M/S. Shree Vinayak Dairy vs State Bank Of India &Ors. .... Opposite ...
2025 Latest Caselaw 8056 Ori

Orissa High Court

M/S. Shree Vinayak Dairy vs State Bank Of India &Ors. .... Opposite ... on 10 September, 2025

Author: Sanjeebk Panigrahi

Bench: Sanjeeb K Panigrahi

                                                              Signature Not Verified
                                                              Digitally Signed
                                                              Signed by: BHABAGRAHI JHANKAR
                                                              Reason: Authentication
                                                              Location: ORISSA HIGH COURT, CUTTACK
                                                              Date: 16-Sep-2025 16:57:44




                  IN THE HIGH COURT OF ORISSA AT CUTTACK

                              W.P.(C) No.17792 of 2025
        (In the matter of an application under Articles 226 and 227 of the
        Constitution of India, 1950).

        M/s. Shree Vinayak Dairy,                   ....                       Petitioner(s)
        Bhubaneswar
                                        -versus-

        State Bank of India &Ors.                   ....        Opposite Party(s)
      Advocates appeared in the case through Hybrid Mode:

        For Petitioner(s)           :               Mr.Rudra Prasad Kar, Sr. Adv.
                                                            Along with associates


        For Opp. Party(s)           :                Mr. Bibekananda Nayak, AGA
                                                       Mr. D. K. Mohapatra, Adv.

                  CORAM:
                  DR. JUSTICE SANJEEB K PANIGRAHI

                       DATE OF HEARING:-18.08.2025
                      DATE OF JUDGMENT:-10.09.2025
      Dr.SanjeebK Panigrahi, J.

1. In this Writ Petition, the Petitioner seeks a direction from this Court to

quash the arbitrary NPA classification and consequent recovery

proceedings, and to mandate referral of its case to the Committee for

Stressed MSMEs under the RBI Framework, ensuring restructuring

and revival in compliance with statutory guidelines.

I. FACTUAL MATRIX OF THE CASE:

2. The brief facts of the case are as follows:

Location: ORISSA HIGH COURT, CUTTACK

(i) The Petitioner, a partnership firm engaged in dairy and food

processing, is registered as an MSME under the MSMED Act with

Udyog Aadhar Certificate No. UDYAM-OD-13-0011569. The unit is

women-led and its credit facilities were covered under the CGTMSE

guarantee scheme (initially 85%, later revised to 90%).

(ii) The petitioner availed multiple credit facilities from SBI, Madhupatna

Branch, Cuttack: a term loan of ₹66,00,000 and cash credit of ₹25,00,000

sanctioned on 14.02.2023, later enhanced with a top-up term loan of

₹1,35,00,000 on 29.08.2023. The aggregate sanctioned facilities

amounted to about ₹2.26 crore, utilised for machinery and installation

costing around ₹2.04 crore, supported by promoter contribution of ₹16

lakh.

(iii) The credit facilities were secured by hypothecation of machinery,

stock, book debts, and current assets. Interest rates applicable were

about 13.15%-13.40%.

(iv) On 11.05.2024, electricity supply to the petitioner's plant was

disrupted for nearly four months, leading to operational stoppage and

financial loss. The issue was resolved only after the petitioner

approached the High Court in W.P.(C) No.14025/2024.

(v) During this period of disruption and thereafter, the petitioner

communicated difficulties in repayment and sought extensions of

EMIs through letters dated 31.08.2024 and 02.12.2024. A representation

for restructuring under the Subordinate Debt Scheme was later

submitted on 31.03.2025.

Location: ORISSA HIGH COURT, CUTTACK

(vi) The petitioner's loan accounts became irregular and were classified as

Non-Performing Assets (NPA) on 08.01.2025. A recall notice was

issued on 10.01.2025.

(vii) On 25.03.2025, SBI filed OA No. 144/2025 before the DRT, Cuttack

under Section 19 of the RDB Act, claiming outstanding dues of

₹2,20,53,401 as on 14.02.2025, plus interest and costs, and seeking a

Recovery Certificate. Summons were issued by the DRT on 17.03.2025.

(viii) The petitioner, through a letter dated 06.06.2025, requested referral of

its case to the Committee for Stressed MSMEs. The Bank responded on

13.06.2025 stating that the account had already turned NPA on

08.01.2025 and was transferred to the Stressed Assets Recovery

Branch, Bhubaneswar on 26.03.2025.

