M/S. M.D. Esthappan vs Reserve Bank Of India on 24 June, 2025

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Kerala High Court

M/S. M.D. Esthappan vs Reserve Bank Of India on 24 June, 2025

These writ appeals filed under Section 5(i) of the Kerala High Court Act, 1958, arise out of the common judgment dated 11.03.2025 of the learned Single Judge in W.P.(C)Nos.45166 of 2024 and 46514 of 2024. The 1st appellant in W.A.No.481 of 2025, arising out of W.P.(C)No.45166 of 2024, is M/s.M.D. Esthappan, a sole proprietorship concern, and the 2nd appellant M.D. Esthappan is the sole proprietor of the said concern. The 1 st appellant in W.A.No.484 of 2025, arising out of W.P.(C)No.46514 of 2024, is M/s.M.D. Esthappan Infrastructure Pvt. Ltd., a company incorporated under the Companies Act, 1956, and the 2 nd appellant M.D. Esthappan is the Managing Director of the said company.

2. The appellants in W.A.No.481 of 2025 filed W.P.(C)No. 45166 of 2024 challenging the proceedings initiated by the 3 rd respondent Dhanalaxmi Bank Ltd. under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), seeking the following reliefs;

2025:KER:45278 WA Nos.481 and 484 OF 2025 8

(a) To declare that the failure on the part of the Central Government/RBI to implement the MSMED notification dated 29.5.2015, in particular, to ensure that the Board of Directors of the Banks/financial institutions in this country, including the Respondent Bank, constitutes a committee for 'stressed micro, small and medium enterprise' and further to prevent the Banks and NBFCs from classifying the account of an MSME as NPA and resorting to recovery under the SARFAESI, RDB Act, IBC, NI Act, etc. in violation of the prohibition to do so as contained in Paragraph 1 and 5(4)(iii) of the said notification, amounts to gross failure on their part to comply with the statutory duty cast upon them under Sections 35, 35A, 35AA, 36, 36AA of the Banking Regulation Act and Sections 45-IE of the Reserve Bank of India Act, and Sections 9 and 10 of the MSMED Act;

(b) To declare that the entire proceedings initiated by the Respondent Bank as against the petitioner in violation of the notification dated 29.05.2015, which not a single bank/ financial institution in this country has given effect to, is rendered void ab initio, still born, and that that alone is the inevitable consequence because the notification does not provide for any penal provision for violation thereof, and that such an inevitable legal consequence is not lost or extinguished simply because an MSME, which the law recognizes as predominantly weak and financially illiterate, had failed to raise such a plea;

(c) To declare that Section 13 of the SARFAESI Act, and Section 19 of the RDB Act, Sections 7, 9, 10 and 95 of the IBC are unconstitutional, ultra vires and void and are liable to be so declared, inasmuch as the said enactments are wholly one-

2025:KER:45278 WA Nos.481 and 484 OF 2025 9 sided, drafted on the grossly erroneous premise that the right to relief, nay, remedies, arise only at the hands of a banker as against the borrower and that the enquiry to be conducted is wholly one-sided, or in the alternative to declare that the borrower's right to be an actor/petitioner for the enforcement of his remedies has to be read into the said Acts;

(d) To issue a writ in the nature of certiorari or any other appropriate writ or order or direction calling for the entire records and proceedings at the hands of the Authorised Officer as well as the Addl. Chief Judicial Magistrate, Ernakulam, leading to the order dated 27.06.2024 passed by the Addl. CJM, Ernakulam, as also, the issuance of notice dated 15.07.2024 by the Advocate Commissioner in furtherance thereof, and to quash and set aside the same as being without jurisdiction, in violation of fundamental principles of judicial procedure and most importantly, being in violation of Articles 14 , 19 and 21 of the Constitution;

(e) To declare that Section 34 of the RDB Act, and Section 34 of the SARFEASI Act and Section 63 of the IBC which bar the jurisdiction of the Civil Court to entertain and adjudicate the Petitioner's/borrower's plea against the Respondent Bank nay, bank/financial institution, is unconstitutional and void inasmuch as the petitioners, victims of the gross breach of contract, culpable negligence, malicious and tortious action, so too, violation of the express statutory provisions at the hands of the respondent Bank, are entitled to institute an action/suit as against the respondent Bank for the enforcement of the petitioners' right as against them;

(f) Declare that the petitioner being an MSME within the meaning of Sections 7 and 8 of the MSMED Act of 2006, it is 2025:KER:45278 WA Nos.481 and 484 OF 2025 10 entitled to the benefits of the said Act and, in particular, the notification S.O.1432(E) dated 29.05.2015 issued by the Central Government under Section 9 of the Act which provides for a mechanism of resolution of stress of MSMEs, as also, the circulars and guidelines issued by the Reserve Bank of India under Section 10 of the MSMED Act and further that no proceedings for recovery of the amounts due by the MSMEs to banks/financial institutions, nay, even operational creditors, shall lie against the petitioner under the SARFAESI Act, RDB Act, IBC, Negotiable Instruments Act or any other law, for recovery of the amounts allegedly due, inasmuch as the MSMED Act being a special law/later law in relation to the aforesaid enactments, the MSMED Act will prevail over them and recovery can be made only in accordance with article 5(4)(iii) of the aforesaid notification dated 29.05.2015;

(g) Declare that the MSMED Act in so far as it has not created a special forum/tribunal to enforce the inter-se rights and obligations/remedies, which it has created in addition to those rights/obligations/remedies recognized by the common law, the jurisdiction of the Civil Court is not ousted, for it is impossible to oust the jurisdiction of the Civil Court without providing for an alternative forum/tribunal to adjudicate the inter se disputes between parties who are governed by the Act, and further as a corollary thereof, the DRTs, NCLTs created under the RDB Act 1993 and the Companies Act 2013 are invested of no jurisdiction to adjudicate a dispute arising out of/involving the MSMED Act;

(h) Declare that the entire recovery steps initiated by respondent Bank under the SARFAESI Act or any other law, is without jurisdiction, illegal and void inasmuch as the 2025:KER:45278 WA Nos.481 and 484 OF 2025 11 respondent are not entitled to take recourse to any form of recovery of the amounts they claim to be due to them from the petitioner except in the manner permitted by the 'Committee for Corrective Action Plan' contemplated in notification S.O.1432(E) dated 29.05.2015, and further to issue a writ in the nature of certiorari quashing and setting aside the entire action taken by the respondent Bank under Sections 13(2), 13(4) and 14 of the SARFAESI Act/Section 19 of the RDB Act;

(i) Declare that the petitioners are entitled to be compensated from the respondents No.2 Bank for the loss and injury, which it has suffered on account of the gross breach of contract and trust, culpable negligence, and malicious and tortious action at the hands of the Bank, financial institution and its officers, which loss and injury far exceeds the very claim of the Bank as against the petitioners and therefore, no amount is due to the respondents by the petitioner and further that the respondents have no enforceable rights as against the petitioner;

(j) To issue a writ in the nature of mandamus or any other appropriate writ/order or direction directing Central Government and the RBI to enforce the notification dated 29.05.2015 in its true letter and spirit and further to direct the Central Government and the RBI to ensure that recovery action initiated against the petitioners in violation of the mandate of the notification is recalled, the clock is put back, the injustice which the petitioners is made to suffer is redressed and that the petitioners is compensated in full measure;

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(k) To issue a writ in the nature of prohibition restraining and prohibiting respondent Bank/Financial institution, their agents, servants, officers, representatives from taking any action for recovery under the SARFAESI Act, IBC, Arbitration and Conciliation Act, Recovery of Debts and Bankruptcy Act, Negotiable Instruments Acts or any other law in respect of the amounts they falsely claim to be due from the petitioners, in particular restraining respondent no.4, from dispossessing the petitioners of their properties;

(l) To issue a writ in the nature of mandamus or any other appropriate writ/order or direction directing the respondent- bank to constitute a committee for the resolution of the stress in the unit of the petitioners Company, an MSME, as contemplated in paragraph 2 of the notification dated 29.05.2015 issued under the MSMED Act, and further to direct the Committee to resolve the stress in accordance with the said notification and such other relevant notifications/ regulations framed by the RBI;

(m) To issue a writ in the nature of mandamus or any other appropriate writ/order or direction directing respondents to put the clock back in respect of the entire action initiated under the SARFAESI Act, in particular, cancel the classification of the petitioners' loan accounts as NPA and the demand notice dated 09.06.2021, putting the petitioners' properties to sale and further to make attempts to revive the petitioners' business as mandated by the notification dated 29.05.2015;

(n) To declare that the various petitions which the petitioner has instituted does not constitute a Cause of Action Estoppel, nay, estoppel per rem judicatam/res judicata, not even issue estoppel, inasmuch as there is no estoppel against statute, 2025:KER:45278 WA Nos.481 and 484 OF 2025 13 does not constitute cause of action estoppel, nay estoppel per rem judicatam/res judicata, or even issue estoppel inasmuch as the rights and remedies which the petitioner seeks to enforce in the instant is based on the notification dated 29.05.2015, and for the added reason that in the previous proceedings before the High Court of Kerala and other forums there was never an adjudication on merits;

3. The interim relief sought for in W.P.(C)No.45166 of 2024 reads thus;

For the reasons stated in the above Writ Petition (Civil) and the affidavit accompanying thereto, it is most humbly prayed that this Hon'ble Court may be pleased to grant an ad-interim injunction restraining and prohibiting the respondents, its agents, servants and privies from proceeding any further in furtherance of the action initiated under the SARFAESI Act, RDB Act, or any other law in force, particularly the notice issued by the Advocate Commissioner dated 15.07.2024.

4. The appellants in W.A.No.484 of 2025, i.e., M/s.M.D. Esthappan Infrastructure Pvt. Ltd. and its Managing Director have filed W.P.(C)No.46514 of 2024 seeking the following reliefs;

(i) To declare that the failure on the part of the Central Government/RBI to implement the MSMED notification dated 29.05.2015, in particular, to ensure that the Board of Directors of the Banks/financial institutions in this country, including the respondent Bank, constitutes a committee for 'stressed micro, small and medium enterprise' and further to prevent the Banks and NBFCs from classifying the account of an MSME as NPA and resorting to recovery under the 2025:KER:45278 WA Nos.481 and 484 OF 2025 14 SARFAESI, RDB Act, IBC, NI Act, etc. in violation of the prohibition to do so as contained in paragraph 1 and 5(4)(iii) of the said notification, amounts to gross failure on their part to comply with the statutory duty cast upon them under Sections 35, 35A, 35AA, 36, 36AA of the Banking Regulation Act and Section 45-IE of the Reserve Bank of India Act, and Sections 9 and 10 of the MSMED Act;

(ii) To issue a writ in the nature of mandamus or any other appropriate writ/order or direction directing the Central Government and the RBI to enforce the notification dated 29.05.2015 in its true letter and spirit and further to direct the Central Government and the RBI to ensure that recovery action initiated against the petitioners in violation of the mandate of the notification is recalled, the clock is put back, the injustice which the petitioners is made to suffer is redressed and that the petitioners is compensated in full measure;

(iii) To declare that Section 13 of the SARFAESI Act, and Section 19 of the RDB Act, Sections 7, 9, 10 and 95 of the IBC are unconstitutional, ultra vires and void and are liable to be so declared, inasmuch as the said enactments are wholly one-sided, drafted on the grossly erroneous premise that the right to relief, nay, remedies, arise only at the hands of a banker as against the borrower and that the enquiry to be conducted is wholly one-sided, or in the alternative to declare that the borrower's right to be an actor/petitioner for the enforcement of his remedies has to be read into the said Acts;

(iv) To declare that Section 34 of the RDB Act, and Section 34 of the SARFEASI Act and Section 63 of the IBC which bar 2025:KER:45278 WA Nos.481 and 484 OF 2025 15 the jurisdiction of the Civil Court to entertain and adjudicate the petitioner's/borrower's plea against the respondent Bank nay, bank/financial institution, is unconstitutional and void inasmuch as the petitioners, victims of the gross breach of contract, culpable negligence, malicious and tortious action, so too, violation of the express statutory provisions at the hands of the respondent Bank, are entitled to institute an action/suit as against the respondent Bank for the enforcement of the petitioners' right as against them;

(v) To issue a writ in the nature of certiorari or any other appropriate writ or order or direction calling for the entire records and proceedings at the hands of the Authorised Officer as well as the Addl. Chief Judicial Magistrate, Ernakulam, leading to the order dated 27.06.2024 passed by the Addl. CJM, Ernakulam, in furtherance thereof, and to quash and set aside the same as being without jurisdiction, in violation of fundamental principles of judicial procedure and most importantly, being in violation of Articles 14 , 19 and 21 of the Constitution;

(vi) To declare that the 1st petitioner being an MSME within the meaning of Sections 7 and 8 of the MSMED Act of 2006, it is entitled to the benefits of the said Act and, in particular, the notification S.O.1432(E) dated 29.05.2015 issued by the Central Government under Section 9 of the Act which provides for a mechanism of resolution of stress of MSMEs, as also, the circulars and guidelines issued by the Reserve Bank of India under Section 10 of the MSMED Act and further that no proceedings for recovery of the amounts due by the MSMEs to banks/financial institutions, nay, even operational creditors, shall lie against the petitioner under the SARFAESI 2025:KER:45278 WA Nos.481 and 484 OF 2025 16 Act, RDB Act, IBC, Negotiable Instruments Act or any other law, for recovery of the amounts allegedly due, inasmuch as the MSMED Act being a special law/later law in relation to the aforesaid enactments, the MSMED Act will prevail over them and recovery can be made only in accordance with article 5(4)(iii) of the aforesaid notification dated 29.05.2015;

(vii) To declare that the MSMED Act in so far as it has not created a special forum/tribunal to enforce the inter-se rights and obligations/remedies, which it has created in addition to those rights/obligations/remedies recognized by the common law, the jurisdiction of the Civil Court is not ousted, for it is impossible to oust the jurisdiction of the Civil Court without providing for an alternative forum/tribunal to adjudicate the inter se disputes between parties who are governed by the Act, and further as a corollary thereof, the DRTs, NCLTs created under the RDB Act 1993 and the Companies Act 2013 are invested of no jurisdiction to adjudicate a dispute arising out of/involving the MSMED Act;

