Kerala High Court
M/S. Ashok Rubber Factory vs Reserve Bank Of India on 28 February, 2025
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
1
2025:KER:17341
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE GOPINATH P.
FRIDAY, THE 28TH DAY OF FEBRUARY 2025 / 9TH PHALGUNA, 1946
WP(C) NO. 39257 OF 2024
PETITIONER/S:
1 M/S. ASHOK RUBBER FACTORY,
HAVING ITS REGISTERED ADDRESS AT ASHOK LAND, INDUSTRIAL
NAGAR P.O., VEROOR, CHANGANACHERRY, REPRESENTED BY ITS
PROPRIETOR, PIN - 686106
2 JOSHMON LAWRENCE,
AGED 60 YEARS
SOLE PROPRIETOR, ASHOK RUBBER FACTORY, RESIDING AT
PLAMOOTTIL HOUSE, INDUSTRIAL HOUSE P.O.,
CHANGANACHERRY, PIN - 686106
BY ADVS.
MARIA NEDUMPARA
SHAMEEM FAYIZ V.P.
RESPONDENT/S:
1 RESERVE BANK OF INDIA,
REPRESENTED BY ITS GOVERNOR, SHAHID BHAGAT SINGH ROAD,
FORT, MUMBAI, PIN - 400001
2 BOARD OF DIRECTORS OF CANARA BANK LTD.,
REPRESENTED BY ITS CEO & MANAGING DIRECTOR ,112, J.C.
ROAD, BENGALURU, PIN - 560002
3 CANARA BANK LIMITED,
REPRESENTED BY ITS CEO & MANAGING DIRECTOR,112, J.C.
ROAD, BENGALURU, PIN - 560002
4 AUTHORISED OFFICER,
CANARA BANK LTD., MOOLAYIL BUILDING, MARKET ROAD,
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
2
2025:KER:17341
CHANGANACHERRY, PIN - 686001
5 EMPOWERED COMMITTEE ON MSMES,
REPRESENTED BY THE REGIONAL DIRECTORS OF THE RESERVE
BANK OF INDIA, RBI REGIONAL OFFICE, TRIVANDRUM, PIN -
695001
6 DISTRICT INDUSTRIES CENTRE (DIC),
KOTTAYAM, NAGAMPADAM, KOTTAYAM, KERALA, PIN - 686002
7 MINISTRY OF MICRO SMALL AND MEDIUM ENTERPRISES,
REPRESENTED BY ITS SECRETARY, UDYOG BHAWAN, RAFI MARG,
NEW DELHI, PIN - 110001
8 UNION OF INDIA,
REPRESENTED BY ITS SECRETARY, DEPARTMENT OF FINANCIAL
SERVICES, MINISTRY OF FINANCE, 3RD FLOOR, JEEVAN DEEP
BUILDING, SANSAD MARG, NEW DELHI, PIN - 110001
9 STATE OF KERALA,
REPRESENTED BY ITS CHIEF SECRETARY, GOVERNMENT
SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695001
10 THE CHAIRMAN,
STATE LEVEL INTER INSTITUTIONAL COMMITTEE, RBI REGIONAL
OFFICE, BAKERY JUNCTION, THIRUVANANTHAPURAM DISTRICT,
PIN - 695033
BY ADVS.
C.AJITH KUMAR
VARSHA S.S.
SRI. T.C.KRISHNA, DSGI IN CHARGE, SRI. SREEJITH V.S.,
GP
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
28.02.2025, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
3
2025:KER:17341
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE GOPINATH P.
FRIDAY, THE 28TH DAY OF FEBRUARY 2025 / 9TH PHALGUNA, 1946
WP(C) NO. 7991 OF 2025
PETITIONER/S:
T.V. BAIJU,
AGED 49 YEARS
S/O. VELAPPAN, PROPRIETOR, S.N. INDUSTRIES, PULLUVAZHY
P.O., PERUMBAVOOR, ERNAKULAM RESIDING AT: THOTTAPPATTU
HOUSE, RAYAMANGALAM, ERNAKULAM, PIN - 683545
BY ADVS.
