Belated MSME restructuring claims unsupported by affidavit do not warrant halting SARFAESI proceedings.

The petitioner, an MSME textile manufacturer, had obtained a cash-credit facility and term loan totalling ₹14 crore from the first respondent bank. Following repayment defaults and account irregularities, the bank rejected the petitioner’s request for consideration under the MSME revival framework by communication dated 21 May 2026.

The bank had issued a SARFAESI demand notice under Section 13(2) on 7 May 2026, a possession notice under Section 13(4) on 19 August 2026, and a sale notice fixing the auction for 30 September 2026.

The petitioner challenged the rejection and the consequential SARFAESI measures, seeking reference of its account to the MSME Committee.

The High Court noted that the Section 13(4) possession notice had not been separately challenged and that the petitioner had not produced an affidavit and supporting documents of the kind discussed in Shri Shri Swami Samarth Construction.

1. Whether the bank’s rejection of the petitioner’s request for consideration under the MSME revival framework, without referring the account to the Committee, warranted interference.

2. Whether the petitioner could challenge the rejection and the consequential SARFAESI proceedings at the stage when a sale notice had been issued and the auction was imminent.

The Court recognised that the Framework for Revival and Rehabilitation of MSMEs, notified on 29 May 2015, has statutory force and requires banks to refer eligible MSME accounts for consideration of a corrective action plan.

It considered Pro Knits v. Board of Directors of Canara Bank, (2024) 10 SCC 292, as cautioning that an MSME borrower may not use the framework to thwart SARFAESI enforcement after allowing the process to run its course.

It also considered Shri Shri Swami Samarth Construction and Finance Solution v. Board of Directors of NKGSB Co-op. Bank Ltd., 2025 SCC OnLine SC 1566, as permitting a borrower, even after a Section 13(2) notice, to make a claim supported by an affidavit and documents; if the claim is genuine and acceptable, the bank should pause proceedings and consider referral to the Committee.

The Court also addressed the relevant SARFAESI notices issued under Sections 13(2) and 13(4).

The Court accepted the mandatory character of the MSME framework but found that the bank had considered and rejected the petitioner’s request through a detailed communication identifying account irregularities and pending compliances.

It further noted that the petitioner had not placed before the Court an affidavit with supporting documents of the kind contemplated in Shri Shri Swami Samarth Construction.

Given the petitioner’s delay in approaching the Court, the unchallenged possession notice, and the imminent auction, the Court considered the writ petition an attempt to stall the sale at the eleventh hour.

It left the petitioner free to pursue its grievance before the appropriate forum in accordance with law.

There was no order as to costs, and the connected miscellaneous petition was closed.