Bombay High Court
Shri Shri Swami Samarth Construction ... vs The Board Of Directors Of Nkgsb Co ... on 6 August, 2025
Author: N.R. Borkar
Bench: M. S. Karnik, N. R. Borkar
2025:BHC-OS:12826-DB
912-IA(L)-24163-2025.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION (L) No. 21202 OF 2025
Shri Shri Swami Samarth
Construction & Finance Solution
& Anr. ...Petitioners
VERSUS
The Board of Directors
of NKGSB Co-operative Bank & Ors. ...Respondents
WITH
INTERIM APPLICATION (L) NO. 24163 OF 2025
....
Mr. Mathew J. Nedumpara a/w. Adv. Hemali Kurne, Mr.Satsang
J. Tailor, Ms Sweta Dadeech and Mr. Akhilesh Naik i/b.
Nedumpara & Nedumpara for the Petitioner/Applicant.
Mr. Suraj Gupte, AGP for the Respondent - State.
....
CORAM : M. S. KARNIK &
N. R. BORKAR, JJ.
DATE : 6th AUGUST, 2025
ORAL ORDER : (PER N.R. BORKAR J.)
1. Heard Mr. Mathew Nedumpara, the learned
counsel for the petitioners.
2. Learned counsel for the petitioners placed on
record a copy of the judgment dated 28 th July 2025 passed
by the Hon'ble Supreme Court in the case of Shri Shri
Swami Samarth Construction & Finance Solution &
Anr. vs. The Board of Directors of NKGSB Co-Op.
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Bank Ltd. & Ors.1.
3. In response to a query regarding whether the
same facts and reliefs sought in this petition was also the
subject matter of challenge before the Hon'ble Supreme
Court, Shri Nedumpara submitted that the petitioners had
approached the Hon'ble Supreme Court on the same facts
and for the same reliefs but by filing a writ petition under
Article 32 of the Constitution of India. The judgment of
the Hon'ble Supreme Court reads thus:
"1. This is a writ petition under Article 32 of the
Constitution of India by an enterprise registered
under the Micro, Small and Medium Enterprises
Development Act, 2006.
2. The petitioning enterprise had executed a loan
agreement with the NKGSB Co-operative Bank but
had failed in its obligation to repay the loan. In due
course, the account of the petitioning enterprise
was classified as a non-performing asset. The
authorised officer of the respondent no.2 issued a
demand notice dated 13th May, 2024 under Section
13(2) of the Securitisation and Reconstruction of
Financial Assets and Enforcement of Security
Interest Act, 2002, calling upon the petitioning
enterprise to repay the dues of the respondent no.2
within 60 days. It does not appear from the writ
petition, filed on 14th July, 2025, that the petitioning
enterprise objected to classification of its account
as NPA as well as issuance of the demand notice on
the ground that the action of the respondent no.2
was in violation of Notification dated 29 th May, 2015,
containing the "FRAMEWORK FOR REVIVAL AND
REHABILITATION OF MICRO, SMALL AND MEDIUM
ENTERPRISES" issued by the Joint Secretary to the
1 Writ Petition (Civil) No. 684 of 2025
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Government of India, Ministry of Micro, Small and
Medium Enterprises. The respondent no.2 having
moved an application before the relevant
Magistrate under Section 14 of the SARFAESI Act, a
Court Commissioner was appointed per order dated
3rd April, 2025. Such order was communicated by
the Court Commissioner to the petitioning
enterprise on 18th June, 2025.
3. Mr. Nedumpara, learned counsel appearing for the
petitioning enterprise, submits that it was the
obligation of the respondent no.2 to identify
"incipient stress" in the loan account of the
petitioning enterprise but it did not so identify prior
to classifying the loan account as NPA which,
according to him, is wholly illegal. Mr. Nedumpara
further submits that the Notification is binding on
the lending banks/secured creditors under the
SARFAESI Act and, therefore, any measure taken
under the SARFAESI Act without complying with the
terms of the FRAMEWORK against a micro, small or
medium enterprise would amount to an act in
excess of jurisdiction. The decision in Pro Knits v.
Canara Bank, forming part of the writ petition and
though not formally cited, was referred to by Mr.
Nedumpara in course of his arguments in support of
this submission. Also, Mr. Nedumpara submits that
such Notification/FRAMEWORK does not mandatorily
require an MSME to notify the lending bank/secured
creditor first that the MSME wishes to have incipient
stress in its account identified; therefore, any
defence that the MSME did not voluntarily initiate
proceedings ought not to be allowed to be raised.
He, thus, prayed for admission of the writ petition
and grant of ad-interim relief against the
respondents.
4. The respondents are not required to be noticed
since we are not persuaded to agree with any of the
submissions advanced by Mr. Nedumpara.
5. The Notification detailing the FRAMEWORK, more
particularly paragraph 1 and its sub-paragraphs,
have to be read together to make its terms effective
and meaningful. Although, in the sequence of the
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FRAMEWORK "Identification by Banks or Creditors"
comes first, it is immediately followed by
"Identification by the Enterprise". In terms of sub-
paragraph 2, any MSME may choose to voluntarily
initiate proceedings under the FRAMEWORK if it
"reasonably apprehends failure of its business or its
inability or likely inability to pay debts and before
the accumulated losses of the enterprise equals to
half or more of its entire net worth" (emphasis
ours). The obligation of the MSME does not end
there. For initiation of proceedings under the
FRAMEWORK, the application has to be verified by
an affidavit of an authorised person and upon
receipt of a request, the lending bank/secured
creditor is mandatorily bound to proceed in terms of
the FRAMEWORK and to constitute a committee to
identify incipient stress in the account.