(viii) To declare that the entire recovery steps initiated by respondent Bank under the SARFAESI Act or any other law, is without jurisdiction, illegal and void inasmuch as the respondent are not entitled to take recourse to any form of recovery of the amounts they claim to be due to them from the petitioner except in the manner permitted by the 'Committee for Corrective Action Plan' contemplated in notification S.O.1432(E) dated 29.05.2015, and quash and set aside the entire action taken by the respondent Bank under Sections 13(2), 13(4) and 14 of the SARFAESI Act/Section 19 of the RDB Act;

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(ix) To declare that the petitioners are entitled to be compensated from respondents No.2 Bank for the loss and injury, which it has suffered on account of the gross breach of contract and trust, culpable negligence, and malicious and tortious action at the hands of the Bank, financial institution and its officers, which loss and injury far exceeds the very claim of the Bank as against the petitioners and therefore, no amount is due to the respondents by the petitioner and further that the respondents have no enforceable rights as against the petitioner;

(x) To award damages of Rs.70 Crores for the loss and injuries the petitioner was unjustly made to suffer by the respondent Bank with a further interest at the rate of 12% per annum from the date of a decree till the date of final payment thereof;

(xi) To declare that the guidelines and notifications issued by the Reserve Bank of India from time to time empowering the bank and financial institutions to declare a borrower as a willful defaulter is without authority of law, for such a declaration amounts to a civil death and further that the petitioners, nay, a borrower is not liable to be declared as a willful defaulter except by the authority of an Act of Parliament or statutory instrument having the force of law;

(xii) To declare that the entire recovery proceedings, under the SARFAESI Act leading to the forceful taking of possession of the petitioners' properties and sale thereof, is illegal and void ab initio, being in violation of express statutory provisions and vitiated by fraud and further to quash and set aside the same;

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(xiii) To issue a writ in the nature of prohibition restraining and prohibiting respondent Bank/Financial institution, their agents, servants, officers, representatives from taking any action for recovery under the SARFAESI Act, IBC, Arbitration and Conciliation Act, Recovery of Debts and Bankruptcy Act, Negotiable Instruments Acts or any other law in respect of the amounts they falsely claim to be due from the petitioner, in particular restraining Respondent No.3, from dispossessing the petitioner of his/his company's properties;

(xiv) To issue a writ in the nature of mandamus or any other appropriate writ/order or direction directing respondent No.2, Board of Directors of the Dhanlaxmi Bank, to constitute a committee for the resolution of the stress in the unit of the petitioners Company, an MSME, as contemplated in paragraph 2 of the notification dated 29.05.2015 issued under the MSMED Act, and further to direct the Committee to resolve the stress in accordance with the said notification and such other relevant notifications/regulations framed by the RBI;

(xv) To issue a writ in the nature of mandamus or any other appropriate writ/order or direction directing respondents to put the clock back in respect of the entire action initiated under the SARFAESI Act, in particular, cancel the sale notice dated 25.06.2024, putting the petitioner's properties to sale and further to make attempts to revive the petitioner's business as mandated by the notification dated 29.05.2015; (xvi) To declare that the various petitions which the petitioner has instituted does not constitute a Cause of Action Estoppel, nay, estoppel per rem judicatam/res judicata, not even issue estoppel, inasmuch as there is no estoppel against statute, 2025:KER:45278 WA Nos.481 and 484 OF 2025 19 does not constitute cause of action estoppel, nay estoppel per rem judicatam/res judicata, or even issue estoppel inasmuch as the rights and remedies which the petitioner seeks to enforce in the instant is based on the notification dated 29.05.2015, and for the added reason that in the previous proceedings before the High Court of Kerala and other forums there was never an adjudication on merits;

(xvii) pass such further and other orders as the nature and circumstances of the case may require.

5. The interim relief sought for in W.P.(C)No.46514 of 2024 reads thus;

To grant an ad-interim injunction restraining and prohibiting the respondents, its agents, servants and privies from proceeding any further in furtherance of the action initiated under the SARFAESI Act, RDB Act, or any other law in force.

6. The writ petitioners in W.P.(C)No.46514 of 2024 filed I.A.No.1 of 2025 to amend the writ petition, which was allowed by the order dated 17.02.2025. Additional reliefs (xviii) to (xx) incorporated by way of amendment read thus;

(xviii) To declare that the circular dated 17.03.2016 restricting, nay completely taking away, the benefit of the notification dated 29.05.2015 from MSMEs whose credit limit exceeds Rs.25 crores, is illegal, ultra vires the MSMED Act/notification and void to that extent that it takes away such right;

(xix) To declare that the circulars dated 17.03.2016, 26.06.2020, and 04.06.2021 are liable to be read together, 2025:KER:45278 WA Nos.481 and 484 OF 2025 20 and that by virtue of the circular dated 04.06.2021, the cap of Rs.25 crores imposed by the RBI stands altered and amended;

(xx) Without prejudice to reliefs (a) and (b) above, to issue a writ in the nature of mandamus or any other appropriate writ, order or direction, directing the RBI to remove the cap of Rs.25 crores which it had imposed by circular dated 17.03.2016 or in the alternative to enhance it with retrospective effect to a minimum of Rs.50 crores, taking into account the revision of the definition of MSMEs from time to time enhancing the upper limit manifold time;

7. W.P.(C)No.45166 of 2024 was filed by the appellants in W.A.No.481 of 2025 invoking the writ jurisdiction of this Court under Article 226 of the Constitution of India, seeking various reliefs due to the proceedings initiated by the 3 rd respondent Dhanalakshmi Bank Ltd., under the provisions of the SARFAESI Act, by raising a contention that the 1 st appellant, namely, M.D. Esthappan is an enterprise falling under the purview of the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) and the notifications issued thereunder and therefore, the proceedings initiated by the 3rd respondent Bank under the provisions of the SARFAESI Act, without following the procedure contemplated in Ext.P2 notification dated 29.05.2015 issued by the 5th respondent Ministry of Micro, Small and Medium 2025:KER:45278 WA Nos.481 and 484 OF 2025 21 Enterprises and Ext.P3 notification dated 17.03.2016 issued by the 1st respondent Reserve Bank of India, cannot be sustained in law. Further, Ext.P2 notification dated 29.05.2015 issued by the 5th respondent Ministry, in exercise of the powers conferred under Section 9 of the MSMED Act, is binding on the 3 rd respondent Bank, in view of Ext.P3 notification dated 17.03.2016 issued by the 1st respondent Reserve Bank of India.

7.1. In W.P.(C)No.45166 of 2024, the document marked as Ext.P1 is a copy of acknowledgment (Part I) issued by the Department of Industries, Government of Kerala dated 06.07.2010, wherein it is stated that the 1st appellant has filed a memorandum expressing its intend to set up an enterprise with the activity stated therein, which is proposed to commence from the date mentioned therein. Ext.P2 is the acknowledgement (Part II) dated 28.10.2010; Ext.P3 is a copy of Udyog Aadhaar Registration Certificate and Ext.P4 is a copy of Udyam Registration Certificate issued by the 5th respondent Ministry of Micro, Small and Medium Enterprises. The document marked as Ext.P5 is a notification dated 29.05.2015 issued by the 5th respondent Ministry, in exercise of the powers conferred under Section 9 of the MSMED Act, to facilitate the promotion and development of 2025:KER:45278 WA Nos.481 and 484 OF 2025 22 Micro, Small and Medium Enterprises (MSMEs). Vide Ext.P5 notification, the 5th respondent Ministry notified the instructions for the Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises. Ext.P6 is a notification dated 17.03.2016 issued by the 1st respondent Reserve Bank of India, enclosing therewith a copy of Ext.P5 instructions issued by the 5th respondent Ministry. In Ext.P6, it is stated that, to provide a simpler and faster mechanism to address the stress in the accounts of MSMEs and to facilitate the promotion and development of MSMEs, the 5th respondent Ministry vide Ext.P5 notification dated 29.05.2015 notified a Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises. However, certain changes in the framework have been carried out, in consultation with the 5th respondent Ministry, to make it compatible with the existing regulatory guidelines on 'Income Recognition, Asset Classification and Provisioning pertaining to Advances' issued by the Reserve Bank of India. Accordingly, a revised framework along with the operating instructions is furnished in the annexure to Ext.P6 notification, and the Board- approved policy to operationalise the framework may be put in place by the Banks, not later than 30.06.2016.

2025:KER:45278 WA Nos.481 and 484 OF 2025 23 7.2. In W.P.(C)No.45166 of 2024, the document marked as Ext.P7 is a notice dated 16.08.2023 issued to the appellants and two others, by the 4th respondent Authorised Officer of the 3rd respondent Bank, invoking the provisions under Section 13(2) of the SARFAESI Act in respect of the credit facilities availed by the appellants, wherein it is stated that due to the default in repayment of the secured loan/financial assistance in violation of the stipulations in the sanction terms, loan agreements and security documents, the Bank has classified the said accounts as Non-Performing Asset (NPA), as defined in clause (o) of Section 2 of the SARFAESI Act, with effect from 31.07.2023. Ext.P8 is a copy of the objection dated 11.10.2023 of the 1st appellant, under Section 13(3A) of the SARFAESI Act, to Ext.P7 notice dated 16.08.2023 of the 4th respondent Authorised Officer, wherein it is stated that the classification of the accounts as NPA, with effect from 31.07.2023, violates Ext.P5 notification dated 29.05.2015 issued by the 5th respondent Ministry under Section 9 of MSMED Act and Ext.P6 notification dated 17.03.2016 issued by the 1 st respondent Reserve Bank of India. The 4th respondent received Ext.P8 objection on 16.10.2023, to which Ext.P9 reply dated 18.10.2023 was issued, pointing out that the credit facilities 2025:KER:45278 WA Nos.481 and 484 OF 2025 24 availed by the appellants have already been classified as NPA as on 16.08.2023, by allowing 60 days' time to close the accounts. Ext.P8 objection is only to protract the recovery proceedings initiated by the Bank. On receipt of Ext.P9 reply, the 1 st appellant submitted Ext.P10 representation dated 25.10.2023.

7.3. In W.P.(C)No.45166 of 2024, the document marked as Ext.P11 is a copy of possession notice dated 31.10.2023 issued by the 4th respondent Authorised Officer, wherein it is stated that the amount that has to be repaid in respect of the loan accounts comes to Rs.2,02,27,777.88 as on 31.07.2023 for overdraft and Rs.20,98,242/- as on 09.07.2023 for Guaranteed Emergency Credit Line (GECL) and interest thereon. On receipt of Ext.P11 possession notice, the 1st appellant submitted Ext.P12 objection dated 02.11.2023. On receipt of the same, the 4th respondent Authorised Officer issued Ext.P13 reply dated 03.11.2023, wherein it is stated that the accounts were classified as NPA on 31.07.2023, strictly following all the norms, the extant guidelines and after complying with regulatory prescriptions. Since the dues were not settled, a notice under Section 13(2) of the SARFAESI Act was issued and after the statutory period of the demand notice, a possession notice was also issued. Ext.P13 reply was 2025:KER:45278 WA Nos.481 and 484 OF 2025 25 followed by Ext.P14 sale notice dated 25.06.2024 issued by the 4th respondent Authorised Officer. The 3rd respondent Bank filed Ext.P15 application under Section 14 of the SARFAESI Act before the Chief Judicial Magistrate Court, Ernakulam, in which the Additional Chief Magistrate, Ernakulam, passed Ext.P16 order dated 27.06.2024 in M.C.No.203 of 2024. Pursuant to Ext.P16 order passed by the Chief Judicial Magistrate Court, the Advocate Commissioner issued Ext.P17 notice dated 15.07.2024.

7.4. The averments in W.P.(C)No.45166 of 2024 would show that, challenging the proceedings initiated by the 3rd respondent Bank under the provisions of the SARFAESI Act, the appellants filed a Securitisation Application before the Debt Recovery Tribunal-1, Ernakulam, as S.A.No.776 of 2023. They have also filed Suit No.(ST)18939 of 2024 seeking MSME relief. The document marked as Ext.P18 is a copy of a notification dated 26.06.2020 issued by the 5th respondent Ministry of Micro, Small and Medium Enterprises, whereby certain criteria for classifying an enterprise as Micro, Small and Medium Enterprises and the form and procedure for filing the memorandum were notified. Ext.P19 is a copy of the order dated 19.12.2023 of the National Company Law Tribunal, Mumbai Bench-I in I.A.No.2429 of 2021 2025:KER:45278 WA Nos.481 and 484 OF 2025 26 in C.P.(IB)No.3025 of 2019 in respect of Reliance Projects and Property Management Services Ltd. Ext.P20 is a copy of the order dated 17.10.2024 of the National Company Law Tribunal, Mumbai Bench in I.A.No.1773 of 2024 in C.P.(IB)No.916 (MB) of 2020.

7.5. In W.P.(C)No.45166 of 2024, the learned Standing Counsel for the 3rd respondent Bank has filed a statement dated 28.01.2025, on behalf of respondents 2 to 4, opposing the reliefs sought for in this writ petition, producing therewith Exts.R2(a) to R2(d) documents, wherein it is stated that, the contention of the writ petitioners that the Bank had failed to abide by Exts.P5 and P6 notifications and failed to identify the incipient stress in the account and communicate the same before classifying the accounts as NPA, is untenable. Ext.R2(a) colly e-mail communications had been sent on 26.07.2023, 15.07.2023, 14.06.2023, 16.06.2023 and 26.06.2023, whereby the Bank informed the writ petitioners about the stress identified in various accounts. The Bank held discussions with the writ petitioners on the matter of incipient sickness/default and they agreed to take measures to rectify the default. But they did not take any steps. Ext.P21 was issued regarding the special restructuring of accounts due to Covid-19. Ext.P21 does not relate to the restructuring of 2025:KER:45278 WA Nos.481 and 484 OF 2025 27 MSME accounts under Exts.P5 and P6 notifications. This said benefit was given to the writ petitioners. Even after the accounts were classified as NPA, the writ petitioners never approached the Bank or the Committee. They only sought OTS and discussions were held, as evident from Ext.R2(b) reply dated 27.08.2024 of the Branch Manager, Angamaly Branch to Ext.R2(c) letter dated 26.08.2024 of the writ petitioners and also Ext.R2(d) reply dated 02.09.2024 of the Branch Manager.

