Suresh Chandra Sahu vs Indian Bank on 30 January, 2026

Author: Chittaranjan Dash

Bench: B. P. Routray, Chittaranjan Dash

      IN THE HIGH COURT OF ORISSA AT CUTTACK
                       W.P.(C) No.2844 of 2024
Suresh Chandra Sahu               ....                         Petitioner
                                               Mr. D. Panda, Advocate
                               -versus-
Indian   Bank,     Cuttack    & ....                    Opposite Parties
Others
                                             Mr. S. K. Dey, Advocate
                                             For O.P. Nos.1 & 2-Bank

                                             Mr. B. Routray, Advocate
                                                        For O.P. No.3

                   CORAM:
     THE HON'BLE MR. JUSTICE B. P. ROUTRAY
  THE HON'BLE MR. JUSTICE CHITTARANJAN DASH

                   Date of Judgment: 30.01.2026


 Chittaranjan Dash, J.:

1. By means of this writ petition, the Petitioner seeks to assail the action of the Opposite Parties, who are alleged to have proceeded with the e-auction of the residential properties of the Petitioner, which were furnished as collateral security for a cash credit facility and working capital limits sanctioned by Opposite Party No.2-Bank on 25.08.2014.

2. The background facts, as pleaded, are that the Petitioner is an MSME establishment registered with the Ministry of Micro, Small and Medium Enterprises, Government of India, bearing Registration No. UDYAM-OD-07-004313. The Petitioner approached Opposite Party No.2-Bank for a cash credit facility,

which was sanctioned in the year 2014. Initially, the Petitioner availed a cash credit facility of Rs.1,18,00,000/- (Rupees One crore eighteen lakhs only) and a working capital limit of Rs.21,00,000/- (Rupees Twenty-one lakhs only) on 25.08.2014. The facilities were subsequently renewed vide sanction letter bearing Ref. No. ZO/CREDIT/F-25/2015-16/678 dated 29.03.2016 issued by the Credit Department of the Zonal Office of the erstwhile Allahabad Bank (now merged with Indian Bank).

3. The facilities were secured by hypothecation of stocks, book debts, and receivables. For the working capital facility, fixed deposit receipts in the name of the Petitioner worth Rs.4,20,000/- along with existing securities in the form of four plots of land with buildings; two situated at Mangalabag, Cuttack and two at Kujang, were accepted as collateral and kept under equitable mortgage. The details of the immovable properties offered as collateral security are as follows:

"1. All that part and parcel of land and building situated in Khata no. 714, Plot no.890, 891 & 894 having area A0.016d situated at Balarampur SRO- Kujang, Jagatsinghpur, Odisha bounded by North- Road, South- Mr. Maheswar Behera, East-Mr. Arata Behera & West-Kalpatru Sahoo.

2. All that part and parcel of land and building situated in Khata no. 915, Plot no.1191/1198/1197 having area A0.021d situated at Makhanpur P.S.- Mangalabag, SRO-Cuttack, Mouza- Unit 18 Buxi Bazar bounded by North-Road & Krushna Chandra Sahoo, South-Road-East-Road & West-Maguni Charan Sahoo.

1. All that part and parcel of land and building situated in Khata no. 1036, Plot no. 817 having area A0.028d situated at Mirkamalpatna P.S.-

Mangalahag, SRO- Cuttack, Mouza- Unit 22, Dist- Cuttack bounded by North-Road, South- Mr. Khan, East- Mr. Dhaneswar Dutta & West-Ishwar Chandra Sahoo.

2. All that part and parcel of land and building situated in Khata no. 714, Plot no.32/33 having area A0.019d situated at Mouza- Balarampur P.S.- Kujang, Jagatsinghpur, bounded by North-Forest Office, South- Road, East- Road & West- Barada Mohanty."

3. The Petitioner contends that he continued to service the loan by paying interest on the originally sanctioned amount. However, owing to the COVID-19 pandemic, the business of the Petitioner suffered severe losses, resulting in irregular servicing of the cash credit facility. Consequently, the account was classified as a Non- Performing Asset (NPA). Despite financial hardship, the Petitioner claims to have made periodic deposits to avoid penal consequences, but the Bank allegedly classified the account as NPA arbitrarily and without assigning reasons.

4. It is further stated that even after issuance of a notice under Section 13(2) of the SARFAESI Act, 2002 on 26.07.2021 demanding Rs.1,27,09,351.58 within sixty days, the Petitioner approached the Bank seeking restructuring of the account. The Petitioner expressed willingness to liquidate the outstanding by sale of certain secured assets at market valuation in conformity with Section 13(8) of the SARFAESI Act. The Bank partly acceded to this request by releasing one collateral property, the sale of which yielded Rs.81,00,000/-, which was adjusted against the outstanding dues. Additionally, Rs.10,23,481/- was adjusted by foreclosure of

pledged FDRs. The Petitioner also made further payments aggregating to Rs.11,25,000/-. Thus, an amount of Rs.1,02,49,638/- stood repaid, as acknowledged by the Bank vide letter dated 22.01.2024.

5. Apprehending coercive action, the Petitioner received a possession notice dated 03.03.2022 under Section 13(4) of the SARFAESI Act read with Rules 8 and 9 of the SARFAESI Rules, 2002, intimating symbolic possession of all collateral securities.

6. Despite repeated efforts by the Petitioner to settle the outstanding dues, the Bank proceeded to obtain valuation reports under Rule 8(5) of the SARFAESI Rules for the remaining collateral properties. The valuation reports dated 05.09.2023 indicated fair market values, realizable values, and distressed values. Subsequently, multiple e-auction notices were issued. While the first two auctions failed due to lack of bidders, the third notice dated 12.01.2024 drastically reduced the reserve prices, allegedly without justification. Single bids were received for two Mangalabag properties, raising apprehension of confirmation of sale at undervalued prices.

