The Debts Recovery Tribunal dismissed the application challenging securitization proceedings initiated by Canara Bank. The court held that the applicant failed to claim MSME status or object under Section 13(3-A) of the SARFAESI Act as required by the 2025 INSC precedent. The court also found the possession notice claim time-barred.
Application dismissed without costs.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM
PRESENT: SRI. SOVAN KUMAR DASH PRESIDING OFFICER
Dated this the 21st day of November, 2025
SECURITIZATION APPLICATION No.605/2025
Between
Kannan V.G., Aged 49 years, S/o. V.P. Gopalakrishnan, Veliyil House, Kuthirapanthi, Thiruvambady P.O., Alappuzha – 688 002. …Applicant.
And
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This Securitization Application having been heard on 29.10.2025 and 10.11.2025 in the presence of Advocate Athul M.V. for the applicant and Advocate Rajesh Rajagopala Pillai for the defendants and stood over to this day for consideration, the Tribunal delivered the following:
F I N A L O R D E R
Challenging the securitization proceeding initiated by the defendants under the provisions of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as ‘the SARFAESI Act’), the applicant has filed this SA under S.17(1) of the SARFAESI Act with a prayer to set aside all proceedings initiated by the defendants against the applicant.
Brief facts of the case :
2.1 The applicant availed an MSME overdraft facility of Rs.40,00,000/- (Rupees Forty lakhs only) from the first defendant bank which was sanctioned on 30.01.2020 by mortgaging his residential property as collateral security for such facility. The applicant has also availed two other loans from the defendants and due to non-repayment of the loan in time, the defendants initiated securitization proceeding by classifying the loan as ‘NPA’ and issued demand notice under Section 13(2) of the SARFAESI Act on
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03.09.2024 calling the applicant to pay an amount of Rs.50,09,580.49. Due to non-repayment step was taken in issuing possession notice under section 13(4) on 26.11.2024.
2.2 The defendants, being unsuccessful in taking physical possession of the secured asset, filed MC No.70/2025 under Section 14 of the SARFAESI Act before the Chief Judicial Magistrate Court, Alappuzha. In such proceeding an Advocate Commissioner was appointed who issued a notice to the applicant to hand over the possession, which is challenged in this proceeding. So also notices issued by the defendants on 11.07.2025 and 26.08.2025 putting the property for sale are impugned in this proceeding.
2.3 The applicant claimed that the loan was financed under MSME scheme and before taking any securitization measure the defendants ought have followed Reserve Bank of India notification dated 17.03.2016 ie., Master Directions issued by RBI in respect of Lending to Micro, Small and Medium Enterprises Sector. Without following the direction of the RBI and not taking step to provide relaxation or restructuring facilities to MSMEs classifying such loans as ‘NPA’ is illegal and hence the entire proceeding is vitiated.
3.1 The defendants filed written statement denying the averments and contended that all the measures are taken in accordance with the statutory procedure.
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3.2 The demand notice was duly served on the applicants. No claim was advanced under Section 13(3-A) of the SARFAESI Act claiming to restructure the loan under MSME Guidelines issued by the RBI. In absence of the same, the applicant is not entitled to get any benefit of RBI circular. All the statutory measures are duly followed. In absence of the same, the applicant is not entitled to get any relief and the same is liable to be dismissed.
defendants, the following points are emerged for adjudication in this case:
FINDINGS:
Point Nos.(i) & (ii):-
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Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises as notified by the Central Government by notification dated 29.05.2015 in exercise of the powers conferred under Section 9 of the MSMED Act, as revised by the RBI notification dated 17.03.2016 and the Master Directions, i.e., the Reserve Bank of India (Lending to Micro, Small and Medium Enterprises Sector) Directions, 2016. The defendants did not provide relaxation to the applicant nor took any step restructuring the facilities to MSME as per the Reserve Bank of India notification and illegally classified the loan as ‘NPA’. During argument stage also the learned counsel appearing for the applicant raised the same contention.
