Mr. Jeevesh Nagrath, Sr. Adv. with Mr. Arun Batta and Mr. Arjun Gaur, Advs v. PUNJAB NATIONAL BANK

$~135 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 8345/2024 AVYUKTA DAIRY PRODUCT LTD .....Petitioner Through: Mr. Jeevesh Nagrath, Sr. Adv. with Mr. Arun Batta and Mr. Arjun Gaur, Advs. versus PUNJAB NATIONAL BANK .....Respondent Through: Mr. Anmol Panwar and Ms. Shashi Ranjan, Advs. CORAM: HON'BLE MR. JUSTICE VIKAS MAHAJAN O R D E R % 29.04.2025 CM APPL. 23709/2025 (for revival of petition) 1. The present application has been filed by the applicant/petitioner seeking following relief: “Allow the present application and pass appropriate directions thereby reviving the writ petition to its original number and directing the Respondent not to proceed with any coercive action/auction of the mortgaged property.” 2. The captioned writ petition was filed by the petitioner alleging that the respondent Bank has illegally taken physical possession of the Plant and Machinery of the petitioner and is proposing to put the same to e-auction completely ignoring the Notification dated 29.05.2015 namely the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00 “Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises” (hereinafter referred to as the „said Framework‟) issued by the Central Government under Section 9 of the MSMED Act, 2006. 3. When the writ petition was listed on 12.03.2025, learned counsel for the petitioner submitted that he would not press the writ petition any further, if he is permitted to approach the respondent/Bank again with a fresh request. He further sought direction to the respondent/Bank to consider such proposal without being prejudiced with the background facts and to consider the proposal in accordance with law. 4. Accordingly, the petition was disposed of as not pressed granting liberty to the petitioner to approach the respondent/Bank with a fresh proposal. It was further observed that in case any such proposal is submitted by the petitioner within 10 days from the date of the said order, it would be up to the respondent/Bank to consider the same in accordance with law, as expeditiously as possible, preferably within a period of eight weeks from the date of submission of the said representation/proposal. 5. The relevant part of the order dated 12.03.2025 reads as under: “1. After hearing arguments for some time, learned counsel for petitioner submits that petitioner would not press his present writ petition any further if he is permitted to approach the respondent-bank again with a fresh request. He only seeks a direction to the bank to consider such proposal without being prejudiced to the background facts and to consider the same in accordance with law. 2. Learned counsel for respondent-bank, without prejudice to their rights and contentions, has no objection to the aforesaid proposal. 3. In view of the aforesaid, present writ petition is disposed of as not pressed. This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00

4. Petitioner is, simultaneously, at liberty to approach the respondent bank with a fresh proposal. In case any such proposal is submitted by the petitioner within ten days from today, it will be upto to the respondent-bank to consider the same in accordance with law, as expeditiously as possible, preferably, within a period of eight weeks from the date of submission of aforesaid representation/proposal.” 6. Subsequently, petitioner filed another application being C.M. APPL. 15669/2025 alleging that after the order dated 12.03.2025 was passed by this Court, petitioner vide its letter dated 15.03.2025 had informed the respondent/Bank that it will be submitting the proposal in a week‟s time i.e. within the time of 10 days granted by this Court, however, the respondent/Bank in complete defiance of the order dated 12.03.2025, made an endorsement on the aforesaid letter of the petitioner to the effect that restructuring cannot be accepted since the unit of the petitioner is not operational/running since inception. It was further alleged that earlier request of the petitioner was declined on the same ground as per extant norms of the Reserve Bank of India. It was also mentioned that mortgaged property is on public auction on 19.03.2025. 7. Cosidering the submissions made by the learned counsel for the petitioner as well learned counsel for the respondent/Bank and further having regard to the fact that writ petition was disposed of on a concession made by the learned counsel for the respondent thereby granting liberty to the petitioner to approach the respondent/Bank with a proposal, it was observed by this Court that the respondent/Bank ought to have waited for the petitioner to submit its proposal in terms of the order of this Court dated 12.03.2025 before proceeding further with an auction. 