6. The way Mr. Nedumpara urges us to read the
Notification and the terms of the FRAMEWORK, if
accepted, would lead to the conclusion that every
lending bank/secured creditor under the SARFAESI
Act would be obliged to find out in every event of
continuing default, likely to give rise to classification
of the relevant account as NPA, whether the
borrower is an MSME to which the FRAMEWORK
applies, whether its business has failed or whether
it is suffering from any disability to pay its debts;
and upon receiving a response, to apply the terms
thereof by, inter alia, including the account in the
Special Mention Account for the claim for a
corrective action plan to be considered by the
Committee for stressed MSMEs. This could not have
been the intention behind introduction of the
FRAMEWORK to aid the MSMEs which, for reasons
personal to them, is unable to clear its debt and
require revival and rehabilitation that the
FRAMEWORK envisages. If indeed it is only the
obligation of the lending bank/secured creditor to
identify incipient stress in the account, sub-
paragraphs 2 and 3 of paragraph 1 would be
rendered redundant. An MSME, despite finding that
its business is failing or that it is unable to pay its
debts or accumulation of losses equals to half or
more of its entire net worth and classification of its
account as NPA is imminent, it would rest on its oars
believing that it has no responsibility and that its
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account will not be classified as NPA because it is
the entire obligation of the lending bank/secured
creditor to do what the FRAMEWORK requires. We
would read and interpret the seemingly confusing
terms of the FRAMEWORK harmoniously to ensure
that a right under the MSME Act is not destroyed by
the SARFAESI Act or vice versa. In our reading, the
terms of the FRAMEWORK do not prohibit the
lending bank/secured creditor (assuming that it has
no conscious knowledge that the defaulting
borrower is an MSME) to classify the account of the
defaulting MSME as NPA and to even issue the
demand notice under Section 13(2) of the SARFAESI
Act without such identification of incipient stress in
the account of the defaulting borrower (MSME);
however, upon receipt of the demand notice, if such
borrower in its response under Section 13(3-A) of
the SARFAESI Act asserts that it an MSME and
claims the benefit of the FRAMEWORK citing
reasons supported by an affidavit, the lending
bank/secured creditor would then be mandatorily
bound to look into such claim keeping further action
under the SARFAESI Act in abeyance; and, should
the claim be found to be worthy of acceptance
within the framework of the FRAMEWORK, to act in
terms thereof for securing revival and rehabilitation
of the defaulting borrower.
7. As has been noted above, the petitioning enterprise
does not seem to have ever claimed the benefit of
the terms of the FRAMEWORK after the demand
notice under Section 13(2) of the SARFAESI Act was
issued. It is at the stage of compliance with an order
passed by the relevant Magistrate under Section 14
of the SARFAESI Act that this writ petition has been
presented before this Court claiming benefits of the
FRAMEWORK to restrain the respondent no.2 and its
officers from proceeding further under the SARFAESI
Act and other enactments except in the manner
contemplated under the said Notification. We find
the bona fides of the petitioning enterprise to be
suspect.
8. Pro-Knits (supra) is a decision of a coordinate
Bench of this Court holding, inter alia, that the
Notification is binding on the lending banks/secured
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creditors. Finding to the contrary by the High Court
of Bombay in the judgment and order under
challenge in the appeal was, thus, quashed. Though
while stressing that the terms of the FRAMEWORK
need to be followed by the lending banks/secured
creditors before the account of an MSME is
classified as NPA, this decision also lays stress on
the obligation of the MSMEs by holding that "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 notice of the Banks concerned, by
producing authenticated and verifiable
documents/material to show its eligibility to get the
benefit of the said Framework". It was cautioned
that "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". This decision, however,
left unsaid something which we have explained
hereinabove while construing the terms consistently
to prevent undermining of rights that one central
enactment confers by another.
9. No case for interference under Article 32 of the
Constitution has been set up. There being no merit
in the writ petition, the same is accordingly ordered
to be dismissed. Pending applications, if any, stand
closed.
10. Needless to observe, the petitioning enterprise will
be at liberty to pursue its remedy under Section 17
of the SARFAESI Act, in accordance with law."
4. Having gone through the judgment, we indicated
that it is not possible for us to examine any of the
contentions raised in this petition in view of the
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authoritative pronouncement of the Hon'ble Supreme
Court.
5. Shri. Nedumpara, vehemently urged that the
judgment passed by the Hon'ble Supreme Court under
Article 32 of the Constitution of India does not constitute
res-judicata, preventing this Court from considering the
present petition on its own merits. It is further submitted
that the statutory provisions on which reliance was placed
are not dealt with and hence this Court under Article 226
of the Constitution can exercise the issues involved in this
petition independently on merits.
6. Shri. Nedumpara then invited our attention to the
provisions of the Micro, Small and Medium Enterprises
Development (MSMED) Act, 2006 to submit that the Act is
intended to promote and protect the interest of small and
medium Enterprises.
7. It is not open for us to examine any of the
contentions raised in this writ petition and as argued by
Shri. Nedumpara, in view of the authoritative
pronouncement of the Hon'ble Supreme Court in the
aforesaid judgment. The decision of the Hon'ble Supreme
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Court is binding on this Court. The petition is therefore,
dismissed.
8. Interim Application stands disposed of.
9. A request is made by Shri. Nedumpara to protect
the petitioners for some time. However, we note that the
the Hon'ble Supreme Court in the order dated 28 th July
2025 has granted liberty to the petitioners to pursue its
remedy under Section 17 of the Securitization and
Reconstruction of Financial Assets and Enforcement of
Security Interest Act, 2002. We are not inclined to accede
to the request of Shri. Nedumpara as the Hon'ble Supreme
Court has dealt with the contentions of Shri. Nedumpara.
It will not be proper on our part to consider such request.
The request is rejected.
(N. R. BORKAR, J.) (M. S. KARNIK, J.)
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