Bombay High Court Denies Relief to MSME in Loan Recovery Dispute

Court Dismisses Petition by Mrs. Manisha Mehta, Upholding NPA Classification Amidst Allegations of Suppressed Material Facts

In a significant judgment, the Bombay High Court has dismissed a writ petition filed by Mrs. Manisha Nimesh Mehta, promoter of Perfect Infraengineers Ltd, an MSME, challenging the classification of the company's loan account as a Non-Performing Asset (NPA) by ICICI Bank and subsequent recovery actions under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002. The decision comes amidst a backdrop of extensive litigation initiated by the petitioner, including multiple proceedings across various forums.

The petitioner had argued that under the MSME notification dated May 29, 2015, which provides a framework for the revival and rehabilitation of MSMEs, it was mandatory for the bank to first explore a revival plan before declaring the loan account as NPA. The court noted that Mrs. Mehta had pursued similar reliefs in over 15 proceedings, and her current petition was an attempt to re-agitate the issues already decided by a coordinate bench.

Justice Suman Shyam and Justice Manjusha Deshpande, presiding over the case, emphasized that the petitioner had failed to disclose material facts, including previous judgments against her claims, thereby abusing the judicial process. The court held that the issue of the applicability of the MSME notification had been conclusively dealt with in previous proceedings, and the petitioner was estopped from raising the same issues again.

The judgment also referenced the Supreme Court's decision in Pro Knits v. The Board of Directors of Canara Bank & Ors, which affirmed the mandatory nature of the MSME notification but stressed the importance of timely compliance with procedural requirements by the MSMEs. In Mrs. Mehta’s case, the court found that she failed to invoke the MSME notification promptly, resulting in the disqualification from its benefits.

The court further noted that despite multiple opportunities, the petitioner did not pursue her rights under the MSME framework within a reasonable time, allowing the bank's recovery actions to crystallize into rights that have become irreversible. The judgment reflects the court's stance on the need for procedural vigilance by MSMEs to avail protective measures under the MSME notification.

While dismissing the petition, the court refrained from imposing additional costs on Mrs. Mehta, considering the Rs. 5 lakh cost already imposed in previous proceedings for filing repetitive petitions. The court granted liberty to the petitioner to pursue appropriate legal remedies if advised.

Bottom Line:

The applicability of MSME Notification dated 29th May 2015 for revival and rehabilitation of MSMEs and its mandatory nature upheld by the Supreme Court in Pro Knits v. The Board of Directors of Canara Bank & Ors, but stringent adherence to procedural requirements by MSMEs emphasized.

Statutory provision(s): Micro, Small and Medium Enterprises Development Act, 2006; Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 Section 13(3A); Doctrine of Issue Estoppel and Res Judicata; SARFAESI Act; MSME Notification dated 29th May 2015

Mrs Manisha Nimesh Mehta v. Technology Development Board, (Bombay)(DB) : Law Finder Doc Id # 2790388