MSME Cannot Claim Revival Framework Benefit After SARFAESI Action: Calcutta HC

(MENAFN- KNN India) Kolkata, Sep 10 (KNN) The Calcutta High Court has dismissed a writ petition filed by Debpara Tea Company Ltd against the State Bank of India (SBI), holding that a micro, small and medium enterprise (MSME) cannot seek the benefit of the Framework for Revival and Rehabilitation of MSMEs at a belated stage after SARFAESI recovery proceedings have commenced.

Justice Krishna Rao observed that Debpara Tea Company, an MSME, sought the benefit of the framework only after SBI had issued a notice under Section 13(4) of the SARFAESI Act and the company had approached the Debt Recovery Tribunal (DRT) under Section 17.

The company was sanctioned financial assistance of Rs 13.73 crore in October 2020, which was enhanced in May 2022. SBI classified the account as an NPA on December 29, 2023, and issued a demand notice under Section 13(2) of the SARFAESI Act on March 21, 2024.

Framework Must Be Invoked at Appropriate Stage

The company submitted a representation to SBI on July 15, 2024, but the court noted that it did not seek the benefit of the MSME revival framework.

SBI subsequently issued a Section 13(4) notice on September 16, 2024. The company then approached the DRT under Section 17, where its securitisation application remained pending.

The High Court held that once the company had invoked the statutory remedy before the DRT, its grievance could not be adjudicated through the writ petition. It also found that the company had failed to take appropriate steps to seek the benefit of the MSME framework at the relevant stage.

Relying on the judgments in Pro Knits and Shri Shri Swami Samarth, the court observed that while banks are required to follow the MSME framework before classifying an account as an NPA, an eligible MSME must also assert its entitlement in time and follow the prescribed procedure.

The court accordingly declined to grant Debpara Tea Company the benefit of the revival framework at the later stage and dismissed the writ petition.

(KNN Bureau)

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