8. Accordingly, vide order dated 18.03.2025, the petitioner was directed to This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00 submit its proposal in terms of order dated 12.03.2025 latest by 24.03.2025 with a further direction to the respondent/Bank to consider the same in terms of the observations made in the said order of this Court. Respondent/Bank was also directed that till the time decision is taken by the respondent/Bank on the proposal so made by the petitioner, the process of auction be deferred. The relevant paras from the order dated 18.03.2025 read thus: “12. I have heard the learned counsel for the petitioner/applicant as well as learned counsel for the respondent/non-applicant. 13. A reading of the order dated 12.03.2025 makes it apparent that the petitioner had not pressed his writ petition only when the learned counsel for the respondent gave a concession to the effect that the proposal of the petitioner will be considered by the respondent bank. Even while disposing the writ petition, this Court had granted liberty to the petitioner to approach the respondent bank with a fresh proposal with an observation that in case any such proposal is submitted by the petitioner within ten days from the date of the order, it will be upto the respondent bank to consider the same in accordance with law, as expeditiously as possible, preferably within a period of eight weeks from the date of submission of such proposal. 14. Intriguingly, the learned counsel for the respondent had not brought to the notice of the Court that the public auction is scheduled on 19.03.2025 and that the bids have been received from the prospective buyers. 15. Be that as it may, once the writ petition has been disposed of on a concession made by the learned counsel for the respondent and the liberty was also granted to the petitioner to approach the respondent bank with a proposal, the respondent bank ought to have waited for the petitioner to submit its proposal in terms of the order of this Court dated 12.03.2025, before proceeding further with an auction. To be noted that the ten days‟ time granted to the petitioner to submit its proposal has not yet expired. This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00

16. Having regard to the aforesaid circumstances, the petitioner is granted liberty to submit its proposal in terms of order dated 12.03.2025 latest by 24th March, 2025. In case any such proposal is submitted by the petitioner to the respondent bank, the same shall be considered by the bank in terms of observations made in the said order dated 12.03.2025. 17. It is directed that till the time the decision is taken by the respondent bank on the proposal so made by the petitioner, the process of auction which is stated to be scheduled on 19.03.2025, be deferred. 18. The application stands disposed of in the above terms.” 9. Mr. Jeevesh Nagrath, learned Senior Counsel appearing on behalf of the petitioner submits that vide order dated 12.03.2025 read with order dated 18.03.2025, this Court while disposing of the writ petition had granted liberty to the petitioner to submit fresh representation/proposal with a further direction to the respondent/Bank to consider the same in accordance with law. He submits that fresh representation/proposal for restructuring was submitted by the petitioner vide its e-mail dated 24.03.2025, whereby request was made to the Chairperson of the Committee for Stressed Micro, Small and Medium Enterprises constituted in terms of the said Framework, to consider the same and to fix a suitable time for meeting with their Chartered Accountant for further discussion. 10. To buttress his contention, Mr. Nagrath has invited attention of the Court to the e-mail dated 24.03.2025 and other documents which were attached with the said e-mail. The submission of the aforesaid proposal was also followed by two other e-mails dated 27.03.2025 and 05.04.2025 requesting therein to fix a meeting. 11. He further invites attention of the Court to the letter of the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00 respondent/Bank dated 02.04.2025 to contend that the respondent/Bank has taken a stand that the account was already restructured by respondent/Bank on 29.10.2021 under one-time restructure (OTR), but the petitioner never started operation of the Plant since then. It is further stated that for restructuring of NPA account the unit has to be functional. However, ample time was given to the petitioner for starting the operation of the unit and the Date of Commencement of Commercial Operations („DCCO‟) was never achieved by the petitioner. 12. Mr. Nagrath submits that the representation/proposal dated 24.03.2025 has been considered and rejected vide letter dated 02.04.2025 by the Assistant General Manager of the respondent/Bank and the same was never placed before the „Committee for Stressed Micro, Small and Medium Enterprises‟ of the respondent/Bank (hereinafter referred to as „the Committee‟) which every Bank is obliged to constitute for the said purpose. 