Gujarat HC Rejects MSME’s RBI Revival-Framework Plea, Raised Months After Bank Took Symbolic Possession of Property

In brief

The question

Whether the petitioner had established a case for interference on the ground that the Bank failed to apply the MSME Framework.

The court held

The Court held that the petitioner was not entitled to the benefit of the MSME Framework because it raised the issue only after symbolic possession had been taken.

It also directed

The petition was rejected, the Rule discharged, and no order as to costs was made.

The Court clarified that the petitioner remained entitled to pursue remedies available under the SARFAESI Act to challenge measures under Sections 13(4) or 14, as applicable.

01Facts

The petitioner challenged the Bank’s sale notice dated 29 September 2026, alleging that the Bank had not followed the RBI’s Framework for Revival and Rehabilitation of MSMEs.

¶ 3–6, 10–11

The loan account was classified as NPA on 30 April 2026; the Bank issued a demand notice under Section 13(2) of the SARFAESI Act on 4 May 2026 and took symbolic possession under Section 13(4) on 9 July 2026.

¶ 3–6, 10–11

The petitioner first raised its MSME status and sought the Framework’s benefit in a communication dated 28 September 2026, after symbolic possession had been taken.

¶ 3–6, 10–11

The Bank opposed the petition on the grounds of delay and the petitioner’s failure to invoke the Framework earlier.

¶ 3–6, 10–11

02Issues

i.Whether the petitioner had established a case for interference on the ground that the Bank failed to apply the MSME Framework.

¶ 7

ii.Whether the petitioner could claim the benefit of the Framework after raising its MSME status only after symbolic possession had been taken under Section 13(4) of the SARFAESI Act.

¶ 10–12

03Law Applied

The Court considered the RBI’s Framework for Revival and Rehabilitation of MSMEs and the SARFAESI Act, particularly Sections 13(2) and 13(4).

¶ 7–9

Relying on Pro Knits v. Board of Directors of Canara Bank, (2024) 10 SCC 292, and Shri Swami Samarth Construction & Finance Solution v. Board of Directors of NKGSB Co-operative Bank Ltd., 2025 INSC 908, the Court applied the principle that MSMEs must be vigilant, follow the Framework’s process, and provide the Bank with verifiable material supporting their eligibility.

¶ 7–9

An MSME that permits enforcement proceedings to progress, or raises its MSME status belatedly to thwart those proceedings, may be denied the Framework’s benefit.

¶ 7–9

Provisions in the judgment · 2 · Linked ones open on LawLens

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section 13 Section 14

04Reasoning

The petitioner did not respond to the Section 13(2) demand notice dated 4 May 2026.

¶ 10–12

It raised its MSME status only on 28 September 2026, after the Bank had taken symbolic possession on 9 July 2026.

¶ 10–12

The Court treated the timing as materially similar to the belated invocation disapproved in Shri Swami Samarth Construction.

¶ 10–12

Although the petitioner’s communication referred to the demand notice, it was sent after the Bank had proceeded under Section 13(4); the Court therefore held that the petitioner had not sought the Framework’s benefit in time.

¶ 10–12

05Holding

The Court held that the petitioner was not entitled to the benefit of the MSME Framework because it raised the issue only after symbolic possession had been taken.

¶ 13

The petition was rejected, the Rule discharged, and no order as to costs was made.

¶ 13

The Court clarified that the petitioner remained entitled to pursue remedies available under the SARFAESI Act to challenge measures under Sections 13(4) or 14, as applicable.

¶ 13

LawLens.Gujarat High Court

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