1. Factual Background and Procedural History
The petitioner, Mrs. Manisha Nimesh Mehta, promoter and guarantor of M/s Perfect Infraengineers Ltd, an MSME registered under Section 8 of the MSMED Act, had availed credit facilities from ICICI Bank as well as financial assistance of ₹750 lakhs from the Technology Development Board (TDB). Upon default, ICICI Bank classified the petitioner’s loan account as NPA on 29 February 2020, initiating SARFAESI proceedings, including issuance of a Section 13(2) notice on 14 October 2020 and subsequent possession of secured assets
The petitioner contended that under the Government of India MSME Notification dated 29 May 2015, lenders were bound to identify “incipient stress,” refer the matter to an MSME Committee, and evaluate a “Corrective Action Plan” (CAP) before declaring any MSME account as NPA.
The dispute escalated through an extraordinary number of litigations—over 15 proceedings before the City Civil Court, Bombay High Court, Delhi High Court, NCLT, DRAT, and the Supreme Court—challenging either SARFAESI actions or seeking enforcement of the 2015 MSME Notification.
Significant prior developments include:
- 11 January 2024 – Bombay High Court dismissed the petitioner’s challenge, holding the MSME Notification not mandatory.
- 1 July 2024 – A coordinate Bench of the Bombay High Court dismissed another petition by the same petitioner, holding that rights under the MSME Notification were barred by delay and issue estoppel.
- 8 July 2024 – Supreme Court clarified that dismissal of earlier SLPs without leave did not attract merger, allowing the High Court to hear review petitions.
- 1 August 2024 – In Pro Knits v. Canara Bank, the Supreme Court held the MSME Framework mandatory, overruling the 11 January 2024 judgment.
- 1 & 14 October 2024 – High Court directed the petitioner to withdraw multiple parallel proceedings, which she did not comply with.
- 29 October 2024 – NCLT rejected recall applications filed by the petitioner.
- 20 December 2024 – High Court again dismissed her writ petition with ₹5 lakh costs for abuse of process.
In the present case—Writ Petition (St) No. 14829 of 2025, decided on 7 October 2025—the petitioner sought:
- Declaration that her MSME account could not be declared NPA without application of the 2015 MSME Notification.
- Mandamus directing ICICI Bank and TDB to constitute an MSME Committee.
- Declaration of illegality of SARFAESI and IBC actions.
2. Identification of Legal Issues
The Court addressed the following key issues:
(i) Whether the petitioner’s loan account could be declared NPA without compliance with the MSME Revival & Rehabilitation Framework under the Notification dated 29 May 2015?
(ii) Whether earlier judgments against the petitioner—especially the 1 July 2024 judgment—bar reconsideration of the same legal issue?
(iii) Whether suppression of material facts and multiplicity of proceedings disentitled the petitioner to equitable writ relief?
(iv) Effect of the Supreme Court’s ruling in Pro Knits v. Canara Bank (2024) on the petitioner’s case.
(v) Whether the petitioner had invoked the MSME mechanism in time and in the manner prescribed under the Notification?
3. Arguments of the Parties
A. Petitioner’s Core Submissions
- The 2015 MSME Notification is mandatory, as confirmed by the Supreme Court in Pro Knits.
- ICICI Bank and TDB declared the account NPA without identifying incipient stress or constituting an MSME Committee.
- Since the Bank had not constituted the Committee, the petitioner was denied statutory protections.
- The issue is a pure question of law, never adjudicated on merits in relation to this petitioner.
- TDB breached contractual obligations by withholding ₹300 lakhs, causing the MSME unit’s collapse.
- Proceedings under SARFAESI and IBC denied her any effective forum to raise these issues.
B. Respondents’ Submissions
Respondents argued:
- The issue of applicability of the MSME Notification to the petitioner’s account had already been conclusively adjudicated in the Bombay High Court judgment dated 1 July 2024, which the petitioner suppressed.
- Multiple proceedings, including SLPs and review applications, had been initiated and withdrawn; the petitioner was abusing the judicial process.
- The petitioner invoked the MSME Notification only in 2023, long after declaration of NPA in 2020 and advanced SARFAESI proceedings.