7.6. In W.P.(C)No.45166 of 2024, the writ petitioners have filed a reply affidavit dated 27.01.2025, producing therewith Ext.P21 circular dated 04.06.2021 issued by the 1st respondent Reserve Bank of India regarding revision in the threshold for aggregate exposure and the document marked as Ext.P22 is a copy of the order dated 15.05.2023 of the Apex Court in SLP(C)No.6184 of 2023.

7.7. In W.P.(C)No.45166 of 2024, the 3 rd respondent Bank has filed a counter affidavit dated 03.01.2025, opposing the reliefs sought for. The writ petitioners had earlier filed writ petitions and this is the third round of litigation. The earlier writ petitions were disposed of, directing the writ petitioners to approach the statutory authority, and the Securitisation Application filed by the 2025:KER:45278 WA Nos.481 and 484 OF 2025 28 2nd petitioner is pending consideration before the Debt Recovery Tribunal, Ernakulam. Moreover, they have filed a similar writ petition before the Bombay High Court seeking identical reliefs and are attempting to evade the recovery proceedings initiated by the 3rd respondent Bank. In the counter affidavit, it was contended, inter alia, that the writ petition is an abuse of the process of this Court, as the matter is within the jurisdiction of the Debt Recovery Tribunal and ought to have been agitated before that Tribunal. In the writ petition, various unconnected parties are arrayed as the respondents, whose presence in the party array is unnecessary, and this is merely an attempt by the petitioners to delay the adjudication of this writ petition. The Bank had been keeping the writ petitioners informed about the state of their accounts, from time to time, and that unless the remedial steps are taken, the accounts are likely to be declared as NPA. One such e-mail is dated 26.07.2023. The said e-mail has been produced as Annexure A8 in the Securitisation Application, i.e., S.A.No.776 of 2023, filed before the Debt Recovery Tribunal-1, Ernakulam, and this aspect had not been brought to the notice of this Court by the writ petitioners, which amounts to suppression of material facts. Despite the receipt of the said e-mail, the writ petitioners did not 2025:KER:45278 WA Nos.481 and 484 OF 2025 29 take any remedial action. Consequently, the accounts were classified as NPA. There is nothing on record to show that Exts.P1 to P4 were ever produced before Bank. Ext.P4 would show that the Bank details indicated therein are of a different Bank and not of the 3rd respondent Bank. At no point prior to declaring the accounts as NPA, the 1st petitioner claimed that it is an MSME and that it required the benefits under Exts.P5 and P6 notifications.

7.8. In the counter affidavit dated 03.01.2025 filed in W.P.(C)No.45166 of 2024, the specific stand taken by the 3 rd respondent Bank is that the writ petitioners have not made any request for restructuring of the accounts before the accounts were classified as NPA. In fact, Exts.P5 and P6 are public documents, and the writ petitioners who had been in business since 1979 ought to have been aware of such notifications. The writ petitioners have not disclosed the fact that a sister concern M/s.M.D. Esthappan Infrastructure Pvt. Ltd., which is a family-held company, has outstanding dues above Rs.36 Crores to the Bank, and was not entitled to any benefits of Exts.P5 or P6 notifications. Now, the said company has filed W.P.No.46514 of 2024 before this Court. Under the Reserve Bank of India notifications/master circulars, once one account of the borrower becomes NPA, 2025:KER:45278 WA Nos.481 and 484 OF 2025 30 automatically all other accounts relating to such borrower, guarantors, etc. have to be declared as NPA. As the 1 st petitioner sole proprietor concern in W.P.(C)No.45166 of 2024 - M/s.M.D. Esthappan - and the 1st petitioner company in W.P.(C)No.46514 of 2024 - M/s.M.D. Esthappan Infrastructure Pvt. Ltd. - were operating the business seamlessly, on the account of the said company being classified as NPA, the account of the sole proprietor concern was classified as NPA, as the 2nd petitioner in both the writ petitions, namely, M.D. Esthappan is a guarantor for both accounts, and the secured assets are common. Apart from that, on its own, the account of the 1st petitioner in W.P.(C)No.45166 of 2024 had become NPA due to its incipient default. The 3rd respondent Bank would contend that Exts.P5 and P6 notifications in no way supersede the RBI Notification regarding prudential norms and classification of assets. There is no violation of any of the statutory norms or the law laid down by the Apex Court in Pro Knits v. Canara Bank [(2024) 10 SCC 292]. The writ petitioners are not entitled to any of the reliefs sought for, and the binding decision of the Division Bench of this Court in P.K. Krishnakumar v. IndusInd Bank [2024 SCC OnLine Ker 6888] is squarely applicable to the facts of the case on hand.

2025:KER:45278 WA Nos.481 and 484 OF 2025 31 Therefore, there is nothing illegal in classifying the accounts as NPA.

7.9. In the counter affidavit filed in W.P.(C)No.45166 of 2024, the 3rd respondent Bank pointed out that the 2nd petitioner had earlier approached this Court challenging the classification of the accounts of M/s.M.D. Esthappan Infrastructure Pvt. Ltd. as NPA, by filing W.P.(C)No.38732 of 2023. This Court, by the judgment in the said writ petition, relegated the 2 nd petitioner herein to invoke the remedy provided before the statutory forum. M/s.M.D. Esthappan Infrastructure Pvt. Ltd. filed another writ petition, i.e., W.P.(C)No.22424 of 2024, when recovery steps were taken against the secured assets. In that writ petition as well, this Court found that no relief can be granted to the writ petitioner and the same was disposed of by relegating the writ petitioner to avail the statutory remedy provided before the Debt Recovery Tribunal. In paragraphs 14 to 18 of the counter affidavit, the 3rd respondent Bank has stated in categorical terms that there is nothing illegal about the classification of the accounts of the 1st writ petitioner - M/s.M.D. Esthappan - as NPA. The writ petitioners cannot prosecute the matter simultaneously before various judicial forums.

2025:KER:45278 WA Nos.481 and 484 OF 2025 32 7.10. The appellants in W.A.No.481 of 2025 have filed I.A.No.1 of 2025 seeking an order to accept Ext.P23 sanction note dated 14.03.2023 issued by the Authorised Signatory in the 3 rd respondent Bank as an additional document. The appellants have also filed I.A.No.2 of 2025 to accept Ext.P24 order dated 22.01.2025 of the Additional Chief Judicial Magistrate Court, Ernakulam in M.C.No.1319 of 2024 and Ext.P25 notice dated 20.02.2025 issued by the Advocate Commissioner.

8. W.P.(C)No.46514 of 2024 was filed by the appellants in W.A.No.484 of 2025, M/s.M.D. Esthappan Infrastructure Pvt. Ltd. and its Managing Director. In the said writ petition, the writ petitioners have placed on record Ext.P1 Udyam Registration Certificate dated 27.03.2021 in the name of M/s.M.D. Esthappan Infrastructure Pvt. Ltd. The document marked as Ext.P2 is a notification dated 29.05.2015 issued by the 5th respondent Ministry, in exercise of the powers conferred under Section 9 of the MSMED Act, to facilitate the promotion and development of MSMEs [Ext.P5 in W.P(C)No.45166 of 2024], notifying the instructions for the Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises. Ext.P3 is a notification dated 17.03.2016 issued by the 1st respondent Reserve Bank of 2025:KER:45278 WA Nos.481 and 484 OF 2025 33 India [Ext.P6 in W.P.(C)No.45166 of 2024], enclosing therewith a copy of Ext.P2 instructions issued by the 5th respondent Ministry. The document marked as Ext.P4 is a notice dated 16.08.2023 issued to the appellants and two others, by the 4 th respondent Authorised Officer of the 3rd respondent Bank, invoking the provisions under Section 13(2) of the SARFAESI Act in respect of the credit facilities availed by the appellants, wherein it is stated that due to the default in repayment of the secured loan/financial assistance in violation of the stipulations in the sanction terms, loan agreements and security documents, the Bank has classified the said accounts as Non-Performing Asset (NPA), as defined in clause (o) of Section 2 of the SARFAESI Act, with effect from 31.07.2023. Ext.P5 is a copy of the objection dated 11.10.2023 of the 1st appellant, under Section 13(3A) of the SARFAESI Act, to Ext.P4 notice dated 16.08.2023 of the 4th respondent Authorised Officer, wherein it is stated that the classification of the accounts as NPA, with effect from 31.07.2023, violates Ext.P2 notification dated 29.05.2015 issued by the 5th respondent Ministry under Section 9 of MSMED Act and Ext.P3 notification dated 17.03.2016 issued by the 1st respondent Reserve Bank of India. The 4th respondent received Ext.P5 objection on 16.10.2023, to which 2025:KER:45278 WA Nos.481 and 484 OF 2025 34 Ext.P6 reply dated 18.10.2023 was issued, pointing out that the credit facilities availed by the appellants have already been classified as NPA as on 16.08.2023, by allowing 60 days' time to close the accounts. Ext.P8 objection is only to protract the recovery proceedings initiated by the Bank. On receipt of Ext.P6 reply, the 1st appellant submitted Ext.P7 representation dated 25.10.2023.

8.1. In W.P.(C)No.46514 of 2024, the document marked as Ext.P8 is a copy of possession notice dated 31.10.2023 issued by the 4th respondent Authorised Officer, wherein it is stated that the amount that has to be repaid in respect of the loan accounts comes to Rs.20,18,71,115.16 as on 31.07.2023 for overdraft, Rs.3,45,50,471.10 as on 23.07.2023 for Guaranteed Emergency Credit Line (GECL), Rs.3,44,94,251/- as on 01.08.2023 for Funded Interest Term Loan (FITL), Rs.1,98,54,097/- as on 24.07.2023 for GECL and Rs.7,99,266/- as on 01.08.2023 for vehicle loan and interest thereon. On receipt of Ext.P8 possession notice, the 1st appellant submitted Ext.P9 objection dated 02.11.2023. On receipt of the same, the 4th respondent Authorised Officer issued Ext.P10 reply dated 03.11.2023, wherein it is stated that the accounts were classified as NPA on 2025:KER:45278 WA Nos.481 and 484 OF 2025 35 31.07.2023, strictly following all the norms, the extant guidelines and after complying with regulatory prescriptions. Since the dues were not settled, a notice under Section 13(2) of the SARFAESI Act was issued and after the statutory period of the demand notice, a possession notice was also issued. Ext.P10 reply was followed by Ext.P11 sale notice dated 25.06.2024 issued by the 4th respondent Authorised Officer. The 3rd respondent Bank filed an application under Section 14 of the SARFAESI Act before the Chief Judicial Magistrate Court, Ernakulam, as M.C.No.203 of 2024 in which the Additional Chief Magistrate, Ernakulam, passed an order dated 27.06.2024 [Ext.P16 in W.P.(C)No.45166 of 2024]. To Ext.P12 lawyer notice dated 29.08.2024 issued on behalf of the 3rd respondent Bank, the writ petitioners, along with other two guarantors, caused to issue Ext.P13 reply notice dated 06.09.2024. They challenged the classification of the accounts as NPA, by filing W.P.(C)No.38732 of 2023. This Court, by Ext.P14 judgment dated 27.11.2023 closed the said writ petition, by relegating them to invoke the remedy provided before the statutory forum.

8.2. In W.P.(C)No.46514 of 2024, the document marked as Ext.P15 is a copy of a notification dated 26.06.2020 issued by the 2025:KER:45278 WA Nos.481 and 484 OF 2025 36 5th respondent Ministry of Micro, Small and Medium Enterprises, whereby certain criteria for classifying an enterprise as Micro, Small and Medium Enterprises and the form and procedure for filing the memorandum were notified. Ext.P17 is a copy of the order dated 11.12.2024 of the High Court Judicature at Bombay, whereby the writ petition filed by the writ petitioners herein was dismissed as withdrawn, with liberty to approach this Court, where the registered office of the 3rd respondent Bank is located. Ext.P18 is a copy of the order dated 19.12.2023 of the National Company Law Tribunal, Mumbai Bench-I in I.A.No.2429 of 2021 in C.P.(IB)No.3025 of 2019 in respect of Reliance Projects and Property Management Services Ltd. Ext.P19 is a copy of the order dated 12.06.2024 of the National Company Law Tribunal, Mumbai Bench in I.A.No.807 of 2024 in C.P.(IB)No.917 (MB) of 2020. Ext.P20 is a copy of the circular dated 04.06.2021 issued by the 1st respondent Reserve Bank of India, wherein it is stated that as per clause 2 of the circular dated 05.05.2021 on Resolution of Covid-19 related stress MSMEs, the eligibility conditions for MSME accounts to be considered for restructuring under the framework, which inter alia include sub-clause (iii) which states that the aggregate exposure, including non-fund based facilities, of all 2025:KER:45278 WA Nos.481 and 484 OF 2025 37 lending institutions to the MSME borrower should not exceed Rs.25 Crore as on 31.03.2021. Based on a review, it has been decided to enhance the above limit from Rs.25 Crore to Rs.50 Crore. Consequently, clause 2(v) would stand modified as stated in Ext.P20.

8.3. In W.P.(C)No.46514 of 2024, the learned Standing Counsel for the 3rd respondent Bank has filed a statement dated 18.01.2025, on behalf of respondents 2 to 4, opposing the reliefs sought for in this writ petition, adopting the averments in the counter affidavit filed in W.P.(C)No.45166 of 2024. No documents were produced by the writ petitioners before the 3rd respondent Bank, prior to the classification of the accounts as NPA to show that the 1st petitioner company was registered as MSME. Ext.P1 Udyam Registration Certificate dated 27.03.2021 has been granted based on the Bank details of the State Bank of India and not that of the 3rd respondent Bank. The Bank had been keeping the Company informed about the state of their accounts from time to time. The company was put on notice that unless remedial steps are taken, the accounts are likely to be declared as NPA. The writ petitioners did not take any remedial action and, consequently, the accounts were classified as NPA on 31.07.2023. Even after 2025:KER:45278 WA Nos.481 and 484 OF 2025 38 classification as NPA, no restructuring proposal has been received. The writ petitioners approached the Bank for OTS, which was not acceptable to the Bank, hence it was rejected. The question of maintainability of the writ petition was also raised in the statement filed on behalf of respondents 2 to 4.

