A writ petition cannot be dismissed on merits when only interim relief was heard.

The appellants—Merchant Monger Agrotech Pvt. Ltd. and Merchant Monger Hospitality Pvt. Ltd., along with their directors—had obtained credit facilities from Indian Bank for operating tea gardens, secured by mortgages over immovable properties.

The facilities were sanctioned under MSME-related schemes, and the accounts were subsequently classified as NPAs.

The Bank issued notices under Section 13(2) of the SARFAESI Act, took symbolic possession of the secured assets, and initiated proceedings under Section 14 of the Act.

The appellants contended that the Bank had failed to follow the RBI’s Framework for Revival and Rehabilitation of MSMEs before classifying the accounts as NPAs and commencing SARFAESI measures.

The writ petitions sought, inter alia, withdrawal of the SARFAESI proceedings, consideration of the appellants’ request under the MSME Framework, and restructuring of the loan accounts.

The learned Single Judge, after hearing the matters on interim relief, dismissed the writ petitions on merits and held that the RBI Framework was inapplicable to the appellants.

During the pendency of the appeals, the appellants had also challenged the SARFAESI proceedings before the Debts Recovery Tribunal, Kolkata.

Whether the learned Single Judge could dismiss the writ petitions on merits after concluding the hearing only on the question of interim relief, without calling for affidavits or concluding the final hearing?

Whether the appellants established a prima facie case warranting an interim stay of the SARFAESI proceedings initiated by Indian Bank?

Whether the appellants were entitled, at the interim stage, to a direction requiring the Bank to consider their case under the RBI Framework for Revival and Rehabilitation of MSMEs and to restructure the loan accounts?

Whether the legality of the SARFAESI measures should be examined by the writ court when the appellants had already invoked the statutory remedy before the DRT?

The Court applied the principles of natural justice and procedural fairness, holding that a court should not finally decide factual and substantive issues without giving the parties an adequate opportunity to file affidavits and complete the hearing.

It considered the SARFAESI Act, 2002, particularly Sections 13(2), 13(3), and 14, which govern enforcement of security interests and possession proceedings.

It also considered the RBI/Central Government Framework for Revival and Rehabilitation of MSMEs, under which banks must identify incipient stress, classify accounts under SMA sub-categories, and adopt a committee-based corrective action plan before an eligible MSME account becomes an NPA; however, the MSME borrower must also be vigilant and produce authenticated and verifiable material and invoke the Framework in a timely manner.

The Court relied on Pro Knits v. Board of Directors of Canara Bank & Ors., (2024) 10 SCC 292, which recognised the binding nature of the Framework while cautioning against its belated invocation to frustrate SARFAESI proceedings.

The Court relied on Shri Shri Swami Samarth Construction and Finance Solution & Anr. v. Board of Directors of NKGSB Co-operative Bank Ltd. & Ors., 2025 SCC OnLine SC 1566, which emphasised both the bank’s obligation to follow the Framework and the borrower’s obligation to claim its benefit with supporting material at the appropriate stage.

The Court further applied the principle that a statutory alternative remedy before the DRT should ordinarily be pursued for challenges to SARFAESI measures and that parallel proceedings should not be encouraged.

The Division Bench held that the learned Single Judge had committed a procedural irregularity by dismissing the writ petitions on merits after hearing only the applications for interim relief.

The Bank’s factual allegations and documents had not been tested through affidavits, and the final hearing had not been concluded; consequently, the dismissal and the definitive finding that the MSME Framework was inapplicable could not stand.

On interim relief, however, the Court found that the appellants had not made out a sufficient prima facie case.

Although the Bank was aware that the appellants were operating under MSME-related schemes, the appellants’ correspondence primarily sought regularisation, repayment of overdue amounts, and continuation of normal banking operations; it did not clearly invoke or seek consideration under the RBI Framework before the SARFAESI measures were substantially advanced.

The appellants had also undertaken to close the Agrotech loan account as a condition of the Hospitality facility but failed to comply with that undertaking.

The Bank had thereafter removed a debit freeze and acted on the undertaking, thereby altering its position.

In view of the appellants’ conduct, the Bank’s alleged grant of opportunities to regularise the accounts, the taking of symbolic possession, and the appellants’ pending DRT proceedings, the Court declined to stay the SARFAESI action.

The Court clarified that the legality of those measures, including the effect of the MSME Framework, could be examined by the DRT, while the writ petitions would proceed independently on affidavits.

The Division Bench directed that the learned Single Judge hear the writ petitions on affidavits and decide them independently.

Nevertheless, the Court refused interim protection or a stay of the SARFAESI proceedings, holding that the appellants had not established a prima facie entitlement to such relief and had already approached the DRT for remedies concerning the SARFAESI action.

The observations of the Division Bench were expressly declared tentative, and the appeals and connected applications were disposed of accordingly.