- RBI circulars apply only to commercial banks—not TDB.
- The petitioner is in contempt for failing to withdraw earlier proceedings per the High Court’s directions.
4. Court’s Analysis and Reasoning
(i) Suppression and Abuse of Process
The Court found that the petitioner:
- Concealed the existence of the 1 July 2024 coordinate Bench decision—directly rejecting the same MSME Notification plea.
- Failed to disclose withdrawal of SLP(C) No. 21367 of 2024 and the pendency of Review Petition (L) No. 28352 of 2024.
- Filed 15+ rounds of parallel, repetitive petitions, abusing judicial process.
This alone justified dismissal.
(ii) Binding Effect of the 1 July 2024 Judgment
The Court held:
- The issue raised in the present petition had been conclusively decided against the petitioner by a coordinate Bench.
- A coordinate Bench cannot sit in appeal over another coordinate Bench’s judgment.
- Only the appellate jurisdiction of the Supreme Court or a successful review could overturn the earlier ruling.
Even if erroneous, the earlier judgment binds the High Court until set aside.
(iii) Effect of Pro Knits v. Canara Bank
The Court acknowledged that:
- The Supreme Court declared the MSME Framework mandatory.
However:
- The Supreme Court refused to remand MSME matters for reconsideration, making its ruling prospective for those whose SARFAESI proceedings were concluded.
- The petitioner’s proceedings under SARFAESI and IBC had progressed to an irreversible stage.
- The petitioner invoked MSME protections only in September 2023, three years after NPA classification.
Thus, Pro Knits did not revive stale claims.
(iv) Requirement of Timely Invocation Under Section 13(3A) SARFAESI
Referring to:
- Pro Knits
- Shri Swami Samarth Construction v. NKGSB Cooperative Bank (2025)
The Court held:
- The MSME must assert its claim before or at the time of replying to the Section 13(2) notice, i.e., under Section 13(3A).
- The petitioner did not invoke MSME rights at any of these stages.
- The belated request in 2023—when all proceedings were advanced—could not undo crystallised rights of the lenders.
(v) No Right to Re-litigate
The Court held the petition barred by:
- Issue estoppel
- Finality of litigation
- Principles of judicial discipline
- Equity jurisdiction limitations
5. Final Conclusion and Holding
The Bombay High Court held:
- The writ petition was not maintainable due to suppression of material facts, multiplicity of prior proceedings, and the binding effect of the 1 July 2024 judgment.
- Even on merits, the petitioner’s delayed invocation of the MSME Framework did not entitle her to relief.
- SARFAESI and IBC proceedings had advanced to a stage where reversal was inequitable.
- Prior costs of ₹5 lakhs imposed were considered sufficient; no further costs imposed.
The writ petition was dismissed, interim relief vacated, with liberty to pursue any other remedy consistent with law and the Supreme Court’s directions in Pro Knits.
FAQs:
1. What is the MSME Revival and Rehabilitation Framework of 2015?
It is a government-mandated process requiring lenders to identify early financial stress in MSMEs, form a committee, and evaluate a Corrective Action Plan before taking recovery steps such as declaring the account NPA.
2. Can a bank declare an MSME account as NPA without forming a committee?
Yes, but only if the MSME has not timely invoked its rights. If the borrower informs the bank before or during its reply to the Section 13(2) SARFAESI notice, the bank must halt recovery and consider the MSME revival mechanism.
3. What happens if an MSME raises its claim long after SARFAESI proceedings begin?
Courts generally do not interfere at a late stage. Once lender rights crystallise—such as possession or auction—belated invocation of MSME protections is ineffective.
4. Does the Supreme Court’s Pro Knits ruling automatically reopen past MSME NPA cases?
No. The Supreme Court held the MSME Framework mandatory but refused to remand past cases where recovery actions were already concluded. Relief is not automatic.
5. Can a borrower approach multiple courts simultaneously against NPA actions?
No. Courts disfavor parallel or repetitive litigation. Suppression of prior proceedings or multiple filings can result in dismissal with costs, as seen in several MSME-related disputes.
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