MARIA NEDUMPARA
SHAMEEM FAYIZ V.P.
RESPONDENT/S:
1 BOARD OF DIRECTORS OF CANARA BANK LTD.,
REPRESENTED BY ITS CEO & MANAGING DIRECTOR, 112, J.C.
ROAD, BENGALURU, PIN - 560002
2 CANARA BANK LIMITED,
REPRESENTED BY ITS CEO & MANAGING DIRECTOR,112, J.C.
ROAD, BENGALURU, PIN - 560002
3 AUTHORISED OFFICER, CANARA BANK LTD.,
REGIONAL OFFICE-II, METRO BUILDING, III FLOOR, M.G.
ROAD, ERNAKULAM, PIN - 682035
4 RESERVE BANK OF INDIA,
REPRESENTED BY ITS GOVERNOR, CENTRAL OFFICE BUILDING,
SHAHED BHAGAT SINGH ROAD, MUMBAI, PIN - 400001
5 EMPOWERED COMMITTEE ON MSMES,
REPRESENTED BY THE REGIONAL DIRECTORS OF THE RESERVE
BANK OF INDIA, RBI REGIONAL OFFICE, NO.6507, BAKERY JCT
RD., NANDAVANAM, PALAYAM, THIRUVANANTHAPURAM, KERALA,
PIN - 695033
6 MINISTRY OF MICRO SMALL AND MEDIUM ENTERPRISES,
REPRESENTED BY SECRETARY, UDYOG BHAWAN, RAFI MARG, NEW
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
4
2025:KER:17341
DELHI, DELHI, PIN - 110001
7 UNION OF INDIA,
REPRESENTED BY SECRETARY, DEPARTMENT OF BANKING,
MINISTRY OF FINANCE, 3RD FLOOR, JEEVAN DEEP BUILDING,
SANSAD MARG, NEW DELHI, PIN - 110001
8 STATE OF KERALA,
REPRESENTED BY ITS CHIEF SECRETARY, GOVERNMENT
SECRETARIAT, THIRUVANANTHAPURAM, PIN - 695001
9 DISTRICT INDUSTRIES CENTRE (DIC), ERNAKULAM,
REPRESENTED BY ITS GENERAL MANAGER, KUNNUMPURAM - CIVIL
STATION RD, ECHAMUKU, KUNNUMPURAM, THRIKKAKARA,
KAKKANAD, KOCHI, KERALA, PIN - 682030
SRI. M.GOPIKRISHNAN NAMBIAR, SC, SRI. T.C.KRISHNA, SCGC
THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON
28.02.2025, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
5
2025:KER:17341
JUDGMENT
The question of law raised in all these Writ Petitions
appears to be squarely covered against the petitioners by the
judgment of the Division Bench of this Court in P.K.Krishnakumar
v. IndusInd Bank; 2024 SCC Online Ker 6888 where the
Division Bench has categorically taken the view that if the loan
account of the borrower which is classified as MSME is permitted to
attain Non-performing Asset (NPA) status, the borrowers cannot
thereafter be permitted to turn around and claim the benefits of
the notification issued by the Ministry of Micro, Small and Medium
Enterprises under the Micro, Small and Medium Enterprises
Development Act, 2006 (MSMED Act 2006) and the corresponding
circular issued by the Reserve Bank of India.
2. Paragraphs 14 to 19 of the judgment of the Division Bench
in P.K.Krishnakumar v. IndusInd Bank (supra) reads thus:
"14. The Hon'ble Supreme Court in the case of M/s. Pro Knits 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 Hon'ble Supreme Court
observed thus:
"16. We may hasten to add that under the
"Framework for Revival and Rehabilitation of MSMEs", the
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
2025:KER:17341
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
nonperforming 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 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
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
2025:KER:17341
the Framework for Revival and Rehabilitation of MSMEs, it
would be equally incumbent on the part of the 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 supplied)
(sic)
The Hon'ble Supreme 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.
15. Furthermore, 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. 16. In this case, the Appellants permitted
the state of affairs to prevail, including that of seeking
repayment by installments, and therefore, clearly benefited from
the delay, which has enured to their benefit, whereby the
Appellants have been able to retain the amount instead of
repaying the same.