8.4. In W.P.(C)No.46154 of 2024, the writ petitioners have filed a reply affidavit dated 16.02.2025, producing therewith Ext.P21 order dated 31.01.2025 of the High Court of Judicature at Bombay in Commercial Suit (L)No.38195 of 2024 and Ext.P22 order dated 04.02.2025 of the Additional Sessions Court, Bombay in Suit (ST)No.18939 of 2024. Along with I.A.Nos.3 of 2024 and 4 of 2024, the writ petitioners have placed on record Ext.P23 sanction notice dated 30.12.2022 issued by the 3rd respondent Bank [Ext.P23 in W.P.(C)No.45166 of 2024]. Along with I.A.No.5 of 2025, the writ petitioners have produced Ext.P24 order dated 22.01.2025 of the Additional Chief Judicial Magistrate Court, Ernakulam in M.C.No.1319 of 2024 and Ext.P25 notice dated 20.02.2025 issued by the Advocate Commissioner.

9. After considering the rival contentions, the learned Single Judge, by a common judgment dated 11.03.2025, dismissed W.P.(C)Nos.45166 of 2024 and 46514 of 2024 on the 2025:KER:45278 WA Nos.481 and 484 OF 2025 39 ground that the writ petitioners have not made out any case for the grant of the reliefs sought for in the writ petitions. Identical issues have already been considered in the judgment dated 17.02.2025 in W.P.(C)No.45285 of 2024. As discernible from the common judgment dated 11.03.2025 in W.P.(C)Nos.45166 of 2024 and 46514 of 2024, before the learned Single Judge, it was not disputed that the claims presently raised have not been raised in any previous litigations and they have been raised for the first time only after the accounts have been classified as NPA. [see:

para.8, Page 19 of the judgment] Therefore, the learned Single Judge found that in the light of the law laid down by the Apex Court in Pro Knits v. Canara Bank [(2024) 10 SCC 292] and by a Division Bench of this Court in P.K. Krishnakumar v.

IndusInd Bank [2024 SCC OnLine Ker 6888] the writ petitioners are not entitled to any relief. The law laid down by the Apex Court in Pro Knits [(2024) 10 SCC 292] is binding on the High Court in terms of the provisions contained in Article 141 of the Constitution of India, and the law laid down by the Division Bench of this Court in P.K. Krishnakumar [2024 SCC OnLine Ker 6888] is also binding on the learned Single Judge, as held by a Full Bench of this Court in Raman Gopi v. Kunju Raman 2025:KER:45278 WA Nos.481 and 484 OF 2025 40 Uthaman [2011 (4) KLT 458]. The learned Single Judge found that the writ petitioners cannot have the luxury of conducting piecemeal litigations where issues are deliberately fragmented across separate proceedings to gain an unfair advantage, as held by the Apex Court in Celir LLP v. Sumati Prasad Bafna [2024 SCC OnLine SC 3727]. The writ petitioners, who are the borrowers, have pursued various proceedings before this Court, the Bombay High Court, and the Debt Recovery Tribunal. The learned Single Judge noticed that the writ petitioners/borrowers do not appear to have raised any claim for the benefit of the Exts.P2 framework and Ext.P3 guidelines issued by the Reserve Bank of India [in W.P.(C)No.46514 of 2024] at any earlier stage before this Court. The learned Single Judge noticed further that Ext.R2(a) communication dated 28.01.2025 produced along with the statement filed by the learned Standing Counsel for the 3 rd respondent Bank in W.P.(C)No.45166 of 2024 indicates that the Bank had actually informed the writ petitioners that their accounts are in Special Mention Account (SMA) category and called upon them to submit proposals. However, no proposals were submitted by the writ petitioners. At least, when the writ petitioners had received Ext.R2(a), they should have sought a reference to the 2025:KER:45278 WA Nos.481 and 484 OF 2025 41 committee constituted in terms of Ext.P2. In Abdul Nazer v.

Union Bank of India [2023 (5) KHC 543], a learned Single Judge of this Court held that, on a reading of clause (1) of the Framework issued under the MSME Act, it can be seen that it is only an optional framework available to the bank and the borrower. The said framework in the notification cannot prevail over the statutory provisions of the SARFAESI Act in the matter of recovery of loans. As per Section 24 of the MSME Act, only the provisions of Sections 15 to 23 are given precedence over other laws. Section 9 or the notifications issued thereunder cannot prevail over the statutory provisions of the SARFAESI Act. In the decision of the Apex Court in Kotak Mahindra Bank Limited v.

Girnar Corrugators (P) Ltd. [(2023) 3 SCC 210], it has been held that the SARFAESI Act will prevail over the MSME Act. In the impugned judgment, the learned Single Judge noticed that Ext.P2 notification in W.P.(C)No. 46514 of 2024 has been issued in the exercise of the power conferred by Section 9 of the MSMED Act.

Therefore, the learned Single Judge agreed with the view expressed by the learned judge in Abdul Nazer [2023 (5) KHC 543]. The learned Single Judge noticed further that Ext.P3 guidelines in W.P.(C)No.46514 of 2024 issued by the Reserve Bank 2025:KER:45278 WA Nos.481 and 484 OF 2025 42 of India provide that restructuring of loan accounts with exposure of above Rs.25 Crore will continue to be governed by the extant guidelines on Corporate Debt Restructuring (CDR)/Joint Lender's Forum (JLF) mechanism. It is not disputed that the liability in the loan accounts, which are the subject matter of W.P.(C)No.46514 of 2024, are in excess of Rs.25 crore. Therefore, the petitioners in W.P.(C)No.46514 of 2024 are not entitled to the benefit of Exts.P2 and P3. For all these reasons, the learned Single Judge found that the writ petitioners are not entitled to any relief in the writ petitions. The learned Single Judge also found that the question of issuing notice to the Reserve Bank of India and the Union of India in the Ministry of Micro, Small, and Medium Enterprises does not arise as, on the facts of the cases, the legal issue stands covered against the writ petitioners, as already noticed above.

Therefore, the writ petitions were dismissed by the impugned common judgment.

10. Challenging the judgment dated 11.03.2025 in W.P.(C)No.45166 of 2024, the appellants-writ petitioners have filed W.A.No.481 of 2025. The judgment in W.P.(C)No.46514 of 2024 is under challenge in W.A.No.484 of 2025.

2025:KER:45278 WA Nos.481 and 484 OF 2025 43

11. On 12.03.2025, when W.A.No.481 of 2025 came up for admission, a Division Bench of this Court directed the Registry to place the matter for consideration before the Division Bench headed by the Hon'ble Chief Justice, on 20.03.2025. The learned Standing Counsel for the 3rd respondent Dhanlaxmi Bank undertook that nothing would happen in the meanwhile. On 24.03.2025, when W.A.No.484 of 2025 came up for consideration, it was ordered to be listed on 27.03.2025, along with W.A.No.481 of 2025.

12. On 10.04.2025, when W.A.No.481 of 2025 came up for consideration along with W.A.No.484 of 2025, the learned counsel for the appellants-writ petitioners contended that the decision of the Division Bench in P.K. Krishnakumar v. IndusInd Bank [2024 SCC OnLine Ker 6888] was rendered in different facts. On 22.05.2025, when the writ appeals came up for consideration, it was ordered that the undertaking recorded in W.A.No.481 of 2025 shall continue till 05.06.2025. Thereafter, it was ordered to be continued till 12.06.2025.

13. On 12.06.2025, we heard detailed arguments of the learned counsel for the appellants-writ petitioners and the learned 2025:KER:45278 WA Nos.481 and 484 OF 2025 44 Standing Counsel for Dhanlaxmi Bank for respondents 2 to 4 and the writ appeals were reserved for judgment.

14. The learned counsel for the appellants-writ petitioners contended that the writ petitioners-borrowers are entitled to the benefits under Ext.P2 framework for revival and rehabilitation of Micro, Small and Medium enterprises and that Ext.P2 is binding on the 3rd respondent Bank in terms of Ext.P3 circular dated 17.03.2016 issued by the 1st respondent Reserve Bank of India. The decision of the Apex Court in Pro Knits [(2024) 10 SCC 292] and the decision of the Division Bench in P.K. Krishnakumar [2024 SCC OnLine Ker 6888] have no application to the facts of the cases on hand. The contention to that effect raised by the writ petitioners were not adverted to by the learned Single Judge in the correct perspective. Other legal contentions raised by the writ petitioners were also not properly considered by the learned Single Judge. The learned counsel would point out that the judgment of the Division Bench in P.K. Krishnakumar [2024 SCC OnLine Ker 6888] is under challenge before the Apex Court in SLP(C)No.29302 of 2024, which is pending consideration. The common judgment of the learned Single Judge dated 28.02.2025 in W.P.(C)Nos.39257 of 2025:KER:45278 WA Nos.481 and 484 OF 2025 45 2024 and 7991 of 2025 is under challenge in SLP(C)Nos.10896 of 2025 and 12783 of 2025, which are pending consideration before the Apex Court.

15. Per contra, the learned Standing Counsel for Dhanlaxmi Bank for respondents 2 to 4 would contend that the issue raised in the writ petitions are covered by the decision of the Apex Court in Pro Knits [(2024) 10 SCC 292] and the decision of the Division Bench in P.K. Krishnakumar [2024 SCC OnLine Ker 6888]. Therefore, the learned Single Judge cannot be found fault with, in dismissing the writ petitions, for the reasons stated in the impugned judgment, relying on the law laid down in the said decisions. After considering the pleadings and materials on record, the learned Single Judge rightly found that it was not disputed that the claims presently raised by the writ petitioners have not been raised in any previous litigations and that they have been raised for the first time only after the accounts have been classified as NPA.

16. In paragraphs 3 and 4 of the impugned judgment dated 11.03.2025, the learned Single Judge has referred to the contentions advanced by the learned counsel for the writ 2025:KER:45278 WA Nos.481 and 484 OF 2025 46 petitioners. Paragraphs 3 and 4 of the impugned judgment read thus;

"3. Sri. Mathews J. Nedumpara, the learned counsel appearing for the petitioners would submit that the borrowers are entitled to the benefits of the framework for revival and rehabilitation of Micro, Small and Medium Enterprises as contained in the notification produced as Ext.P2 in W.P.(C)No.46514 of 2024. It is submitted that Ext.P2 is binding on the Bank in terms of Ext.P3 Circular dated 17.03.2016 issued by the RBI. It is submitted that, when a unit is registered as MSME, Ext.P2 requires that the loan account shall be referred to a committee known as the Committee for Stressed Micro, Small and Medium Enterprises for the implementation of a corrective action plan which may include rectification and restructuring and only when rectification or restructuring is not possible, can the Bank proceed for recovery. It is submitted that the framework contains detailed guidelines for restructuring/rectification and any action for recovery without considering the scope of rectification or restructuring would be contrary to the statutory framework and the guidelines issued by the RBI.

4. It is submitted that the judgment of the Supreme Court in Pro Knits v. Canara Bank [(2024) 10 SCC 292] deals with the situation where no claim was made by the unit in question that it was an MSME. It is submitted that where the Bank does not dispute that the borrower is an MSME, the question of identification upon a claim being raised by the borrower that the matter is to be referred to the 2025:KER:45278 WA Nos.481 and 484 OF 2025 47 Committee for a corrective action plan as noticed above does not arise. It is submitted that it is clear from the judgment in Pro Knits (supra), especially paragraph No.16 thereof that where there are materials already before the Bank which show that the borrower is to be classified as an MSME, the failure of the Bank to refer the issue for consideration of the Committee is clearly illegal and contrary to the circulars issued by the RBI. It is submitted that the judgment of the Division Bench of this Court in P.K. Krishnakumar v. IndusInd Bank [2024 SCC OnLine Ker 6888] does not lay down the correct law and cannot be treated as a binding precedent. It is submitted that the judgment of the Supreme Court in Zee Telefilms Ltd. v. Union of India [(2005) 4 SCC 649] is the authority for the proposition that no judgment should be read as a statute. It is submitted that the recent judgment of the Supreme Court in NBCC (India) Ltd. v. The State of West Bengal [2025 SCC OnLine SC 73] establishes that MSMEs are the backbone of the economy and provide employment to 62% of the country's workforce, contribute 30% to India's GDP and account for around 45% of India's total exports. It is submitted that it is in this background that the framework for revival and rehabilitation of MSMEs has been conceived and, therefore, the rights conferred on the borrowers under the provisions of the framework should not be denied to them. It is submitted that the petitioners are entitled to a direction that all proceedings under the SARFAESI Act shall remain suspended till action in terms of the Ext.P2 framework is taken by the respondent Bank. The learned counsel also refers to the reliefs sought in both the 2025:KER:45278 WA Nos.481 and 484 OF 2025 48 writ petitions and states that the matter should not be decided without issuing notice to the various authorities, including the RBI and the Union of India in the Ministry of Micro, Small and Medium Enterprises."

17. In paragraphs 5 and 6 of the impugned judgment dated 11.03.2025, the learned Single Judge has referred to the contentions advanced by the learned Standing Counsel for the 3rd respondent Bank. Paragraphs 5 and 6 of the impugned judgment read thus;

"5. Sri. C.K. Karunakaran, the learned counsel appearing for the respondent Bank, vehemently opposes the grant of any relief to the petitioners. It is submitted that the issue raised in these writ petitions is squarely covered against the petitioners by the judgment of the Supreme Court in Pro Knits (supra) as also the judgment of the Division Bench of this Court in P.K. Krishnakumar (supra). It is submitted that a reading of the judgment of the Supreme Court in Pro Knits (supra) will indicate beyond doubt that a claim for restructuring, etc., in terms of Ext.P2 framework will arise only if such claim is made by the borrower prior to the declaration of the account as 'Non-Performing Asset' (NPA). It is submitted that, in the facts of the present case, no such claim was made by the borrowers. The learned counsel appearing for the respondent Bank referred to Ext.R2(a) communication dated 28.01.2025 produced along with the statement filed in W.P.(C)No.45166 of 2024 to contend that the Bank had actually communicated to the borrowers in 2025:KER:45278 WA Nos.481 and 484 OF 2025 49 these cases that they are in Special Mention Account (SMA) category and calling upon the borrowers to submit a detailed action plan in respect of the points mentioned in the communication. It is submitted that the borrowers failed to submit any action plan and therefore, the Bank was forced to initiate proceedings under the SARFAESI Act against the borrowers. It is submitted that, having failed to submit any action plan pursuant to the communication issued by the Bank before the account turned into a 'NPA' status, the borrowers cannot now contend that they are entitled to be considered in terms of Ext.P2. It is submitted that the borrowers in these cases had conducted previous litigations before this Court as is evident from Ext.P14 judgment in W.P.(C)No.38732 of 2023. It is submitted that the Managing Director of M/s.M.D. Esthappan Infrastructure Pvt. Ltd had filed W.P.(C)No.22424 of 2024 before this Court. It is submitted that the very same group has also filed W.P.(C)No.35456 of 2024 before the High Court of Bombay and has also approached the Debt Recovery Tribunal by invoking Section 17 of the SARFAESI Act. It is submitted that the borrowers had also initiated proceedings by filing a civil suit as S.T. No.18939 of 2024 before the High Court of Bombay. It is submitted that in the earlier round of litigations conducted before this Court, the borrowers had no case that they were entitled to the benefits of Exts.P2 and P3. It is submitted that in such circumstances, the issue is clearly covered against the petitioners by the judgment of the Division Bench of this Court in P.K. Krishnakumar (supra).