13. He submits that the procedure prescribed in the said Framework read with the Master Direction called „Reserve Bank of India [Lending to Micro, Small and Medium Enterprises (MSME) Sector] Directions, 2016‟ issued vide notification dated 21.07.2016 is mandatory and every Bank is obliged to follow the same for revival and rehabilitation of MSMEs. To buttress his contention, Mr. Nagrath has invited attention of the Court to the relevant part of the said Framework which reads thus: “2. Committees for Stressed Micro, Small and Medium Enterprises (1) Subject to any regulations prescribed by the Reserve Bank of India for this Framework, all banks shall constitute one or more Committees at such locations as may be considered necessary by the Board of Directors of such bank to provide reasonable access, to all eligible Micro, Small and This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00 Medium enterprises which have availed of credit facilities from such bank. (2) Subject to inclusion in categories referred to in Para 1, stressed Micro, Small and Medium Enterprises shall have access to the Committee for stressed Micro, Small and Medium Enterprises for deciding on a corrective action plan and determining the terms thereof in accordance with regulations prescribed in this Framework: Provided that where the Committee decides that recovery is to be made as part of the corrective action plan, the manner and method of recovery shall be in accordance with the existing policies approved by the Board of Directors of the bank which has extended credit facilities to the enterprise, subject to any regulations prescribed by the Reserve Bank of India.” (emphasis supplied) 14. The relevant portion of the aforesaid Master Directions is as follows: “4.8. Framework for Revival and Rehabilitation of MSMEs.—The Ministry of Micro, Small and Medium Enterprises, Government of India, vide their Gazette Notification dated 29-5-2015 had notified a “Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises” to provide a simpler and faster mechanism to address the stress in the accounts of MSMEs and to facilitate the promotion and development of MSMEs. The Reserve Bank was advised to issue necessary instructions to banks for effective implementation and monitoring of the said Framework. After carrying out certain changes in the captioned Framework in consultation with the Government of India, Ministry of MSME so as to make it compatible with the existing regulatory guidelines on “Income Recognition, Asset Classification and provisioning pertaining to Advances” issued to banks by RBI, the guidelines on the captioned Framework along with operating instructions were issued to banks on 17-3-2016. The revival and rehabilitation of MSME units having loan limits up to Rs 25 crores would be undertaken under this Framework. Banks were required to put in place their own Board approved policy to operationalise the Framework not This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00 later than 30-6-2016. The revised Framework supersedes our earlier Guidelines on Rehabilitation of Sick Micro and Small Enterprises issued vide our circular RPCD. CO. MSME & NFS.BC.40/06.02.31/2012-2013 dated 1-11-2012, except those relating to Reliefs and Concessions for Rehabilitation of Potentially Viable Units and One Time Settlement, mentioned in the said circular. The salient features of the Framework are as under: (i) Before a loan account of an MSME turns into a Non-Performing Asset (NPA), banks or creditors should identify incipient stress in the account by creating three sub-categories under the Special Mention Account (SMA) category as given in the Framework. (ii) Any MSME borrower may also voluntarily initiate proceedings under this Framework. (iii) Committee approach to be adopted for deciding corrective action plan. (iv) Time lines have been fixed for taking various decisions under the Framework.” (emphasis supplied) 15. Mr. Nagrath also refers to the decision of the Hon‟ble Supreme Court in M/s Pro Knits v. The Board of Directors of Canara Bank & Ors., (2024) 10 SCC 292, the relevant part of which reads as under: “17. What is contemplated in the “Framework for Revival and Rehabilitation of MSMEs” contained in the Instructions/Directions stated hereinabove, is required to be followed prior to the classification of the borrower's account, (in the instant case MSMEs loan account), as non-performing assets. The said Instructions contained in the Notification dated 29-5-2015 as part of measures taken for facilitating the promotion and development of MSMEs issued by the Central Government in exercise of powers conferred under Section 9 of the MSMED Act, followed by the Directions issued by the RBI in exercise of the powers conferred under Sections 21 and 35-A of the Banking Regulation Act, the banking companies though