(ix) The petitioner has filed the present writ petition seeking quashing of

the NPA classification, the recovery proceedings before the DRT, and

enforcement of the RBI/MSME Framework for Revival and

Rehabilitation of MSMEs notified on 29.05.2015 and RBI's circular

dated 17.03.2016.

II. SUBMISSIONS ON BEHALF OF THE PETITIONER:

3. Learned counsel for the Petitioner earnestly made the following

submissions in support of his contentions:

(i) The Bank acted negligently and arbitrarily in classifying petitioner's

account as NPA and filing recovery proceedings without following the

statutory Framework and RBI Master Directions, despite being aware

of sanction that the petitioner is an MSME under CGTMSE coverage.

(ii) The petitioner had repeatedly notified the Bank regarding incipient

stress before NPA classification through letters dated 31.08.2024 and

Location: ORISSA HIGH COURT, CUTTACK

02.12.2024, requesting relief and restructuring. Hence, the reliance of

the Bank on Swami Samarth Construction v. NKGSB Bank (2025) is

distinguishable, since unlike in that case, here prior notice of stress

was indeed given.

(iii) The Framework obliges banks to refer stressed MSME accounts above

₹10 lakh to the Committee within 5 working days for corrective action,

and to classify accounts under SMA categories before NPA. This was

not complied with, despite petitioner's status as MSME being on

record.

(iv) The Bank's action lacked transparency, fairness, and reasoned

decision-making, thereby amounting to arbitrary administrative action

violative of Articles 14, 19(1)(g), and 21. Courts insist on reasons for

administrative action to check arbitrariness, which are absent here.

(v) The petitioner, being women entrepreneurs working with farmers and

cooperatives, has suffered irreparable loss, and public interest is

harmed by denying due statutory protection to MSMEs. The viable

business could have been revived with restructuring, and the exposure

was already secured under CGTMSE, minimising risk to the Bank.

(vi) Writ petition is maintainable under Article 226 as the Bank, an

instrumentality of the State, failed to follow mandatory RBI/MSME

guidelines, amounting to breach of statutory duty and fundamental

rights, and not merely a contractual dispute. Alternative remedy

before DRT does not bar writ jurisdiction when constitutional rights

are at stake.

Location: ORISSA HIGH COURT, CUTTACK

(vii) The petitioner relies on judgments including Phoenix Arc v. Vishva

Bharti Vidya Mandir1, Rajiv Subramanian v. Pandiyas2, and Bajaj

Finance v. Ali Agency3 to affirm the maintainability of Writ.

(viii) Petitioner prays that its case be referred to the Committee as per RBI

Framework and that NPA classification and recovery proceedings be

quashed as arbitrary, illegal, and violative of binding statutory

directions.

III. SUBMISSIONS ON BEHALF OF THE OPPOSITE PARTIES:

4. The Learned Counsel for the Opposite Parties earnestly made the

following submissions in support of his contentions:

(i) The Framework requires the MSME itself to identify incipient stress

and voluntarily initiate proceedings by an application verified by

affidavit before classification as NPA. The petitioner failed to do so,

hence no violation by the Bank.

(ii) The MSME was obliged to bring stress to the Bank's notice before its

net worth eroded by half; petitioner never notified or applied under

the Framework before NPA declaration.

(iii) Reliance on Pro-Knits v. Canara Bank4and Shri Shri Swami Samarth

Construction v. NKGSB Co-Operative Bank5. Both rulings

emphasized that unless MSME initiates proceedings with

authenticated proof prior to NPA, Banks are free to recover dues

under SARFAESI/RDB Act. Harmonious reading of the Framework

shows duty lies equally on MSME to act proactively.

CIVIL APPEAL NOS. 257-259 OF 2022.

AIR 2012 MADRAS 12.

2024 INSC 565

2025 INSC 908

Location: ORISSA HIGH COURT, CUTTACK

(iv) Petitioner never produced verifiable MSME documents before account

became NPA; belated claims after DRT filing are untenable.

(v) Classification of NPA cannot ordinarily be challenged under Article

226. The DRT is the appropriate forum to examine violations of RBI

guidelines.

(vi) The classification as NPA was valid and lawful; Bank's action under

RDB Act is proper. Writ petition is an abuse of process aimed at

thwarting recovery and deserves dismissal.

IV. COURT'S REASONING AND ANALYSIS:

5. Heard Learned Counsel for parties and perused the documents placed

before this Court.