2025:KER:45278 WA Nos.481 and 484 OF 2025 50

6. The learned counsel appearing for the respondent Bank also submits that the petitioners in W.P.(C)No.46514 of 2024 are also not entitled to the benefit of Exts.P2 and P3 as it is clear from a reading of Ext.P3 guidelines issued by the RBI that where the loan exposure is above Rs.25 crores, the same will continue to be governed by the guidelines for Corporate Debt Restructuring (CDR)/Joint Lenders' Forum (JLF) mechanism and not by Ext.P2 framework. It is submitted that the liability of the petitioners in W.P.(C)No.46514 of 2024 is in excess of Rs.25 crores. The learned counsel for the respondent Bank also placed reliance on the judgment of the Supreme Court in Celir LLP v. Sumati Prasad Bafna [2024 SCC OnLine SC 3727] to contend that the petitioners are not entitled to conduct piecemeal litigations where issues are deliberately fragmented across separate proceedings to gain an unfair advantage. It is submitted that the issues raised by the petitioners are also covered against the petitioners by the judgment of this Court in W.P.(C)No.45285 of 2024, where the very same contentions had been considered and rejected following the law laid down in P.K. Krishnakumar (supra)."

18. A reading of the impugned judgment dated 11.03.2025 of the learned Single Judge would show that though various reliefs including declaratory reliefs were sought for in the writ petitions, the arguments advanced by the learned counsel for the writ petitioners were confined to the contentions referred to in 2025:KER:45278 WA Nos.481 and 484 OF 2025 51 paragraphs 3 and 4 of that judgment. The learned Single Judge considered the said contentions with reference to the rival contentions raised by the learned Standing Counsel for the 3 rd respondent Bank, which were noted in paragraphs 5 and 6 of the impugned judgment, and dismissed the writ petitions, after taking note of the law laid down in the decisions referred to therein.

19. As already noticed hereinbefore, in W.P.(C)No.45166 of 2024, the document marked as Ext.P7 is a notice dated 16.08.2023 issued to the appellants and two others, by the 4 th respondent Authorised Officer of the 3 rd respondent Bank, invoking the provisions under Section 13(2) of the SARFAESI Act in respect of the credit facilities availed by the appellants, wherein it is stated that due to the default in repayment of the secured loan/financial assistance in violation of the stipulations in the sanction terms, loan agreements and security documents, the Bank has classified the said accounts as Non-Performing Asset (NPA), as defined in clause (o) of Section 2 of the SARFAESI Act, with effect from 31.07.2023. Ext.P8 is a copy of the objection dated 11.10.2023 of the 1st appellant, under Section 13(3A) of the SARFAESI Act, to Ext.P7 notice dated 16.08.2023 of the 4 th respondent Authorised Officer, wherein it is stated that the 2025:KER:45278 WA Nos.481 and 484 OF 2025 52 classification of the accounts as NPA, with effect from 31.07.2023, violates Ext.P5 notification dated 29.05.2015 issued by the 5 th respondent Ministry under Section 9 of MSMED Act and Ext.P6 notification dated 17.03.2016 issued by the 1st respondent Reserve Bank of India. The 4th respondent received Ext.P8 objection on 16.10.2023, to which Ext.P9 reply dated 18.10.2023 was issued, pointing out that the credit facilities availed by the appellants have already been classified as NPA as on 16.08.2023, by allowing 60 days' time to close the accounts. Ext.P8 objection is only to protract the recovery proceedings initiated by the Bank. On receipt of Ext.P9 reply, the 1st appellant submitted Ext.P10 representation dated 25.10.2023. Similarly, in W.P.(C)No.46514 of 2024 the document marked as Ext.P4 is a notice dated 16.08.2023 issued to the appellants and two others, by the 4 th respondent Authorised Officer of the 3 rd respondent Bank, invoking the provisions under Section 13(2) of the SARFAESI Act in respect of the credit facilities availed by the appellants, wherein it is stated that due to the default in repayment of the secured loan/financial assistance in violation of the stipulations in the sanction terms, loan agreements and security documents, the Bank has classified the said accounts as Non-Performing Asset 2025:KER:45278 WA Nos.481 and 484 OF 2025 53 (NPA), as defined in clause (o) of Section 2 of the SARFAESI Act, with effect from 31.07.2023. Ext.P5 is a copy of the objection dated 11.10.2023 of the 1st appellant, under Section 13(3A) of the SARFAESI Act, to Ext.P4 notice dated 16.08.2023 of the 4 th respondent Authorised Officer, wherein it is stated that the classification of the accounts as NPA, with effect from 31.07.2023, violates Ext.P2 notification dated 29.05.2015 issued by the 5 th respondent Ministry under Section 9 of MSMED Act and Ext.P3 notification dated 17.03.2016 issued by the 1st respondent Reserve Bank of India. The 4th respondent received Ext.P5 objection on 16.10.2023, to which Ext.P6 reply dated 18.10.2023 was issued, pointing out that the credit facilities availed by the appellants have already been classified as NPA as on 16.08.2023, by allowing 60 days' time to close the accounts. Ext.P8 objection is only to protract the recovery proceedings initiated by the Bank. On receipt of Ext.P6 reply, the 1st appellant submitted Ext.P7 representation dated 25.10.2023. In the impugned judgment, the learned Single Judge noticed that Ext.R2(a) communication dated 28.01.2025 produced along with the statement filed by the learned Standing Counsel for the 3rd respondent Bank in W.P.(C)No.45166 of 2024 indicates that the Bank had actually 2025:KER:45278 WA Nos.481 and 484 OF 2025 54 informed the writ petitioners that their accounts are in Special Mention Account (SMA) category and called upon them to submit proposals. However, no proposals were submitted by the writ petitioners.

20. In Kotak Mahindra Bank Ltd. v. Girnar Corrugators (P) Ltd. [(2023) 3 SCC 210], a Two-Judge Bench of the Apex Court was dealing with a case in which the Civil Appeal filed by the appellant- secured creditor arose out of the judgment of a Division Bench of the High Court of Madhya Pradesh at Indore dated 11.08.2017 in W.A.No.248 of 2017, by which the Division Bench allowed the said writ appeal preferred by the 1st respondent therein and set aside the judgment passed by the learned Single Judge, by holding that the Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) will prevail over the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

20.1. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210], before the Apex Court, it was contended that there is no repugnancy between the provisions of the SARFAESI Act and the MSMED Act. The non-obstante clause in the MSMED Act, i.e., Section 24, provides that provisions under Sections 15 to 23 shall 2025:KER:45278 WA Nos.481 and 484 OF 2025 55 have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force. Sections 15 to 23 of the MSMED Act only provide for a special mechanism for adjudication of the dispute, along with enforcing certain other contractual and business terms on the parties, such as the time limit for payments and interest in case of delayed payments. It was contended that the scheme of Sections 15 to 23 of the MSMED Act clearly shows that there is no express 'priority' envisaged for payments under the said Act over the dues of secured creditors or any taxes or cesses payable to the Central Government or the State Government or the local authority, as the case may be. In sharp contrast to this, the scheme of the SARFAESI Act, including in Section 26E thereof, leaves no room for doubt that the legislature has expressly and unambiguously provided for a legal framework exclusively on the issue of 'priority' of payment of dues. In case of certain other legislations, there is an express provision in the SARFAESI Act providing how the dues thereunder may either have a charge over the property or have 'priority over other dues. Reference was made to the provisions of the Maharashtra Value Added Tax Act, 2002; the Employees' Provident Funds and Miscellaneous Provisions Act, 1952; the Kerala General Sales Tax 2025:KER:45278 WA Nos.481 and 484 OF 2025 56 Act, 1963; the Workmen's Compensation Act, 1923; the Central Excise Act, 1944; the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016; etc. In the absence of such express provisions, there can be no basis to ignore the specific scheme of the SARFAESI Act, in comparison to such specific scheme under the MSMED Act, with regard to 'priority' of payments. Any such 'priority' over and above the dues of secured creditors or Government dues has to be expressly and unambiguously provided for and cannot be read by implication. Therefore, it was contended that there is no conflict between the two schemes, i.e., the MSMED Act and the SARFAESI Act, as far as the specific subject of 'priority' is concerned. Further, Section 26E of the SARFAESI Act, being subsequently inserted vide an amendment of the year 2016, the non-obstante clause in Section 26E of the said Act shall prevail over the provisions of the MSMED Act. Reliance was placed on the decision of the Apex Court in Bank of India v. Ketan Parekh [(2008) 8 SCC 148]. It was the case of the 1st respondent that in view of Section 24 of the MSMED Act, which provides that the provisions of Sections 15 to 23 of the said Act would have overriding effect and shall have 2025:KER:45278 WA Nos.481 and 484 OF 2025 57 effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force, and since the MSMED Act being a later enactment than the SARFAESI Act, the MSMED Act would prevail over the MSMED Act.

20.2. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210], after considering the rival contentions, the Apex Court noticed that the short question which requires consideration is whether the MSMED Act would prevail over the SARFAESI Act and whether recovery proceedings/recoveries under the MSMED Act would prevail over the recoveries made/recovery proceedings under the provisions of the SARFAESI Act. The Apex Court found that Sections 15 to 23 of the MSMED Act only provide for a special mechanism for adjudication of the dispute, along with enforcing certain other contractual and business terms on the parties, such as the time limit for payments and interest in case of delayed payments. In the entire MSMED Act, there is no specific express provision giving 'priority' for payments under the said Act over the dues of the secured creditors or any taxes or cesses payable to the Central Government or the State Government or the local authority, as the case may be. In sharp contrast to this, Section 26E of the SARFAESI Act, which has been inserted vide 2025:KER:45278 WA Nos.481 and 484 OF 2025 58 Amendment Act of 2016, it provides that notwithstanding anything inconsistent therewith contained in any other law for the time being in force, after the registration of security interest, the debts due to any secured creditor shall be paid in 'priority' over all other debts and all revenue taxes and cesses and other rates payable to the Central Government or the State Government or local authority. However, the priority to secured creditors in payment of debt as per Section 26E of the SARFAESI Act shall be subject to the provisions of the Insolvency and Bankruptcy Code (IBC). Therefore, such dues vis-à-vis dues under the MSMED Act, as per the decree or order passed by the Facilitation Council, debts due to the secured creditor shall have a priority in view of Section 26E of the SARFAESI Act, which is a later enactment in point of time than the MSMED Act.

20.3. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210], the Apex Court noticed that Section 26E of the SARFAESI Act, which was inserted in 2016, also has a non-obstante clause. If the two enactments have competing non-obstante provisions and nothing repugnant, then the non-obstante clause of the subsequent statute would prevail over the earlier enactments. As per the settled position of law, if the legislature confers the later 2025:KER:45278 WA Nos.481 and 484 OF 2025 59 enactment with a non-obstante clause, it means the legislature wanted the subsequent/later enactment to prevail. Thus, a 'priority' conferred/provided under Section 26E of the SARFAESI Act would prevail over the recovery mechanism of the MSMED Act. It has to be considered along with the fact that under the provisions of the MSMED Act, more particularly Sections 15 to 23, no 'priority' is provided with respect to the dues under the said Act, like Section 26E of the SARFAESI Act. Sections 15 to 23 of the MSMED Act provide a special mechanism for adjudication of disputes and to adjudicate and resolve the disputes between the supplier and buyer-micro or small enterprise. The said Act does not provide any priority over the debt dues of the secured creditor akin to Section 26E of the SARFAESI Act. At the most, the decree/order/award passed by the Facilitation Council shall be executed as such and the micro or small enterprise in whose favour the award or decree has been passed by the Facilitation Council shall be entitled to execute the same like other debts/creditors. Therefore, considering the provisions of Sections 15 to 23, read with Section 24 of the MSMED Act and the provisions of the SARFAESI Act, as such, there is no repugnancy between the two enactments, viz. the SARFAESI Act and 2025:KER:45278 WA Nos.481 and 484 OF 2025 60 the MSMED Act. As such, there is no conflict between the two schemes, i.e., the MSMED Act and the SARFAESI Act, as far as the specific subject of 'priority' is concerned. The SARFAESI Act has been enacted to regulate securitisation and reconstruction of financial assets and enforcement of security interests and to provide for a central database of security interests created on property rights, and for matters connected therewith or incidental thereto. The SARFAESI Act has been enacted to provide a specific mechanism/provision for the financial assets and security interests. It is a special legislation for the enforcement of security interests created in favour of the secured creditor-financial institution. Therefore, in absence of any specific provision for priority of the dues under the MSMED Act, if dues under the said Act would prevail over the SARFAESI Act, as contended by the 1st respondent, then in that case, not only the object and purpose of special enactment, i.e., the SARFAESI Act would be frustrated, even the later enactment by way of insertion of Section 26E of the SARFAESI Act would be frustrated. If the submission on behalf of 1st respondent is accepted, then in that case, Section 26E of the SARFAESI Act would become nugatory and would become otiose and/or redundant. Any other contrary view would be 2025:KER:45278 WA Nos.481 and 484 OF 2025 61 defeating the provision of Section 26E of the SARFAESI Act and also the object and purpose of the said Act.

