(Prayer in WA.No.1872 of 2026: Appeal filed under Clause 15 of the Letters Patent to set aside the order dated 19.02.2026 passed by the learned Single Judge in W.M.P.No.2481 of 2026 in W.P.No.2244 of 2026.

In WP.No.2244 of 2026: Petition filed under Article 226 of the Constitution of India seeking issuance of a writ of certiorarified mandamus calling for the records relating to the Respondents letter dated 30.09.2025, whereby the petitioner was denied the benefit of the Framework for Revival and Rehabilitation of Micro, Small and Medium enterprises notified on 29.05.2015 and all proceedings connected therewith, and quash the same as being illegal, arbitrary and contrary to law, and consequently direct the Respondent No. 2, namely the Board of Directors of Punjab National Bank, to forthwith Constitute a Committee for Distressed Micro, Small and Medium Enterprises (MSMEs) as contemplated under the notification dated 29.05.2015, and further direct the said Committee to consider and decide the petitioner’s application for restructuring strictly in accordance with the aforesaid notification and such other relevant circulars, guidelines and regulations issued by the Reserve Bank of India.)

Common Judgment

G. Arul Murugan, J.

1. The writ petition is filed seeking to quash the letter of the first respondent bank dated 30.09.2025, which denied the benefit of the framework for the revival and rehabilitation of MSMEs notified on 29.05.2015 and for a consequential direction to constitute a Committee to decide the petitioner’s application for restructuring.

The Writ Appeal is filed by the respondent bank challenging the interim order dated 19.02.2026 granted in W.M.P.No.2481 of 2026 in W.P.No.2244 of 2026.

2. Since both the writ appeal and the writ petition arise out of the same issue, they have been heard analogously and are disposed of by this common judgment.

3. For the sake of convenience, the parties are referred to as per their status in the writ petition.

4.1. It is the case of the petitioner that it is a partnership firm engaged in textile manufacturing and export and is a Micro, Small and Medium Enterprises (MSME) duly registered under the MSME Act, 2006, holding registration certificate dated 25.01.2021. The petitioner firm had availed various credit facilities from the respondent bank. These credit facilities were renewed on 05.10.2023 and the petitioner, even though repaid the dues promptly, due to the sudden market downturn, suffered loss and financial stress, resulting in default.

                     4.2. It is further stated that due to default in the repayment of dues, the account was classified as a Non-Performing Asset (NPA) on 26.08.2024. Without adhering to the regulatory safeguards provided to MSMEs, the bank initiated proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (in short “SARFAESI Act”) and issued a demand notice dated 30.08.2024 under Section 13(2) of the SARFAESI Act, claiming a sum of Rs.1,72,84,956.54.

                     4.3. A detailed objection was submitted. However, the bank issued a possession notice dated 06.12.2024 under Section 13(4) of the SARFAESI Act. The petitioner challenged the said possession notice in S.A.No.226 of 2025 before the Debts Recovery Tribunal (DRT), Coimbatore. Subsequently, the respondent bank withdrew the demand notice by its letter dated 07.04.2025 and the said S.A. was disposed of.

                     4.4. It is further stated that, again, a fresh demand notice dated 22.04.2025 was issued under Section 13(2) of the SARFAESI Act claiming a sum of Rs.1,74,43,210.54, to which the petitioner submitted an objection dated 21.06.2025. The respondent bank, after issuing a reply on 30.06.2025, issued the possession notice under Section 13(4) dated 04.07.2025. This was also put to challenge in S.A.No.829 of 2025 before the DRT, but citing administrative reasons, the respondent bank withdrew the second possession notice.

                     4.5. The petitioner had submitted a further representation and objection under Section 13(3A) of the SARFAESI Act along with an application to the Committee for corrective action plan to the bank on 25.09.2025 and 26.09.2025. The respondent bank summarily rejected the request by letter dated 30.09.2025 and issued possession notice and sale notice under the SARFAESI Act. In such circumstances, the petitioner had come up with the writ petition challenging the aforesaid communication.

                     4.6. The said writ petition was initially listed before the learned single Judge and by order dated 23.01.2026, interim injunction was granted restraining the respondent bank from proceeding with the recovery action till 19.02.2026 and subsequently, by an order dated 19.02.2026, the said interim order was extended. This interim order is challenged by the respondent bank in the present writ appeal.

5.1. Learned Senior Counsel appearing for the petitioner submitted that the petitioner had availed financial facilities to the tune of Rs.4 crores and, admittedly, had been servicing their dues. The fact that only a sum of around Rs.1 crore was pending due, sufficiently revealed that the petitioner was actively pursuing the business and repaying the dues. However, the respondent bank, for no valid reason, had initiated proceedings under the SARFAESI Act.