6. At the outset, the Court must address the maintainability of this writ

petition in view of the alternative statutory remedy available to the

petitioner. It is well settled that where a borrower is aggrieved is

aggrieved by recovery action initiated under a special statute, such as

the Recovery of Debts and Bankruptcy Act, 1993 or SARFAESI Act,

2002, the borrower must ordinarily pursue the remedies provided

under that statute, rather than directly invoking the writ jurisdiction.

7. The Supreme Court has repeatedly emphasized that the existence of

an efficacious remedy before the Debt Recovery Tribunal (DRT) bars

interference by the High Court except in exceptional circumstances. In

United Bank of India v. Satyawati Tondon6 for instance, the Supreme

Court clarified that borrowers must avail remedy under the same law

and a Writ Petition will not be maintainable under Article 226 of the

(2010) 8 SCC 110

Location: ORISSA HIGH COURT, CUTTACK

Constitution of India, in a case where the effective remedy is available

to the aggrieved person. The relevant excerpts are produced below:

"43. Unfortunately, the High Court overlooked the settled law that the High Court will ordinarily not entertain a petition under Article 226 of the Constitution if an effective remedy is available to the aggrieved person and that this rule applies with greater rigour in matters involving recovery of taxes, cess, fees, other types of public money and the dues of banks and other financial institutions. In our view, while dealing with the petitions involving challenge to the action taken for recovery of the public dues, etc. the High Court must keep in mind that the legislations enacted by Parliament and State Legislatures for recovery of such dues are a code unto themselves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute.

44. While expressing the aforesaid view, we are conscious that the powers conferred upon the High Court under Article 226 of the Constitution to issue to any person or authority, including in appropriate cases, any Government, directions, orders or writs including the five prerogative writs for the enforcement of any of the rights conferred by Part III or for any other purpose are very wide and there is no express limitation on exercise of that power but, at the same time, we cannot be oblivious of the rules of self- imposed restraint evolved by this Court, which every High Court is bound to keep in view while exercising power under Article 226 of the Constitution.

45. It is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the

Location: ORISSA HIGH COURT, CUTTACK

Constitution and pass interim order ignoring the fact that the petitioner can avail effective alternative remedy by filing application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance."

8. The petitioner contends that SBI, being a public sector bank

(instrumentality of the State), violated binding RBI guidelines and the

petitioner's fundamental rights, thus warranting exercise of writ

jurisdiction despite the pending DRT proceedings. It is true that

breach of a mandatory statutory duty or violation of fundamental

rights can be grounds for the High Court to intervene notwithstanding

an alternative remedy. However, the present case does not disclose

any such extraordinary circumstance that cannot be adequately

addressed in the statutory forum.

9. Here, the petitioner's allegations of arbitrariness and non-compliance

with RBI guidelines can be raised before the DRT, which is

empowered to examine whether the Bank's actions were in accordance

with law. Mere assertion of a guideline violation or principles of

natural justice, without more, is not a sufficient reason to bypass the

statutory remedy.

10. In view of the above, the writ petition is not maintainable on facts. The

Recovery of Debts and Bankruptcy Act provides a comprehensive

mechanism for the petitioner to seek redress (including any relief on

interest, charges or irregularity in Bank's actions) before the DRT. This

Court must exercise restraint and not usurp the functions of the DRT,

lest it undermine the legislative intent of an expeditious recovery

process. Accordingly, the petition is liable to be dismissed as not

Location: ORISSA HIGH COURT, CUTTACK

maintainable. Nevertheless, since elaborate arguments were addressed

on the alleged non-compliance of the RBI's Framework for Revival and

Rehabilitation of MSMEs, this Court deems it appropriate to briefly

examine the merits of that claim for the sake of completeness.

11. It is not in dispute that the petitioner's enterprise is a registered

MSME, Micro, Small & Medium Enterprise, under the MSMED Act,

2006, and the Bank was aware of this status (the credit facilities were

even covered by the CGTMSE guarantee scheme). The petitioner

invokes the Framework for Revival and Rehabilitation of MSMEs

notified on 29.05.2015 by the Ministry of MSME, implemented via RBI

Circular dated 17.03.2016 ("the Framework"). This Framework, having

statutory force by virtue of Sections 9 and 10 of the MSMED Act and

the RBI's powers under the Banking Regulation Act, is binding on all

scheduled commercial banks.