20.4. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210], on the facts of the case on hand, the Apex Court noticed that the Naib Tahsildar was not at all justified in not taking possession of the secured assets/properties as per order dated 24.09.2014 passed by the District Magistrate under Section 14 of the SARFAESI Act. The order passed by the Naib Tahsildar refusing to take possession of the secured assets/properties despite the order passed under Section 14 of the SARFAESI Act on the ground that recovery certificates issued by the 1st respondent for recovery of the orders passed by the Facilitation Council are pending, is wholly without jurisdiction. Under Section 14 of the SARFAESI Act, the District Magistrate or the Chief Metropolitan Magistrate, as the case may be, is required to assist the secured creditor in getting the possession of the secured assets. Under Section 14 of the SARFAESI Act, neither the District Magistrate nor the Metropolitan Magistrate would have any jurisdiction to adjudicate and/or decide the dispute even between the secured creditor and the debtor. If any person is aggrieved by the steps under Section 13(4)/order passed under Section 14, then the aggrieved person 2025:KER:45278 WA Nos.481 and 484 OF 2025 62 has to approach the Debt Recovery Tribunal by way of appeal/application under Section 17 of the SARFAESI Act. Therefore, the order passed by the Naib Tahsildar refusing to take possession pursuant to the order passed by the District Magistrate under Section 14 of the SARFAESI Act was wholly without jurisdiction and, therefore, the same was liable to be set aside. In the result, the Apex Court set aside the judgment dated 11.08.2017 in W.A.No.248 of 2017 of the Division Bench of the High Court of Madhya Pradesh at Indore and restored the judgment by the learned Single Judge. The Apex Court held that so far as recoveries under the SARFAESI Act with respect to the secured assets would prevail over the recoveries under the MSMED Act to recover the amount under the award/decree passed by the Facilitation Council. As rightly observed by the learned Single Judge, if the 1st respondent is aggrieved by the order passed by the District Magistrate under Section 14 of the SARFAESI Act, it will be open for him to initiate proceedings under Section 17 of the SARFAESI Act, which will be considered in accordance with law and on its merits and subject to Section 17 and other provisions of the SARFAESI Act.

21. In Pro Knits v. Canara Bank [(2024) 10 SCC 292], 2025:KER:45278 WA Nos.481 and 484 OF 2025 63 a Two-Judge Bench of the Apex Court was dealing with a batch of Civil Appeals in which the appellants, who claim themselves to be the Micro, Small and Medium Enterprises (MSMEs) registered under the MSMED Act, have challenged the common judgment dated 11.01.2024 passed by the High Court of Judicature at Bombay in W.P.(L)No.20100 of 2023 and connected matters, whereby the High Court dismissed the said writ petitions by holding that the Banks/Non-Banking Financial Companies (NBFCs) are not obliged to adopt the restructuring process as contemplated in the Notification dated 29.05.2015 issued by the Ministry of Micro, Small and Medium Enterprises, on its own without there being any application by the petitioners/MSMEs. The High Court, without expressing any opinion on the merits or the factual aspects of the writ petitions, granted leave to the appellant-writ petitioners to agitate the other issues by adopting alternative remedies as may be available to them under the law.

21.1. In Pro Knits [(2024) 10 SCC 292], before the Apex Court, the bone of contention raised by the learned counsel for the appellants was that the respondent Banks could not have classified the loan accounts of the appellants, who were the MSMEs, as non- performing assets (NPAs), without following the procedure laid 2025:KER:45278 WA Nos.481 and 484 OF 2025 64 down in the Instructions for Framework for Revival and Rehabilitation of MSMEs issued vide the Notification dated 29.05.2015 by the Ministry of Micro, Small and Medium Enterprises, in exercise of the powers conferred under Section 9 of the MSMED Act. According to the learned counsel, it was incumbent on the part of the respondent Banks/NBFCs to identify incipient stress in the account by creating three sub-categories as mentioned in the said notification and to explore various options to resolve the stress in the account as contemplated in the said notification. Further, the said notification and the subsequent instructions/directions issued by the Central Government and the Reserve Bank of India are for the purpose of facilitating the promotion and development and enhancing the competitiveness of MSMEs and, therefore, it was mandatory on the part of the respondent Banks/NBFCs to follow the same. Non-observance of the mandatory instructions contained in the said notification has rendered all the subsequent actions taken by the respondent Banks/NBFCs under the SARFAESI Act illegal and void ab initio. Per contra, the learned counsel for the respondent Banks/NBFCs contended that the High Court has rightly not considered the process or procedure laid down in the notification dated 2025:KER:45278 WA Nos.481 and 484 OF 2025 65 29.05.2015 as mandatory, inasmuch as the provisions contained in the SARFAESI Act override the provisions of the other Acts including the MSMED Act, as per Section 35 of the said Act. The learned counsel for the respondent Banks/NBFCs pointed out that the appellants concerned had not applied to the respondent Banks/NBFCs to avail the benefit of the said notification at the relevant time and respondent Banks/NBFCs have already initiated and in certain cases concluded the proceedings undertaken under the SARFAESI Act, after following the due process of law. The process of restructuring as contemplated in the said notification and classification of borrower's account as NPA are two independent subjects and, therefore, it cannot be interpreted that unless the procedure under the said notification for restructuring is adopted, the appellants' accounts could not have been classified as NPAs. According to them, the instructions issued under Section 9 of the MSMED Act are mere directory and not mandatory nor do they have any statutory force.

21.2. In Pro Knits [(2024) 10 SCC 292], before delving into the issue involved in the appeals as to whether the notification dated 29.05.2015 issued by the Central Government in exercise of the powers conferred under Section 9 of the MSMED Act, as 2025:KER:45278 WA Nos.481 and 484 OF 2025 66 revised from time to time, is mandatory or directory, the Apex Court had a glance over the relevant provisions of the MSMED Act. The Apex Court noticed that the very object and purpose of the MSMED Act is to provide for facilitating the promotion and development and enhancing the competitiveness of Micro, Small and Medium Enterprises and for matters connected therewith and incidental thereto. Section 9 of the said Act empowers the Central Government to take measures for the purpose of facilitating such promotion and development and enhancing the competitiveness of MSMEs by specifying the programmes, guidelines or instructions as it may deem fit, by issuing notifications. Section 10 of the said Act states that the policies and practices in respect of the credit to the Micro, Small and Medium Enterprises shall be progressive and such as may be specified in the guidelines or instructions issued by Reserve Bank, from time to time, to ensure timely and smooth flow of credit to such enterprises, minimise the incidence of sickness among and enhance the competitiveness of such enterprises. Section 21 of the Banking Regulation Act, 1949, empowers the Reserve Bank of India to control advances by banking companies. The said section inter alia provides that where the Reserve Bank is satisfied that it is necessary or expedient in 2025:KER:45278 WA Nos.481 and 484 OF 2025 67 the public interest or in the interest of the depositors or banking policy so to do, it may determine the policy in relation to advances to be followed by banking companies generally or by any company in particular and when the policy has been so determined, all banking companies or the banking company concerned, as the case may be, shall be bound to follow the policy as so determined. Sub-section (3) of Section 21 states that every banking company shall be bound to comply with any directions given to it under the said section. Section 35A of the said Act deals with the power of the Reserve Bank to give directions. As per sub- section (1) of Section 35A, where the Reserve Bank is satisfied that in the public interest; or in the interest of banking policy; or to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions. Thus, Section 21 read with 2025:KER:45278 WA Nos.481 and 484 OF 2025 68 Section 35A makes it clear that the directions issued by the Reserve Bank of India to the banking companies are binding on them and they are bound to comply with such directions.

21.3. In Pro Knits [(2024) 10 SCC 292], the Apex Court noticed that the whole controversy in the appeals centered around the notification dated 29.05.2015 issued by the Central Government, in exercise of the powers conferred by Section 9 of the MSMED Act, which contains the instructions for the Framework for Revival and Rehabilitation of MSMEs. The Apex Court extracted the relevant portion of the said notification in para.10 of the judgment. The Apex Court noticed that the Reserve Bank of India, in order to make the framework contained in the notification dated 29.05.2015 compatible with the existing regulatory guidelines on 'Income Recognition, Asset Classification and provisioning pertaining to Advances' issued to the banks, made certain changes in the said framework, in consultation with the Central Government and issued revised framework along with the operating instructions, vide the communication dated 17.03.2016 addressed to all the scheduled commercial banks. In exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act, the Reserve Bank of India, after having being 2025:KER:45278 WA Nos.481 and 484 OF 2025 69 satisfied that it was necessary and expedient in the public interest to do so, issued the master direction, i.e., the Reserve Bank of India [Lending to Micro, Small and Medium Enterprises (MSME) Sector] Directions, 2016, vide the notification dated 21.07.2016. The said directions have been made applicable to every scheduled commercial bank, excluding the Regional Rural Banks (RRBs) licensed to operate in India by the Reserve Bank of India. Amongst the other directions, direction 4 contained in Chapter IV pertained to the common guidelines/instructions for lending to the MSME sector. While advising all the scheduled commercial banks to follow the guidelines/instructions pertaining to MSMEs, it was directed in Direction 4.8 that the Ministry of Micro, Small and Medium Enterprises, Government of India, vide their Gazette Notification dated 29.05.2015 notified 'Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises' to provide a simpler and faster mechanism to address the stress in the accounts of MSMEs and to facilitate the promotion and development of MSMEs. The Reserve Bank was advised to issue necessary instructions to banks for the effective implementation and monitoring of the said framework. After carrying out certain changes in the captioned framework, in consultation with the 2025:KER:45278 WA Nos.481 and 484 OF 2025 70 Government of India, Ministry of MSME, so as to make it compatible with the existing regulatory guidelines on Income Recognition, Asset Classification and provisioning pertaining to Advances issued to banks by the Reserve Bank of India, the guidelines on the captioned framework along with operating instructions were issued to banks on 17.03.2016. The revival and rehabilitation of MSME units having loan limits up to Rs.25 crores would be undertaken under this framework. Banks were required to put in place their own Board-approved policy to operationalise the framework not later than 30.06.2016. The revised framework supersedes the earlier 'Guidelines on Rehabilitation of Sick Micro and Small Enterprises' issued vide circular dated 01.11.2012, except those relating to reliefs and concessions for rehabilitation of potentially viable units and One Time Settlement, mentioned in the said circular. The salient features of the framework are that before a loan account of an MSME turns into a Non-Performing Asset (NPA), banks or creditors should identify incipient stress in the account by creating three sub-categories under the Special Mention Account (SMA) category as given in the Framework; any MSME borrower may also voluntarily initiate proceedings under this Framework; committee approach to be adopted for deciding 2025:KER:45278 WA Nos.481 and 484 OF 2025 71 corrective action plan; time lines have been fixed for taking various decisions under the Framework. In view of the above, the Apex Court held that the instructions for the Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises as notified by the Central Government, vide the notification dated 29.05.2015, in exercise of the powers conferred under Section 9 of the MSMED Act, as revised by the RBI Notification dated 17.03.2016, and the master directions, i.e., the Reserve Bank of India [Lending to Micro, Small and Medium Enterprises (MSEM) Sector] Directions, 2016, issued by the Reserve Bank of India, in exercise of the powers conferred by Sections 21 and 35A of the Banking Regulation Act, having statutory force, are binding on all scheduled commercial banks, licensed to operate in India by the Reserve Bank of India, as stated in the said directions. It cannot be gainsaid that the Banking Regulation Act basically seeks to regulate banking business and mandates a statutory, comprehensive and formal structure of banking regulation and supervision in India.

21.4. In Pro Knits [(2024) 10 SCC 292], the Apex Court found that Sections 21 and 35A of the Banking Regulation Act empower the Reserve Bank of India to frame the policy and give 2025:KER:45278 WA Nos.481 and 484 OF 2025 72 directions to the banking companies in relation to the advances to be followed by the banking companies. Such directions are to be read as a supplement to the provisions of the Banking Regulation Act and accordingly are required to be construed as having statutory force and are mandatory. As transpiring from the said instructions/directions, the entire exercise as contained in the Framework for Revival and Rehabilitation of MSMEs is required to be carried out by the banking companies before the accounts of MSMEs turn into a Non-Performing Asset. It is true that the security interest created in favour of any bank or secured creditor may be enforced by such creditor in accordance with the provisions contained in Chapter III of the SARFAESI Act, and that as per Section 35 of the SARFAESI Act, the provisions of the said Act have the effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. However, pertinently the whole process of enforcement of security interest as contained in Chapter III of the SARFAESI Act, could be initiated only when the borrower makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-

2025:KER:45278 WA Nos.481 and 484 OF 2025 73 performing asset, in view of Section 13(2) of the said Act. What is contemplated in the Framework for Revival and Rehabilitation of MSMEs contained in the instructions/Directions stated hereinabove, is required to be followed prior to the classification of the borrower's account (in the instant case MSMEs loan account), as Non-Performing Assets. The said Instructions contained in the Notification dated 29.05.2015 as part of measures taken for facilitating the promotion and development of MSMEs issued by the Central Government in exercise of powers conferred under Section 9 of the MSMED Act, followed by the directions issued by the Reserve Bank of India in exercise of the powers conferred under Sections 21 and 35A of the Banking Regulation Act, the banking companies though may be secured creditors as per the definition contained in Section 2(zd) of the SARFAESI Act, are bound to follow the same, before classifying the loan account of MSME as Non-Performing Assets. The Apex Court noticed that under the "Framework for Revival and Rehabilitation of MSMEs", the banks or creditors are required to identify the incipient stress in the account of the Micro, Small and Medium Enterprises, before their accounts turn into Non- Performing assets, by creating three sub-categories under the 2025:KER:45278 WA Nos.481 and 484 OF 2025 74 "Special Mention Account" category, however, while creating such sub-categories, the banks must have some authenticated and verifiable material with them as produced by the MSME concerned to show that loan account is of a Micro, Small and Medium Enterprise, classified and registered as such under the MSMED Act. Framework for Revival and Rehabilitation of MSMEs also enables the Micro, Small or Medium Enterprise to voluntarily initiate the proceedings under the said framework, by filing an application along with the affidavit of an authorised person. Therefore, the stage of identification of incipient stress in the loan account of MSMEs and categorisation under the Special Mention Account category, before the loan account of MSME turns into Non-Performing Asset is a very crucial stage, and therefore it would be incumbent on the part of the MSME concerned also to produce authenticated and verifiable documents/material for substantiating its claim of being MSME, before its account is classified as Non-Performing Asset. If that is not done, and once the account is classified as a Non-Performing Asset, the banks, i.e., the secured creditors, would be entitled to take recourse to Chapter III of the SARFAESI Act for the enforcement of the security interest.

