs) for revival measurers of their Loan as per the Central Government's Notification dated 29.05.2015.

2. The petitioners have defaulted in payment of the loan and the same has been declared as Non-Performing Assets (NPA). Notice has been issued under Section 13(2) of the SARFAESI Act, dated 18.12.2025. Thereafter, the petitioners concern had sent a communication on 05.02.2026 to the respondent claiming the benefits of MSME and sought a request for forming committee for Revival/Rehabilitation. Since the said application is still pending without constitution of the committee, the present writ petition has been filed.

3. The learned Senior Counsel appearing for the petitioners had relied upon the decision of the Hon'ble Supreme Court in 2025 INSC 908 Sri Sri Swami Samarth Construction and Finance Solution and others Vs. the Board of Directors of NKGSB Cooperative bank limited and others Paragraph No.6 of the said order is extracted as follows:

........ . .......6 The way Mr. Nedumpara urges us to read the Notification and the terms of the FRAMEWORK, if accepted, would lead to the conclusion that every lending bank/secured creditor under the SARFAESI Act would be obliged to find out in every event of continuing default, likely to give rise to classification of the relevant account as NPA, whether the borrower is an MSME to which the FRAMEWORK applies, whether its business has failed or whether it is suffering from any disability to pay its debts; and upon receiving a response, to apply the terms thereof by, inter alia, including the account in the Special Mention Account for the claim for a corrective action plan to be considered by the Committee for stressed MSMEs. This could not have been the intention behind introduction of the FRAMEWORK to aid the MSMEs which, for reasons personal to them, is unable to clear its debt and require revival and rehabilitation that the FRAMEWORK envisages. If indeed it is only the obligation of the lending bank/secured creditor to identify incipient stress in the account, sub- paragraphs 2 and 3 of paragraph 1 would be rendered redundant. An MSME, despite finding that its business is failing or that it is unable to pay its debts or accumulation of losses equals to half or more of its entire net worth and classification of its account as NPA is imminent, it would rest on its oars believing that it has no responsibility and that its account will not be classified as NPA because it is the entire obligation of the lending bank/secured creditor to do what the FRAMEWORK requires. We would read and interpret the seemingly confusing terms of the FRAMEWORK harmoniously to ensure that a right under the MSME Act is not destroyed by the SARFAESI Act or vice versa. In our reading, the terms of the FRAMEWORK do not prohibit the lending bank/secured creditor (assuming that it has no conscious knowledge that the defaulting borrower is an MSME) to classify the account of the defaulting MSME as NPA and to even issue the demand notice under Section 13(2) of the SARFAESI Act without such identification of incipient stress in the account of the defaulting borrower (MSME); however, upon receipt of the demand notice, if such borrower in its response under Section 13(3-A) of the SARFAESI Act asserts that it an MSME and claims the benefit of the FRAMEWORK citing re