12. In the case of M/s Pro-Knit (Supra), the Supreme Court affirmed that

the RBI's instructions in this regard carry mandatory weight, banks are

obligated to identify incipient stress in MSME accounts and follow the

prescribed revival mechanism before classifying the loan as an NPA or

proceeding to enforce recovery. In other words, the statutory MSME

Revival Framework cannot be ignored by a bank. The relevant

excerpts are produced below:

"6. 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-

Location: ORISSA HIGH COURT, CUTTACK

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 authorized person. Therefore, the stage of identification of incipient stress in the loan account of MSMEs and categorization 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"

13. In other words, the statutory MSME Revival Framework cannot be

ignored by a bank at its whim; it is intended as a pre-NPA corrective

mandate to protect viable MSME units. The petitioner's grievance is

that SBI failed to follow this Framework. The undisputed facts show

that the petitioner's loan accounts turned irregular after May 2024 due

to a severe disruption (a four-month power supply outage at its dairy

plant). The petitioner, anticipating stress, wrote to the Bank on

31.08.2024 and again on 02.12.2024, explaining the difficulties in

repayment and seeking extension of time for instalments (in effect, a

plea for restructuring). These communications, the petitioner argues,

amounted to notification of incipient stress, which should have

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triggered the corrective mechanism under the RBI Framework. Despite

this, the Bank did not convene any Committee or offer any revival

plan; instead, it went on to declare the account as NPA on 08.01.2025

and initiated recovery proceedings soon thereafter.

14. On the other hand, the Bank (respondent) contends that the onus was

equally on the petitioner to formally invoke the Framework by

submitting a duly authenticated application before the NPA stage. The

respondent points out that the petitioner's letters, while requesting ad-

hoc relief, were not in the format of the prescribed application with an

affidavit and financial documents. According to the Bank, it had no

obligation to act under the Framework unless the MSME borrower

expressly applied with proof of its stress prior to the loan becoming an

NPA. The respondent relies on the recent pronouncement in Shri Shri

*Swami Samarth Construction & Finance Co. vs. NKGSB Co-op. Bank

Ltd.7, which clarified the mutual responsibilities under the

Framework.

15. An MSME must not simply suffer in silence or make casual requests; it

should affirmatively invoke the statutory restructuring process with

proper disclosure of its financial stress. If it fails to do so and allows

the account to deteriorate into a default without trigger, the Bank's

hands are not completely tied. But, a borrower who genuinely seeks

rehabilitation must come forward at the first sign of trouble;

conversely, a borrower who remains passive until enforcement is

imminent cannot claim that the bank acted arbitrarily in not extending

the benefits of the Framework.

2025 SCC OnLine SC 1566

Location: ORISSA HIGH COURT, CUTTACK

16. Given this factual matrix, the Court finds that no actionable breach of

the RBI Framework by the Bank is made out. The Framework

contemplates a cooperative effort: while the Bank should ordinarily

take initiative when an MSME account shows stress, the borrower too

must actively seek revival with bona fide disclosure. Here, the Bank

had general knowledge of the petitioner's MSME status and

difficulties, yet it has not been shown that the account met any specific

quantitative trigger (such as crossing SMA-2 threshold) that would

automatically oblige the Bank to form a Committee absent a request.

The petitioner's letters did not provide the kind of authenticated and

verifiable documents that would necessitate a firm conclusion about

incipient stress under the Framework.

17. On an overall conspectus of the facts and law, the Court finds no

ground to interfere with the respondent Bank's actions. The writ

petition is devoid of merit. As discussed, the petition is liable to be

dismissed both on the ground of alternate remedy and on the merits of

the claim. The Bank's classification of the petitioner's account as NPA

and recourse to legal recovery cannot be characterized as arbitrary or

illegal in the teeth of the petitioner's own inaction in formally seeking

timely rehabilitation. The RBI/MSME Revival Framework, though

salutary, is not an unqualified fetter on a bank's power to classify an

account as NPA in every case, especially where the MSME did not

properly invoke the very protection it now seeks. The petitioner's

rights were not prejudiced without remedy; indeed, it retains the

liberty to approach the DRT to present any factual defences or

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settlement plan, and it may even now engage with the Bank for an out-

of-court restructuring if feasible.

18. For the foregoing reasons, the Writ Petition is dismissed. The

Petitioner is at liberty to pursue its remedies before the DRT, Cuttack

or any other forum as available in law.

19. Interim order, if any, passed earlier stands vacated.

(Dr. Sanjeeb K Panigrahi) Judge Orissa High Court, Cuttack, Dated the 10th Sept., 2025/