7. The Petitioner asserts that he obtained independent valuation certificates indicating substantially higher market values. It is contended that confirmation of the impugned bids would cause grave prejudice, as the Petitioner's ancestral properties would be sold at undervalued rates despite his continued efforts to settle the outstanding dues. Even after issuance of the third auction notice, the Petitioner sought time for settlement vide letter dated 19.01.2024.

8. According to the Petitioner, the Bank's action in reducing reserve prices below distressed values and proceeding with e- auction without granting reasonable extension of time is arbitrary and unjustified. The Petitioner, therefore, seeks issuance of a writ of mandamus declaring the bids received pursuant to the e-auction notice dated 12.01.2024 as illegal and arbitrary.

9. Opposite Party Nos.1 and 2, in their counter affidavit, opposed the writ petition. It is stated that the loan account was classified as NPA on 31.03.2021 with outstanding dues of Rs.1,27,09,351.58 and Rs.23,17,942.50. Notice under Section 13(2) of the SARFAESI Act was duly issued, followed by a possession notice on 03.03.2022. The sale notices were issued only after affording ample opportunity to the borrower. The reduction of reserve price by 10% in the third auction was strictly in accordance with bank guidelines and SARFAESI Rules after repeated auction failures. The independent valuation relied upon by the Petitioner is stated to be misleading and contrary to official valuation norms.

10. In the additional affidavit, the Opposite Parties contended that the account was classified as NPA in compliance with RBI guidelines and the Framework for Revival and Rehabilitation of MSMEs. Reliance was placed on the judgment of the Hon'ble Supreme Court in M/s Pro Knits v. Canara Bank (2024 INSC 56), wherein it was held that MSME borrowers must proactively claim the benefit of the framework and cannot raise such pleas belatedly after SARFAESI proceedings have progressed.

11. It is further contended that although the Petitioner's account was under SMA categories between 2013 and 2020, the Petitioner

never submitted any restructuring proposal or revival package as mandated under RBI guidelines. On the contrary, the Petitioner expressed inability to continue business operations and sought release of securities, which the Bank accommodated to the extent permissible.

12. In the matter of Shri Shri Swamy and Finance Solution and another vs. The Board of Directors of NKGSB Co-Op. Bank Ltd., and Others, reported in 2025 INSC 908, the Hon'ble Supreme Court referring to the decision in the matter of M/s Pro Knits (supra) came to held as follows:-

"6. The way Mr. Nedumpara urges us to read the Notification and the terms of the FRAMEWORK, if accepted, would lead to the conclusion that every lending bank/secured creditor under the SARFAESI Act would be obliged to find out in every event of continuing default, likely to give rise to classification of the relevant account as NPA, whether the borrower is an MSME to which the FRAMEWORK applies, whether its business has failed or whether it is suffering from any disability to pay its debts; and upon receiving a response, to apply the terms thereof by, inter alia, including the account in the Special Mention Account for the claim for a corrective action plan to be considered by the Committee for stressed MSMEs. This could not have been the intention behind introduction of the FRAMEWORK to aid the MSMEs which, for reasons personal to them, is unable to clear its debt and require revival and rehabilitation that the FRAMEWORK envisages. If indeed it is only the obligation of the lending bank/secured creditor to identify incipient stress in the account, sub-paragraphs 2 and 3 of paragraph 1 would be rendered redundant. An MSME, despite finding that its business is failing or that it is unable to pay its debts or accumulation of losses equals to half or more of its entire net worth and classification of its account

as NPA is imminent, it would rest on its oars believing that it has no responsibility and that its account will not be classified as NPA because it is the entire obligation of the lending bank/secured creditor to do what the FRAMCWORK 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 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."

13. Applying the aforesaid principles to the facts of the present case, this Court finds that during the course of hearing, no material has been placed to demonstrate that the Petitioner, in response to the demand notice issued under Section 13(2) of the SARFAESI Act, ever asserted its MSME status or sought the benefit of the RBI

framework by filing objections supported by an affidavit, as mandatorily contemplated. Admittedly, no restructuring proposal or revival package was submitted at any stage. On the contrary, the record discloses that the Bank scrupulously complied with the statutory requirements under the SARFAESI Act and, far from acting precipitously, afforded substantial latitude to the Petitioner, including release of secured properties to enable liquidation of dues. The considerable time gap between classification of the account as NPA and initiation of auction proceedings clearly evidences a measured and restrained approach on the part of the Bank. In such circumstances, the Petitioner, having failed to avail the statutory remedies in the manner and at the stage prescribed by law, cannot be permitted to invoke the equitable jurisdiction of this Court to stall proceedings lawfully initiated under the SARFAESI Act.

14. For the reasons aforesaid, this Court is of the considered view that no case is made out for interference under Articles 226 and 227 of the Constitution of India. The measures initiated by the Bank are in consonance with the provisions of the SARFAESI Act and the Rules framed thereunder, and no arbitrariness, procedural impropriety, or violation of statutory mandate is discernible. Consequently, the writ petition stands dismissed.



                                                                    (Chittaranjan Dash)
                                                                           Judge
               B.P. Routray, J.        I agree.



Signed by: ANANTA KUMAR PRADHAN                                              Judge
Designation: Senior Stenographer
                 AKPradhan
Reason: Authentication
Location: HIGH COURT OF ORISSA
Date: 30-Jan-2026 15:16:04