                     5.2. He further contended that when the petitioner is admittedly an MSME unit, as per the notification dated 29.05.2015, the bank had to mandatorily refer the distressed MSME to the Committee under the framework for revival and rehabilitation. When the petitioner had intimated the bank about its MSME status and sought a revival under the notification, the bank did not take any steps to refer the matter to the Committee and, therefore, the impugned order rejecting the request is not sustainable.

                     5.3. In support of his contention, learned Senior Counsel placed reliance on the decisions of the Hon'ble Supreme Court in the cases of M/s.Pro Knits vs. Board of Directors of Canara Bank and Others [(2024) 10 SCC 292] and Shri Shri Swami Samarth Construction and Finance Solution and Another vs. Board of Directors of NKGSB Co-op. Bank Ltd. and Others. [(2025) SCC OnLine SC 1566].

6.1. Countering the submissions, learned counsel appearing for the bank, submitted that, in fact, the request of the petitioner for restructuring had already been considered by the Committee under the RBI guidelines for MSMEs. The petitioner had not only participated before the Committee, but was also allowed sufficient time to restructure the credit limit, however the petitioner failed to comply with the assurance made by it.

                     6.2. He contended that since the petitioner failed to clear the over dues and regularize the account and defaulted its own undertaking given before the Committee, the petitioner cannot now be allowed to challenge the impugned order, by which only a subsequent request made for the same purpose was rejected.

                     6.3. Learned counsel for the bank further submitted that a possession notice had already been issued on 29.09.2025 and the petitioner had filed S.A.No.1116 of 2025 before the DRT, Coimbatore, wherein the petitioner has raised all these issues and has sought to set aside the possession notice, which is still pending. He also contended that a sale notice had already been issued and the sale is fixed today and even before the case was taken up for hearing, the sale has started, which might have also been concluded and, therefore, in such circumstances, he sought for the dismissal of the writ petition.

7. We gave our anxious consideration to the rival submissions made and considered the materials available on record.

8. The petitioner, a partnership firm engaged in the business of textile manufacturing and export, has admittedly availed financial assistance through various credit facilities from the respondent bank. In view of the default in repayment of the dues, the account of the petitioner was classified as NPA on 26.08.2024. It is also not in dispute that the petitioner is an MSME registered under the MSMED Act.

9. The bank initiated proceedings under the SARFAESI Act and issued a demand notice dated 30.08.2024 under Section 13(2) of the SARFAESI Act, followed by a possession notice dated 06.12.2024, which was assailed by the petitioner in S.A.No.226 of 2025 before the DRT. The same was subsequently dropped, as the respondent bank withdrew the notice.

10. The bank issued a fresh demand notice dated 22.04.2025 under Section 13(2), claiming a sum of Rs.1,74,43,210.54 and the petitioner submitted their objections on 21.06.2025. The respondent Bank through reply dated 30.06.2025 rejected the objection and issued a possession notice under Section 13(4) of the Act on 04.07.2025. The second possession notice was challenged in S.A. No.829 of 2025 before the DRT, Coimbatore. However, citing administrative reasons, the possession notice was withdrawn and SA was closed. The petitioner again submitted a rejoinder objection to notice under Section 13(2) of the SARFAESI Act dated 22.04.2025 on 26.09.2025, which was received by the bank on 29.09.2025, but was rejected on the very next day through the impugned reply dated 30.09.2025.

11. The bank issued a possession notice under Section 13(4) of the SARFAESI Act on 29.09.2025, following which the petitioner filed S.A.No.1116 of 2025 before the DRT, Coimbatore, which is pending. The petitioner has raised grounds challenging the NPA classification, contending that it is unsustainable as the bank failed to adhere to the notification dated 29.05.2015 regarding the revival and rehabilitation of the petitioner.

12. Learned senior counsel by placing reliance on the decisions of the Hon'ble Supreme Court in M/s.Pro Knits’s case supra and Shri Shri Swami Samarth Construction’s case supra, submitted that the Hon'ble Supreme Court has held that it is mandatory on the part of the bank to follow the framework for revival and rehabilitation of MSMEs under the notification dated 29.05.2015. He further submitted that if an MSME borrower files a reply to the demand notice issued under Section 13(2) of the SARFAESI Act, bringing to the notice of the bank about the MSME status and its applicability, the bank has to mandatorily pause the SARFAESI proceedings and take a decision about the claim made under the notification and only thereafter can proceed further.

13. At this juncture, it is apposite to refer to the decision in M/s.Pro Knits’s case supra, where the Hon'ble Supreme Court held as follows:

                     “20. 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 MSME concerned 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.

                     21. 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 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 notice of the Banks concerned, by producing authenticated and verifiable documents/material to show its eligibility to get the benefit of the said Framework.”