2025:KER:45278 WA Nos.481 and 484 OF 2025 75 21.5. In Pro Knits [(2024) 10 SCC 292], the Apex Court noticed that sufficient safeguards have been provided under Chapter III of the SARFAESI Act for safeguarding the interest of the defaulters-borrowers for giving them opportunities to discharge their debt. However, if at the stage of classification of the loan account of the borrower as Non-Performing Asset, the borrower does not bring to the notice of the bank/creditor concerned that it is a Micro, Small or Medium Enterprise under the MSMED Act and if such an enterprise allows the entire process for enforcement of security interest under the SARFAESI Act to be over, or it having challenged such action of the bank/creditor concerned in the court of law/tribunal and having failed, such an enterprise could not be permitted to misuse the process of law for thwarting the actions taken under the SARFAESI Act by raising the plea of being an MSME at a belated stage. Suffice it to say, when it is mandatory or obligatory on the part of the Banks to follow the instructions/directions issued by the Central Government and the Reserve Bank of India with regard to the Framework for Revival and Rehabilitation of MSMEs, it would be equally incumbent on the part of the MSMEs concerned to be vigilant enough to follow the process laid down under the said framework, and bring to the 2025:KER:45278 WA Nos.481 and 484 OF 2025 76 notice of the Banks concerned, by producing authenticated and verifiable documents/material to show its eligibility to get the benefit of the said framework. In that view of the matter, the Apex Court held that the findings recorded by the High Court in the impugned judgment that the banks are not obliged to adopt the restructuring process on its own or that the framework contained in the notification dated 29.05.2015, as revised from time to time could not be said to be mandatory in nature, are highly erroneous and cannot be countenanced. The instructions/directions issued by the Central Government under Section 9 of the MSMED Act and by the Reserve Bank of India under Section 21 and Section 35A have statutory force and are binding on all the banking companies. Therefore, the Apex Court set aside the impugned judgment of the High Court [A. Navinchandra Steels (P) Ltd. v. Union of India, (2024) 246 Comp Cas 402]. Since, it has been submitted by the learned counsel for the respondent Banks that in all the cases, the proceedings under the SARFAESI Act have already been concluded and the possession of the respective premises of the petitioners has already been taken over, the Apex Court did not remanded the matters to the High Court for deciding the writ petitions afresh. However, since the High Court has not dealt with 2025:KER:45278 WA Nos.481 and 484 OF 2025 77 the other issues based on the factual aspects of the writ petitions, the Apex Court clarified that it would be open for the appellants to take recourse to any remedy as may be legally available to them for agitating the issues not decided by the High Court in the impugned judgment and the appeals were allowed to the above extent.

22. In P.K. Krishnakumar v. IndusInd Bank [2024 SCC OnLine Ker 6888], a Division Bench of this Court was dealing with a writ appeal filed by the petitioners in W.P.(C)No. 41576 of 2023 challenging the judgment of the learned Single Judge dated 24.10.2024 in that writ petition, which was one filed by them seeking nine reliefs, including various declarations primarily concerning the action of the respondent Bank in proceeding under Section 14 of the SARFAESI Act. The main contention was based on the claimed status of the appellant enterprise as a Micro, Small and Medium Enterprise (MSME). The appellants had approached the respondent Bank for financial assistance. They were granted financial assistance, by way of a loan against property, working capital for a sum of Rs.1,25,01,220/- and another loan account of Rs.24,00,000/-. As per the terms and conditions of the loan agreement, the appellants 2025:KER:45278 WA Nos.481 and 484 OF 2025 78 were liable to repay the loan amounts along with interest. The Bank proceeded against the appellants since they failed and neglected to pay the dues. The accounts became Non-Performing Assets on 06.1.2022. Pursuant thereto, the Authorised Officer of the respondent Bank issued notice to the appellants on 04.04.2022, under Section 13(2) of the SARFAESI Act calling upon them to make payment of a sum of Rs.1,54,92,422/- with interest, within a period of 60 days, failing which the respondent Bank would proceed under the SARFAESI Act. However, no amount was paid. The respondent Bank, thereafter, moved the Additional Chief Judicial Magistrate, Ernakulam, under Section 14 of the SARFAESI Act to seek possession of the secured asset. The Magistrate Court passed an order on 03.03.2023 under Section 14 of the SARFAESI Act. An Advocate Commissioner was appointed, who issued notice to the Appellants on 24.04.2023 stating that the physical possession of the secured asset would be taken on 06.05.2023 or thereafter. The appellants filed W.P.(C)No. 15055 of 2023, which was disposed of on 04.09.2023. Thereafter, the appellants filed W.P.(C)No.31724 of 2023 for consideration of their representation for One Time Settlement. The said writ petition was disposed of on 16.10.2023, directing the respondent 2025:KER:45278 WA Nos.481 and 484 OF 2025 79 Bank to consider their representation and protecting their possession for a week. No amount was paid, and a third writ petition, i.e. W.P.(C)No. 41576 of 2023, came to be filed raising various grounds based on the provisions of the MSMED Act and the notification issued thereunder. The learned Single Judge considered the contentions and following the decision of the Apex Court in Pro Knits [(2024) 10 SCC 292] that a framework under the notification issued under the MSMED Act also enables the MSME to initiate proceedings voluntarily, and it would be incumbent on the part of MSME, at the stage of identification of incipient stress, to produce an authenticated and verifiable document, observed that the appellants failed to do so and thereafter they cannot be heard to raise such contentions. The learned Single Judge found that the conduct of the appellants was nothing but an attempt to postpone and stall the recovery proceedings and dismissed the writ petition. Feeling aggrieved, the appellants filed W.A.No.1728 of 2024 under Section 5(i) of the Kerala High Court Act, 1958.

22.1. In P.K. Krishnakumar [2024 SCC OnLine Ker 6888], before the Division Bench, it was contended that, though it is correct that the appellants have not raised the ground of the 2025:KER:45278 WA Nos.481 and 484 OF 2025 80 enterprise being an MSME at an early stage and in the earlier round of writ petitions, the appellants cannot be estopped from raising legal contentions which go to the root of the case. There can be no estoppel against a statute. Also, the doctrine of res judicata can only be applied to disputed questions of fact and evidence and not to legal position, as it is a basic position that there can be no estoppel against law. The Ministry of Micro, Small and Medium Enterprises, in pursuance of the power under Section 9 of the MSMED Act, has issued a notification dated 29.05.2015 laying down the framework for the revival and rehabilitation of MSME. Under clause (1)(2), the MSME may voluntarily initiate proceedings if it apprehends the failure of its business or its inability. There is no mandate for the MSME, and it is a voluntary action. On the other hand, the framework mandates banks and creditors to adhere to clause (1) with respect to the identification of incipient stress. Therefore, merely because the MSME did not raise the ground with respect to the notification at the time of identification cannot result in estoppel. In fact, it is a failure of duty of the banks and creditors to adhere to the notification and considering the beneficial objective of the notifications, the MSME should be permitted to raise the ground at any time of the 2025:KER:45278 WA Nos.481 and 484 OF 2025 81 proceedings. A Committee constituted under the notification performs judicial functions, as seen from the nature of its power. Therefore, an elaborate methodology has been laid down. The Reserve Bank of India has also issued certain guidelines for the revival of MSMEs. Therefore, these guidelines should have been adhered to. Though the appellants are educated, they were not aware of these intrinsic positions of law and, therefore, merely because the appellants failed to point out the status of MSME, it cannot be held against them. Even assuming that the appellants have not repaid the amount and equitable considerations may be against them, the statutory protection available to the appellants cannot be taken away. Therefore, the impugned judgment and the action taken by the respondent Bank under the SARFAESI Act ought to be set aside. Per contra, the learned counsel for the respondent Bank submitted that nothing stopped the appellant enterprise from advancing an argument based on its alleged status as an MSME at the inception and in the two writ petitions filed by them. In fact, the appellants had sought repayment by way of installments, and now this is the third attempt on some grounds to stall the recovery proceedings. The learned counsel submitted that the law laid down by the Apex Court in Pro Knits [(2024) 2025:KER:45278 WA Nos.481 and 484 OF 2025 82 10 SCC 292] is clear and the learned Single Judge was not in error in following the same.

22.2. In P.K. Krishnakumar [2024 SCC OnLine Ker 6888], after considering the rival contentions, the Division Bench noticed that the Apex Court in Pro Knits [(2024) 10 SCC 292] had examined the scheme of MSMED Act in conjunction with the SARFAESI Act and had accepted the contention of the MSMEs that they could have a special status as regards recovery of loans. However, after concluding so, the Apex Court observed thus;

"16. We may hasten to add that under the "Framework for Revival and Rehabilitation of MSMEs", the banks or creditors are required to identify the incipient stress in the account of the Micro, Small and Medium Enterprises, before their accounts turn into non-performing assets, by creating three sub-categories under the "Special Mention Account"

Category, however, while creating such sub-categories, the Banks must have some authenticated and verifiable material with them as produced by the concerned MSME to show that loan account is of a Micro, Small and Medium Enterprise, classified and registered as such under the MSMED Act. The said Framework also enables the Micro, Small or Medium Enterprise to voluntarily initiate the proceedings under the said Framework, by filing an application along with the affidavit of an authorised person. Therefore, the stage of identification of incipient stress in the loan account of MSMEs and categorisation under the Special Mention 2025:KER:45278 WA Nos.481 and 484 OF 2025 83 Account category, before the loan account of MSME turns into NPA is a very crucial stage, and therefore it would be incumbent on the part of the concerned MSME also to produce authenticated and verifiable documents/material for substantiating its claim of being MSME, before its account is classified as NPA. If that is not done, and once the account is classified as NPA, the banks, i.e., secured creditors would be entitled to take the recourse to Chapter III of the SARFAESI Act for the enforcement of the security interest.

17. It is also pertinent to note that sufficient safeguards have been provided under the said Chapter for safeguarding the interest of the Defaulters-Borrowers for giving them opportunities to discharge their debt. However, if at the stage of classification of the loan account of the borrower as NPA, the borrower does not bring to the notice of the concerned bank/creditor that it is a Micro, Small or Medium Enterprise under the MSMED Act and if such an Enterprise allows the entire process for enforcement of security interest under the SARFAESI Act to be over, or it having challenged such action of the concerned bank/creditor in the court of law/tribunal and having failed, such an Enterprise could not be permitted to misuse the process of law for thwarting the actions taken under the SARFAESI Act by raising the plea of being an MSME at a belated stage. Suffice it to say, when it is mandatory or obligatory on the part of the Banks to follow the Instructions/Directions issued by the Central Government and the Reserve Bank of India with regard to the Framework for Revival and Rehabilitation of MSMEs, it would be equally incumbent on the part of the 2025:KER:45278 WA Nos.481 and 484 OF 2025 84 concerned MSMEs to be vigilant enough to follow the process laid down under the said Framework, and bring to the notice of the concerned Banks, by producing authenticated and verifiable documents/material to show its eligibility to get the benefit of the said Framework."

(emphasis originally supplied) The Apex Court, therefore, has laid down the position of law that if, at the stage of classification of the loan account, the borrower does not bring to the notice of the Bank that it is an MSME and allow the entire process to go through, then it will be precluded from raising it at the belated stage. This dicta is very clear and is binding.

22.3. In P.K. Krishnakumar [2024 SCC OnLine Ker 6888], the Division Bench noticed that the appellants are mixing up several issues which have different connotations, such as res judicata, estoppel, waiver and acquiescence. The waiver and acquiescence will stand on a completely different footing than an estoppel. If a party knowingly permits a certain state of affairs to go through, the concept of waiver and acquiescence also comes into play. On the facts of the case on hand, the Division Bench noticed that the appellants permitted the state of affairs to prevail, including that of seeking repayment by installments, and 2025:KER:45278 WA Nos.481 and 484 OF 2025 85 therefore, clearly benefited from the delay, which has enured to their benefit, whereby they have been able to retain the amount instead of repaying the same. The observations of the Apex Court in paragraph 17 of the decision in Pro Knits [(2024) 10 SCC 292] lay down the principle that the borrowers have to be diligent, and if they knowingly permit the state of affairs to continue, they will be precluded from raising the challenge. The case is not only of estoppel, as argued, but of acquiescence and waiver as well. The appellants have sidestepped this aspect of the matter and have focused entirely on the principle of estoppel. Even otherwise, the clear dicta of the Apex Court in Pro Knits [(2024) 10 SCC 292] leaves no room to accept the contention raised by the appellants.

22.4. In P.K. Krishnakumar [2024 SCC OnLine Ker 6888], the Division Bench noticed further that, in the earlier two writ petitions, there is not even a whisper of the appellant enterprise being an MSME. The argument that the appellants were not aware of the status of the enterprise as an MSME is too far- fetched to believe when they had filed two writ petitions through legal counsel. A lame explanation is given that the appellants were unaware of their rights, which the Division Bench found entirely 2025:KER:45278 WA Nos.481 and 484 OF 2025 86 unacceptable. It is nowhere stated that the appellants are illiterate. Therefore, the Division Bench concluded that the attempt of the appellants is only to raise repeated challenges in the Court to stall the repayment. Before the Division Bench, the learned counsel for the respondent Bank pointed out that the appellants paid not a single paisa, and the entire loan amount has been defalcated.

22.5. In P.K. Krishnakumar [2024 SCC OnLine Ker 6888], the Division Bench found that the appellants' argument that the High Court must intervene, no matter how they conducted themselves, proceeds on a complete misunderstanding of the nature of writ jurisdiction. There are two separate issues. One, whether the respondent Bank lacked the authority to proceed. Second, whether the appellants' conduct disqualifies or disentitles them from invoking equity jurisdiction. In cases where a borrower who qualifies as MSME does not initially raise its status to challenge the Bank's recovery proceedings under the SARFAESI Act but instead participates fully in the process without objection, cannot later use their MSME status to argue that the proceedings were without jurisdiction. The power of the High Court under Article 226 of the Constitution of India is discretionary based on 2025:KER:45278 WA Nos.481 and 484 OF 2025 87 the principles of fairness and justice, which include examining the conduct of the parties involved. When the appellants, by their actions, accepted the Bank's authority without objection, the High Court will refuse to exercise its writ jurisdiction to assist such appellants, even if there are questions about the jurisdiction of the Bank. This is because the appellants' own conduct disqualifies them from claiming such relief. When the High Court declines to interfere in such circumstances, it does not mean that the appellants' waiver vested the Bank with jurisdiction, assuming it is inherently lacking; it means that the borrower is not entitled to invoke writ jurisdiction irrespective of whether the Bank's actions are without jurisdiction or not. These two concepts are distinct, and the distinction is emphasised by the Apex Court in Pro Knits [(2024) 10 SCC 292]. The Division Bench, therefore, found no error in the view taken by the learned Single Judge in the impugned judgment, which follows the law laid down by the Apex Court in Pro Knits [(2024) 10 SCC 292]. Accordingly, the writ appeal was dismissed.