17. The observations of the Hon'ble Supreme Court in paragraph
(17) in the case of M/s. Pro Knits lays 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
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 Hon'ble Supreme Court in the case of M/s. Pro Knits leaves
no room to accept the contention raised by the Appellants.
18. In the earlier two writ petitions, there is not even a whisper
of the Appellant Enterprise being MSME. The argument that the
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
2025:KER:17341
Appellants were not aware of the status of the Enterprise as
MSME is too far-fetched to believe when they had filed two writ
petitions through legal counsels. In this case, a lame explanation
is given that the Appellants were unaware of their rights, which
we find entirely unacceptable. It is nowhere stated that the
Appellants are illiterate. Therefore, all we see before us is an
attempt to raise repeated challenges in the Court to stall the
repayment. The learned counsel for the Respondent Bank
submitted that the Appellants paid not a single paisa, and the
entire loan amount has been defalcated.
19. 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
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 a
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 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 emphasized by
the Hon'ble Supreme Court in the case of M/s. Pro Knit."
3. There is no case for any of the petitioners that they have
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
2025:KER:17341
raised the claim for restructuring prior to the declaration of the
account as an NPA. Therefore, following the binding precedent of
P.K.Krishnakumar (Supra), which in turn follows the judgment of
the Supreme Court in the Pro Knits vs. the Board of Directors
of Canara Bank; [(2024) (10) SCC 292] , I have no option but to
dismiss these Writ Petitions.
These Writ Petitions accordingly stand dismissed.
sd/-
GOPINATH P.
JUDGE
Nsd
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
2025:KER:17341
APPENDIX OF WP(C) 39257/2024
PETITIONER EXHIBITS
Exhibit P1 A COPY OF THE UDYAM CERTIFICATE NO. UDYAM-KL-
07-0004707 DATED 16/04/2021 ISSUED TO THE
Exhibit P2 A COPY OF THE MSME NOTIFICATION NO. S.O.1432
(E) DATED 29.05.2015
Exhibit P3 A COPY OF THE RBI NOTIFICATION NO. RBI
NOTIFICATION NO. FIDD.MSME & NFS.BC.NO.
21/06.02.31 /2015-16, DATED 17.03.2016
Exhibit P4 A COPY OF THE LETTER DATED 12/07/2023 ISSUED
BY THE RESPONDENT NO. 4 MANAGER OF THE
RESPONDENT NO. 2 BANK
Exhibit P5 A COPY OF THE LETTER DATED 13.07.2023
ADDRESSED BY THE PETITIONER TO THE RESPONDENT
BANK
Exhibit P6 A COPY OF THE LETTER DATED 31.01.2024 BY THE
PETITIONER TO THE RESPONDENT NO. 2 BANK
Exhibit P7 A COPY OF THE 13(2) DEMAND NOTICE DATED
24.04.2024 ISSUED BY RESPONDENT NO.2
Exhibit P8 A COPY OF THE PETITIONERS' COMPLAINT DATED
24.04.2024 TO THE RESPONDENT NO. 1 UNDER THE
OMBUDSMAN SCHEME
Exhibit P9 A COPY OF THE LETTER DATED 24.04.2024
ADDRESSED BY THE PETITIONER TO THE PRIME
MINISTER OF INDIA