14. Further, the Hon'ble Supreme Court in Shri Shri Swami Samarth Construction’s case supra has 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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, would be obliged to find out in every event of continuing default, likely to give rise to classification of the relevant account as non-performing asset, whether the borrower is an micro, small and medium enterprise 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 micro, small and medium enterprises. This could not have been the intention behind introduction of the framework to aid the micro, small and medium enterprises 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. A micro, small and medium enterprise, 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 non-performing asset is imminent, it would rest on its oars believing that it has no responsibility and that its account will not be classified as non-performing asset 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 Micro, Small and Medium Enterprise Act is not destroyed by the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 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 a micro, small and medium enterprise) to classify the account of the defaulting micro, small and medium enterprise as non-performing asset and to even issue the demand notice under section 13(2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 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(3A) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act asserts that it is a micro, small and medium enterprise and claims the benefit of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act was issued. It is at the stage of compliance with an order passed by the relevant Magistrate under section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act that this writ petition has been presented before this court claiming benefits of the framework to restrain respondent No. 2 and its officers from proceeding further under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 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 [Pro Knits v. Board of Directors of Canara Bank, (2024) 246 Comp Cas 422 (SC); (2024) 10 SCC 292; (2024) 4 SCC (Civ) 1; 2024 SCC OnLine SC 1864.] 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 micro, small and medium enterprise is classified as non-performing asset, this decision also lays stress on the obligation of the micro, small and medium enterprises by holding that “it would be equally incumbent on the part of the micro, small and medium enterprises 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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest 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 Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act by raising the plea of being an micro, small and medium enterprise 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.”

15. A bare perusal of the aforesaid decisions reveals that the stage of identification of the stress in the loan account of MSMEs before the account turns into NPA is a very crucial stage, and it was incumbent upon on the MSME to claim its status, before the account is classified as an NPA. In the event of such failure, the bank would be entitled to take recourse to proceedings under the SARFAESI Act and the borrower cannot be allowed to misuse the process of law for thwarting the actions taken under the SARFAESI Act by raising a plea at a belated stage. The Hon'ble Supreme Court clarified this position and held that even if the borrower, upon receipt of a notice under Section 13(2) of the SARFAESI Act, submits a detailed response under Section 13(3A) of the SARFAESI Act, claiming the benefits substantiated by an affidavit, the bank shall examine the claim and keep the SARFAESI proceedings in abeyance, provided the claim is worthy of acceptance.

16. Therefore, the borrower must be vigilant to raise any claim seeking MSME benefits even prior to the classification of the account as an NPA. However, even if such a claim is made by the MSME with supporting documents along with an affidavit in reply to a notice under Section 13(2), the bank is bound to consider the claim.

17. In the instant case, it is evident from the impugned order itself that the petitioner's claim seeking MSME benefits for restructuring under the notification dated 29.05.2015 has already been considered by referring it to the Committee. The impugned order dated 30.09.2025 reads as follows:



18. A bare perusal of the impugned order reveals that the petitioner’s request for restructuring of the credit facility was already considered and placed before the Committee and the claim was discussed and deliberated at length in the meeting held on 21.08.2024. It is to be noted that the petitioner participated in the meeting before the Committee and agreed to clear the over dues and to regularize the account and the bank also assured support for new orders of the petitioner.

19. However, even after the Committee considered the petitioner's claim for restructuring and granted sufficient time and support, the petitioner committed default and filed the present writ petition, seeking once again to refer the account to the Committee. Under such circumstances, the claim is totally misconceived and baseless.

20. The reply submitted by the petitioner under Section 13(3A) of the SARFAESI Act, along with an application and an affidavit, was considered and rejected by the bank on 30.09.2025. Meanwhile, a possession notice was issued on 29.09.2025. The petitioner has admittedly challenged this possession notice before the DRT, Coimbatore, in S.A.No. 1116 of 2025, on the ground that the declaration of the account as NPA without granting the benefits under the Notification dated 29.05.2015 and the SARFEASI proceedings initiated are illegal.

21. The petitioner has to pursue the statutory SARFAESI application, especially since a sale notice has already been issued and the sale is fixed today. As submitted by learned counsel for the bank, by the time this matter was taken up for hearing, the auction might have already been concluded. The petitioner cannot be allowed to stall the proceedings under the SARFAESI Act by belatedly and successively raising a plea for consideration of MSME benefits, when the benefits were already extended to the petitioner, which were not utilized as undertaken before the committee.

22. In such circumstances, we see no merit in the relief sought, and accordingly, the writ petition stands dismissed. Consequently, the writ appeal arising out of the interim order dated 19.02.2026 granted by the learned Single Judge in W.M.P.No.2481 of 2026 in W.P.No.2244 of 2026 stands allowed and the said order dated 19.02.2026 is set aside. There shall be no order as to costs. Consequently, connected miscellaneous petitions are closed.