23. The learned counsel for the appellants pointed out that the judgment of the Division Bench of this Court in P.K. Krishnakumar [2024 SCC OnLine Ker 6888] is already under 2025:KER:45278 WA Nos.481 and 484 OF 2025 88 challenge before the Apex Court in SLP(C)No.29302 of 2024, which is pending consideration. Therefore, the learned Single Judge went wrong in dismissing the writ petitions filed by the respective borrowers, relying on the decision of the Division Bench in P.K. Krishnakumar [2024 SCC OnLine Ker 6888]. The common judgment of the learned Single Judge dated 28.02.2025 in W.P.(C)Nos.39257 of 2024 and 7991 of 2025 is also under challenge in SLP(C)Nos.10896 of 2025 and 12783 of 2025, which are pending before the Apex Court.

24. On the aforesaid submission made by the learned counsel for the appellants, we notice the judgment of a Division Bench of this Court in Abdu Rahiman v. District Collector, Malappuram [2009 (4) KHC 283], wherein it was held that even when a decision of the Division Bench is stayed by the Apex Court, the learned Single Judge is bound to follow the decision of the Division Bench, as it continues to be a binding precedent for the learned Single Judge. The interim order of stay by the Apex Court only relieves the parties concerned from obeying the judgment under appeal. In the said decision the Division Bench has relied on the judgment of the Division Bench in Kannappan v. Regional Transport Officer [1988 (1) KLT 902] and the 2025:KER:45278 WA Nos.481 and 484 OF 2025 89 judgment of the Apex Court in Official Liquidator v. Dayanand [(2008) 10 SCC1]. Therefore, the learned Single Judge cannot found fault with in dismissing the writ petitions relying on the decision of the Division Bench of this Court in P.K. Krishnakumar [2024 SCC OnLine Ker 6888], which was one rendered relying on the decision of the Apex Court in Pro Knits [(2024) 10 SCC 292].

25. In Pro Knits [(2024) 10 SCC 292] the Apex Court found that the framework for Revival and Rehabilitation of MSMEs also enables the Micro, Small or Medium Enterprise to voluntarily initiate the proceedings under the said framework, by filing an application along with the affidavit of an authorised person. Therefore, the stage of identification of incipient stress in the loan account of MSMEs and categorisation under the Special Mention Account category, before the loan account of MSME turns into Non- Performing Asset is a very crucial stage, and therefore it would be incumbent on the part of the MSME concerned also to produce authenticated and verifiable documents/material for substantiating its claim of being MSME, before its account is classified as Non-Performing Asset. If that is not done, and once the account is classified as a Non-Performing Asset, the banks, 2025:KER:45278 WA Nos.481 and 484 OF 2025 90 i.e., the secured creditors, would be entitled to take recourse to Chapter III of the SARFAESI Act for the enforcement of the security interest. If at the stage of classification of the loan account of the borrower as Non-Performing Asset, the borrower does not bring to the notice of the bank/creditor concerned that it is a Micro, Small or Medium Enterprise under the MSMED Act and if such an enterprise allows the entire process for enforcement of security interest under the SARFAESI Act to be over, or it having challenged such action of the bank/creditor concerned in the court of law/tribunal and having failed, such an enterprise could not be permitted to misuse the process of law for thwarting the actions taken under the SARFAESI Act by raising the plea of being an MSME at a belated stage.

26. In P.K. Krishnakumar [2024 SCC OnLine Ker 6888], the specific contention raised before the Division Bench was that, though it is correct that the appellants have not raised the ground of the enterprise being an MSME at an early stage and in the earlier round of writ petitions, the appellants cannot be estopped from raising legal contentions which go to the root of the case. In paragraph 14 of the judgment, the Division Bench extracted paragraphs 16 and 17 of the decision of the Apex Court 2025:KER:45278 WA Nos.481 and 484 OF 2025 91 in Pro Knits [(2024) 10 SCC 292] and stated in categorical terms that the dicta laid down by the Apex Court is that if, at the stage of classification of the loan account, the borrower does not bring to the notice of the Bank that it is an MSME and allow the entire process to go through, then it will be precluded from raising it at the belated stage. In the said decision, the Division Bench found that the argument of the appellants that the High Court must intervene, no matter how they conducted themselves, proceeds on a complete misunderstanding of the nature of the writ jurisdiction.

27. In the instant case, as stated in the notices dated 16.08.2023 issued by the authorised officer of the 3rd respondent Bank, which are marked as Ext.P7 in W.P.(C)No.45166 of 2024 and Ext.P4 in W.P.(C)No.46514 of 2024, the borrowers and guarantors of the respective loan accounts were informed that the Bank has classified the said accounts as NPA, with effect from 31.07.2023. In the objection dated 11.10.2023 of the respective borrowers to the notice issued under Section 13(2) of the SARFAESI Act, which are marked as Ext.P8 in W.P.(C)No.45166 of 2024 and Ext.P5 in W.P.(C)No.46514 of 2024, it was pointed out that the classification of the loan accounts as NPA, with effect from 2025:KER:45278 WA Nos.481 and 484 OF 2025 92 31.07.2023 violates Ext.P5 notification dated 29.05.2015 issued by the 5th respondent Ministry under Section 9 of MSMED Act and Ext.P6 notification dated 17.03.2016 issued by the 1st respondent Reserve Bank of India. In paragraph 8 at page 19 of the impugned judgment dated 11.03.2025, the learned Single Judge noticed that it was not disputed that the claims presently raised have not been raised in any previous litigations and they have been raised for the first time only after the accounts have been classified as NPA.

28. In view of the law laid down by the Apex Court in Pro Knits [(2024) 10 SCC 292] and that laid down by the Division Bench of this Court in P.K. Krishnakumar [2024 SCC OnLine Ker 6888] if, at the stage of classification of the loan accounts as NPA, the writ petitioners-borrowers do not bring to the notice of the Bank that it is an MSME and allowed the proceedings under the SARFAESI Act to go through, then they will be precluded from raising it at the belated stage. The learned Single Judge, after taking note of the law laid down in the decisions referred to supra, arrived at a conclusion that the writ petitioners-borrowers are not entitled to raise the plea of being an MSME at a belated stage, having failed to bring to the notice of the 3rd respondent Bank that it is an MSME before classification of the loan accounts as NPA.

2025:KER:45278 WA Nos.481 and 484 OF 2025 93

29. In Kotak Mahindra Bank Ltd. [(2023) 3 SCC 210], the Apex Court noticed that the order passed by the Naib Tahsildar refusing to take possession of the secured assets/properties despite the order passed under Section 14 of the SARFAESI Act on the ground that recovery certificates issued by the 1st respondent for recovery of the orders passed by the Facilitation Council are pending, is wholly without jurisdiction. Under Section 14 of the SARFAESI Act, neither the District Magistrate nor the Metropolitan Magistrate would have any jurisdiction to adjudicate and/or decide the dispute even between the secured creditor and the debtor. If any person is aggrieved by the steps under Section 13(4)/order passed under Section 14, then the aggrieved person has to approach the Debt Recovery Tribunal by way of appeal/application under Section 17 of the SARFAESI Act.

30. In South Indian Bank Ltd. v. Naveen Mathew Philip [2023 SCC online (SC) 435], in the context of the challenge made against the notices issued under Section 13(4) of the SARFAESI Act, the Apex Court reiterated the settled position of law on the interference of the High Court invoking Article 226 of the Constitution of India in commercial matters, where an effective and efficacious alternative forum has been constituted 2025:KER:45278 WA Nos.481 and 484 OF 2025 94 through a statute. In the said decision, the Apex Court took judicial notice of the fact that certain High Courts continue to interfere in such matters, leading to a regular supply of cases before the Apex Court. The Apex Court reiterated that a writ of certiorari is to be issued over a decision when the court finds that the process does not conform to the law or the statute. In other words, courts are not expected to substitute themselves with the decision-making authority while finding fault with the process along with the reasons assigned. Such a writ is not expected to be issued to remedy all violations. When a Tribunal is constituted, it is expected to go into the issues of fact and law, including a statutory violation. A question as to whether such a violation would be over a mandatory prescription as against a discretionary one is primarily within the domain of the Tribunal. The issues governing waiver, acquiescence and estoppel are also primarily within the domain of the Tribunal. The object and reasons behind the SARFAESI Act are very clear as observed in Mardia Chemicals Ltd. v. Union of India [(2004) 4 SCC 311]. While it facilitates a faster and smoother mode of recovery sans any interference from the court, it does provide a fair mechanism in the form of the Tribunal being manned by a 2025:KER:45278 WA Nos.481 and 484 OF 2025 95 legally trained mind. The Tribunal is clothed with a wide range of powers to set aside an illegal order, and thereafter, grant consequential reliefs, including repossession and payment of compensation and costs. Section 17(1) of the SARFAESI Act gives an expansive meaning to the expression 'any person', who could approach the Tribunal.

31. In Naveen Mathew Philip [2023 SCC OnLine (SC) 435] the Apex Court noticed that, in matters under the SARFAESI Act, approaching the High Court for the consideration of an offer by the borrower is also frowned upon by the Apex Court. A writ of mandamus is a prerogative writ. The court cannot exercise the said power in the absence of any legal right. More circumspection is required in a financial transaction, particularly when one of the parties would not come within the purview of Article 12 of the Constitution of India. When a statute prescribes a particular mode, an attempt to circumvent that mode shall not be encouraged by a writ court. A litigant cannot avoid the non- compliance of approaching the Tribunal, which requires the prescription of fees, and use the constitutional remedy as an alternative. In paragraph 17 of the decision, the Apex Court reiterated the position of law regarding the interference of the 2025:KER:45278 WA Nos.481 and 484 OF 2025 96 High Courts in matters pertaining to the SARFAESI Act by quoting its earlier decisions in Federal Bank Ltd. v. Sagar Thomas [(2003) 10 SCC 733], United Bank of India v. Satyawati Tondon [(2010) 8 SCC 110], State Bank of Travancore v. Mathew K.C. [(2018) 3 SCC 85], Phoenix ARC (P) Ltd. v. Vishwa Bharati Vidya Mandir [(2022) 5 SCC 345] and Varimadugu Obi Reddy v. B. Sreenivasulu [(2023) 2 SCC 168] wherein the said practice has been deprecated while requesting the High Courts not to entertain such cases. In paragraph 18 of the said decision, the Apex Court observed that the powers conferred under Article 226 of the Constitution of India are rather wide, but are required to be exercised only in extraordinary circumstances in matters pertaining to proceedings and adjudicatory scheme qua a statute, more so in commercial matters involving a lender and a borrower, when the legislature has provided for a specific mechanism for appropriate redressal.

32. Though various reliefs, including declaratory reliefs, (which we have noted hereinbefore at paragraphs 2, 4 and 6), have been sought for in the respective writ petitions, the arguments advanced by the learned counsel for the writ petitioners before the learned Single Judge were confined to that 2025:KER:45278 WA Nos.481 and 484 OF 2025 97 referred to in paragraphs 3 and 4 of the impugned judgment dated 11.03.2025, (which we have referred to hereinbefore at paragraph

16).

33. The petitioners in W.P.(C)No.46514 of 2024 challenged the classification of the accounts as NPA, by filing W.P.(C)No.38732 of 2023. This Court, by Ext.P14 judgment dated 27.11.2023 closed the said writ petition, by relegating them to invoke the remedy provided before the statutory forum. Thereafter, the 1st petitioner in W.P.(C)No.46514 of 2024 - M/s.M.D. Esthappan Infrastructure Pvt. Ltd. - filed W.P.(C)No. 22424 of 2024, when recovery steps were taken against the secured assets. In that writ petition, this Court found that no relief can be granted to the writ petitioner and the same was disposed of by relegating the writ petitioner to avail the statutory remedy provided before the Debt Recovery Tribunal. The writ petitioners in W.P.(C)No.46514 of 2024 challenged the proceedings initiated by the 3rd respondent Bank under the provisions of the SARFAESI Act, by filing a Securitisation Application before the Debt Recovery Tribunal-1, Ernakulam, as S.A.No.776 of 2023. The said Securitisation Application was dismissed as withdrawn on 12.02.2025, with liberty to file fresh Securitisation Application on 2025:KER:45278 WA Nos.481 and 484 OF 2025 98 the same cause of action, based on a memo filed by the learned counsel for the applicants that the applicants have approached the civil court and the High Court invoking their statutory remedy.

34. After considering the rival contentions raised at the Bar, the learned Single Judge found that the writ petitions are liable to be dismissed. For the reasons stated hereinbefore, we find that the learned Single Judge cannot be found fault with in not entertaining the writ petitions, for the reasons stated in the impugned judgment.

In the result, these writ appeals fail and are accordingly dismissed.

Sd/-

ANIL K. NARENDRAN, JUDGE Sd/-

MURALEE KRISHNA S., JUDGE AV After the judgment was pronounced in open Court, the learned counsel for the appellants-writ petitioners, who appeared online, sought for stay of the operation of the judgment for two weeks, to enable the appellants to approach the Apex Court.

2025:KER:45278 WA Nos.481 and 484 OF 2025 99 For the reasons stated in the judgment, we find that the appellants are not entitled to such an order of stay. Therefore, the oral request made by the learned counsel for the appellants is declined.

Sd/-

ANIL K. NARENDRAN, JUDGE Sd/-

MURALEE KRISHNA S., JUDGE AV 2025:KER:45278 WA Nos.481 and 484 OF 2025 100 APPENDIX OF WA 484/2025 PETITIONER ANNEXURES Copy Of Judgment CERTIFIED COPY OF THE JUDGMENT IN WPC 46514/2024 DATED 11/03/2025

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