This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00 may be “secured creditors” as per the definition contained in Section 2(zd) of the SARFAESI Act, are bound to follow the same, before classifying the loan account of MSME as NPA. 18. We may hasten to add that under the “Framework for Revival and Rehabilitation of MSMEs”, the banks or creditors are required to identify the incipient stress in the account of the Micro, Small and Medium Enterprises, before their accounts turn into non-performing assets, by creating three sub-categories under the “Special Mention Account” category, however, while creating such sub-categories, the banks must have some authenticated and verifiable material with them as produced by the MSME concerned to show that loan account is of a Micro, Small and Medium Enterprise, classified and registered as such under the MSMED Act. xxx xxx xxx 21. It is also pertinent to note that sufficient safeguards have been provided under the said Chapter for safeguarding the interest of the defaulters-borrowers for giving them opportunities to discharge their debt. However, if at the stage of classification of the loan account of the borrower as NPA, the borrower does not bring to the notice of the bank/creditor concerned that it is a Micro, Small or Medium Enterprise under the MSMED Act and if such an Enterprise allows the entire process for enforcement of security interest under the SARFAESI Act to be over, or it having challenged such action of the bank/creditor concerned in the court of law/tribunal and having failed, such an Enterprise could not be permitted to misuse the process of law for thwarting the actions taken under the SARFAESI Act by raising the plea of being an MSME at a belated stage. Suffice it to say, when it is mandatory or obligatory on the part of the Banks to follow the Instructions/Directions issued by the Central Government and the Reserve Bank of India with regard to the Framework for Revival and Rehabilitation of MSMEs, it would be equally incumbent on the part of the MSMEs concerned to be vigilant enough to follow the process laid down under the said Framework, and bring to the notice of the Banks concerned, by This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00 producing authenticated and verifiable documents/material to show its eligibility to get the benefit of the said Framework.” (emphasis supplied) 16. He further contends that it is not in dispute that the petitioner is MSME, and further similar to M/s Pro Knits (supra), proceedings under SARFAESI Act have been initiated against the present applicant/petitioner as well, therefore the respondent/Bank is still obliged to follow the procedure laid down in the said Framework. Thus, the fresh proposal for restructuring submitted by petitioner in terms of the order dated 12.03.2025 of this Court ought to have been considered by the „Committee‟ in terms of the said Framework read with Master Directions of the RBI, but the said proposal was never placed before the „Committee‟ by the respondent/Bank. 17. In view of the above, issue notice. 18. Mr. Anmol Panwar, learned counsel appearing on behalf of the respondent/Bank accepts notice. He submits that earlier also the petitioner had filed a writ petition i.e. W.P.(C) 7020/2022 which was disposed of by this Court granting liberty to the petitioner to raise all the grounds before the learned DRT. He submits that some of the prayers in the previous writ petition as well as present writ petition are identical. He invites attention of the Court to the counter-affidavit filed by the respondent/Bank in the said earlier writ petition, wherein stand has been taken by the respondent that the unit of the petitioner was not found operational at the time of visits made by the officials of the respondent/Bank to verify its status. He further refers to various anomalies pointed out in the said counter-affidavit. 19. Be that as it may, prima facie it appears that the rejection of petitioner‟s fresh representation/proposal is not in terms of the procedure prescribed in This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 01/05/2025 at 16:19:00 the said Framework inasmuch as the said rejection has been issued and signed by the Assistant General Manager of the respondent/Bank and it appears that the fresh proposal was not placed before the Committee constituted in terms of the said Framework. Accordingly, this Court is of the view that the submission of the petitioner requires consideration. 20. Let reply to the application be filed by the respondent/Bank within a period of two weeks. Rejoinder thereto be filed within one week thereafter. 21. Re-notify on 27.05.2025. 22. In the meanwhile, having regard to the above prima facie view formed by this Court, it is directed that the auction of the property in question be kept in abeyance till the next date of hearing. VIKAS MAHAJAN, J APRIL 29, 2025/jg