Exhibit P10 A COPY OF THE EMAILED REPLY DATED 06.05.2024
BY THE RESPONDENT NO. 1 RBI
Exhibit P11 A COPY OF THE PETITIONER'S LETTER DATED
04.06.2024 TO THE RESPONDENT BANK CONTESTING
THE 13(2) DEMAND NOTICE
Exhibit P12 A COPY OF THE RESPONDENT BANK'S LETTER DATED
15.06.2024 REJECTING THE OBJECTIONS /
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
2025:KER:17341
REPRESENTATIONS OF THE PETITIONERS
Exhibit P13 A COPY OF THE ORDER DATED 08.07.2024 PASSED
BY THE THIS HON'BLE COURT IN WP(C) 22497/2024
FILED BY THE PETITIONER
Exhibit P14 TRUE COPY OF THE JUDGMENT DATED 01/10/2024 IN
WP(C) 22497/2024
Exhibit P15 A COPY OF THE CIVIL SUIT (ST) NO.15919 OF
2024 BEFORE THE BOMBAY CITY CIVIL COURT,
Exhibit P16 A COPY OF THE NOTIFICATION NO. S.O 2119 (E)
DATED 26.6.2020 ISSUED BY THE GOVERNMENT OF
INDIA
Exhibit P17 A COPY OF THE LETTER DATED 19.10.2024, ISSUED
BY THE RESPONDENT BANK REJECTING THE
PETITIONERS' RESTRUCTURING PROPOSAL
RESPONDENT EXHIBITS
Exhibit-R4(a) True copy of the W.P (C) 22497/2024 filed by
the 2nd petitioner before this Hon'ble Court
Exhibit-R4(b) True copy of the internal communication dated
30/09/2024 of the respondents
Exhibit-R4(c) True copy of the letter dated 03/10/2024
issued by 4th respondent to the petitioners
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
2025:KER:17341
APPENDIX OF WP(C) 7991/2025
PETITIONER EXHIBITS
Exhibit P1 A TRUE COPY OF THE PETITIONER'S APPLICATION
FOR SSI-REGISTRATION DATED 09-04-2001,
SUBMITTED BEFORE THE 8TH RESPONDENT
Exhibit P2 A TRUE COPY OF THE MSME REGISTRATION
CERTIFICATE UDYAM-KL-02-0095873 DATED 21-08-
2024, ISSUED BY THE MSME MINISTRY, GOVERNMENT
OF INDIA, TO THE PETITIONER'S PROPRIETORSHIP
Exhibit P3 A TRUE COPY OF THE NOTIFICATION S.O. 1432(E)
DATED 29-05-2015 FOR REVIVAL AND
REHABILITATION OF MSME ISSUED BY THE MINISTRY
OF MICRO SMALL & MEDIUM ENTERPRISES
Exhibit P4 A TRUE COPY OF THE CIRCULAR FIDD.MSME &
NFS.BC.NO.21/06.02.31/2015-16 DATED 17-03-
2016, ISSUED BY THE RESERVE BANK OF INDIA
(RBI)
Exhibit P5 A TRUE COPY OF THE LEGAL NOTICE DATED 05-04-
2023 ISSUED BY THE RESPONDENT-BANK'S COUNSEL
Exhibit P6 A TRUE COPY OF THE REPLY NOTICE DATED
24.04.2023 TO THE LEGAL NOTICE, BY THE
PETITIONER
Exhibit P7 A TRUE COPY OF THE LETTER DATED 28-03-2022,
ISSUED BY THE RESPONDENT-BANK TO THE
PETITIONER
Exhibit P8 A TRUE COPY OF THE SALE-NOTICE DATED 05-08-
2022, ISSUED BY THE RESPONDENT-BANK
Exhibit P9 A TRUE COPY OF THE SALE-NOTICE DATED 21-06-
2023, ISSUED BY THE RESPONDENT-BANK,
Exhibit P10 A TRUE COPY OF THE LETTER DATED 09-08-2024,
ISSUED BY THE PETITIONER TO THE RESPONDENT-
BANK
Exhibit P11 A TRUE COPY OF THE SALE-NOTICE DATED 17-08-
2024, ISSUED BY THE RESPONDENT-BANK
WP(C) No.39257 of 24 & WP(C) NO. 7991 OF 2025
2025:KER:17341
Exhibit P12 A TRUE COPY OF THE JUDGEMENT DATED 24-09-2024
IN W.P.(C) NO. 33164/2024 ON THE FILE OF THIS
HON'BLE COURT
Exhibit P13 A TRUE COPY OF THE SALE-NOTICE DATED 28-01-
2025, ISSUED BY THE RESPONDENT-BANK
Exhibit P14 A COPY OF THE UN NUMBERED ORIGINAL SUIT
(WITHOUT ANNEXURES) FILED BY THE PETITIONER
BEFORE THE MUNSIFF COURT, ERNAKULAM
