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Shri Shri Swami Samarth Construction and Finance Solution v. The Board of Directors of NKGSB Co-op. Bank Ltd.

Writ Petition (Civil) · 2025 INSC 908Decided 28 Jul 2025
Writ Petition (Civil) No. 684 of 2025
Justice Dipankar Datta · Justice Augustine George Masih

Background

The petitioner, a registered micro, small and medium enterprise (MSME), defaulted on a loan from NKGSB Co-operative Bank, and its account was classified as a non-performing asset. The bank issued a demand notice under Section 13(2) of the SARFAESI Act and, after the petitioner failed to repay, moved to take possession of secured assets through a court-appointed commissioner under Section 14. Only at that late enforcement stage did the petitioner approach the Supreme Court under Article 32, arguing that the bank had failed to first identify "incipient stress" in its account as required by a 2015 Government of India framework for reviving distressed MSMEs before classifying it as an NPA.

Decision Breakdown

The Court acknowledged, based on its own recent precedent (Pro-Knits), that the MSME revival framework is binding on lending banks. However, it held that MSMEs are equally obliged to be vigilant and to invoke the framework's protections promptly, with proper supporting documents, rather than waiting until enforcement proceedings are already underway. Since the petitioner never claimed the framework's benefit at any earlier stage (not when the NPA classification happened, not when the demand notice issued) and raised it only after a Magistrate's enforcement order was already being executed, the Court found its bona fides "suspect" and held no case for interference under Article 32 was made out. The writ petition was dismissed, though the petitioner remained free to pursue its statutory remedy under Section 17 of the SARFAESI Act.

Lesson Learnt

An MSME wanting the protection of the government's revival and rehabilitation framework must invoke it early and diligently with the bank. It cannot be raised for the first time as a last-minute shield once loan recovery enforcement is already in motion.

Official source (sci.gov.in)View Judgment (PDF)

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