An MSME cannot belatedly invoke the revival framework after challenging SARFAESI action before the DRT.

The petitioner company, an MSME, obtained financial assistance of ₹13.73 crores from State Bank of India on 7 October 2020, which was enhanced on 6 May 2022; the other petitioners were its directors and guarantors.

The bank classified the company’s account as a Non-Performing Asset (NPA) on 29 December 2023 and informed the petitioners on 2 January 2024.

Thereafter, the bank issued demand and recovery communications, including a notice under Section 13(2) of the SARFAESI Act, followed by a notice under Section 13(4) for taking possession of the secured assets.

After issuance of the Section 13(4) notice, the petitioners also initiated proceedings under Section 17 of the SARFAESI Act before the Debt Recovery Tribunal, which remained pending.

Whether the petitioners were entitled, at a belated stage, to challenge the classification of the MSME loan account as an NPA on the ground that the bank had not followed the 2016 Framework for Revival and Rehabilitation of MSMEs.

Whether the writ petition was maintainable after the petitioners had invoked the statutory remedy under Section 17 of the SARFAESI Act against the bank’s measures under Section 13(4).

The Court applied the Framework for Revival and Rehabilitation of MSMEs issued by the RBI on 17 March 2016, which applies to MSME accounts with loan limits up to ₹25 crores and requires lenders to identify incipient stress before NPA classification through SMA-0, SMA-1 and SMA-2 categories.

In Pro Knits v. Board of Directors of Canara Bank, (2024) 10 SCC 292, the Supreme Court held that the framework is binding on secured creditors and must ordinarily be followed before an MSME account is classified as an NPA; it equally imposed an obligation on the MSME to remain vigilant, produce authenticated and verifiable material establishing its MSME status, and voluntarily initiate the framework process where appropriate.

In Shri Shri Swami Samarth Construction and Finance Solution v. Board of Directors of NKGSB Co-operative Bank Ltd., 2025 SCC OnLine SC 1566, the Supreme Court cautioned that an MSME cannot raise the framework plea belatedly to thwart SARFAESI proceedings, particularly after failing to claim the benefit following the Section 13(2) notice or after invoking proceedings before a court or tribunal.

The Court further applied the principle that grievances concerning SARFAESI measures should be pursued before the statutory forum under Section 17 rather than through a parallel writ proceeding.

The Court found that, although the petitioner company was an MSME and its loan exposure fell within the monetary limit of the 2016 framework, the petitioners did not claim the framework’s benefit in their reply to the Section 13(2) notice or at the stage when the account was classified as an NPA.

They also failed to voluntarily initiate the framework procedure by submitting the prescribed application accompanied by an affidavit of an authorised person.

Their later representations and revised settlement proposals were therefore treated as belated requests made after the NPA classification and after commencement of SARFAESI measures.

Applying Pro Knits and Shri Shri Swami Samarth, the Court held that the MSME framework could not be invoked at this advanced stage to obstruct recovery proceedings.

Further, since the petitioners had already challenged the Section 13(4) measures before the Debt Recovery Tribunal under Section 17, the dispute could not simultaneously be adjudicated in the writ jurisdiction.

It held that the petitioners were not entitled to claim the benefit of the 2016 MSME framework belatedly after NPA classification, issuance of the Section 13(4) notice, and invocation of the Section 17 SARFAESI remedy.

The challenge to the NPA classification and consequential recovery measures was therefore not entertained in the writ proceeding.

W.P.O. No. 198 of 2026 was dismissed.