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submitted that the Judgment referred by the applicant in the case of M/s. Pro Knits (supra) was clarified by the Hon’ble Apex Court in the subsequent Judgment reported in 2025 INSC 908 in the case of Shri Shri Swami Samarth Construction & Finance Solution
& Anr. Vs. The Board of Directors of NKGSB Co-Op. Bank Ltd.
& Ors . To avail the facility of MSME it is required to raise such contention after receiving demand notice by the applicant in their objection under Section 13(3-A) of the SARFAESI Act. Since the applicant has not raised any objection under Section 13 (3-A) of the SARFAESI Act seeking such benefit as per MSME Framework, he is not entitled to claim the same subsequently.
“17. 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,
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the borrower does not bring to the notice of the concerned bank/creditor 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 concerned bank/creditor 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 concerned MSMEs to be vigilant enough to follow the process laid down under the said Framework, and bring to the notice of the concerned Banks, by producing authenticated and verifiable documents/material to show its eligibility to get the benefit of the said Framework.”
In view of this ratio, it is necessary on the part of the borrower to
claim benefit of MSME should follow the process laid down by the RBI under said framework and it must be brought to the notice of the concerned banks by producing authenticated and verifiable documents to show its eligibility to get such benefit of the said Framework.
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“6. In our reading, the terms of the FRAMEWORK do not prohibit the lending bank/secured creditor (assuming that it has no conscious knowledge that the defaulting borrower is an MSME) to classify the account of the defaulting MSME as NPA and to even issue the demand notice under Section 13(2) of the SARFAESI Act without such identification of incipient stress in the account of the defaulting borrower (MSME); however, upon receipt of the demand notice, if such borrower in its response under Section 13(3-A) of the SARFAESI Act asserts that it an MSME and claims the benefit of the FRAMEWORK citing reasons supported by an affidavit, the lending bank/secured creditor would then be mandatorily bound to look into such claim keeping further action under the SARFAESI Act in abeyance; and, should the claim be found to be worthy of acceptance within the framework of the FRAMEWORK, to act in terms thereof for securing revival and rehabilitation of the defaulting borrower.”
In view of this ratio, the applicant having not raised any
objection to the demand notice claiming benefit under MSME, now he cannot raise the same. Hence the contention of the learned counsel for the applicant has no force and the same is not accepted.
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the applicant did not point out any material illegality in such proceeding. In absence of the same, it cannot be said that there is any defect or illegality in such proceeding to interdict. The sale notice under challenge in this proceeding marked as Annexure-A3 did not fructify. Hence the contention in respect of the same is also not sustainable.
Hence it is ordered:-
ORDER
[SOVAN KUMAR DASH] PRESIDING OFFICER
Documents on the part of the applicant
| Annexures | Date | Particulars of documents |
|---|---|---|
| Annexure-A1 | 26.11.2024 | True copy of the notice under Section 13(4) of the Act which was served on the applicant. |
| Annexure-A2 | 20.02.2025 | True copy of the Advocate Commissioner’s notice. |
| Annexure-A3 | 11.07.2025 | True copy of the notice under Section 13(4) along with the sale notice issued to the applicant. |
| Annexure-A4 | 26.08.2025 | True copy of the notice under Section 13(4) of the Act along with the sale notice issued to the applicant. |
Documents on the part of the defendants
| Annexures | Date | Particulars of documents |
|---|---|---|
| Annexure-B1 | 03.09.2024 | True copy of demand notice. |
| Annexure-B2 | True copy of the A/D card evidencing the receipt of the demand notice by the applicant. |
|
| Annexure-B3 | 01.12.2024 | True copy of the possession notice published in The Hindu (English Daily). |
| Annexure-B4 | 01.12.2024 | True copy of the possession notice published in Mangalam (Malayalam Daily). |
| Annexure-B5 | A true photograph showing the affixture of the possession notice in the secured asset. |
|
| Annexure-B6 | 28.10.2025 | A true copy of the undertaking made by the applicant along with its English translation. |
PRESIDING OFFICER
IN THE DEBTS RECOVERY TRIBUNAL-2, KERALA AT ERNAKULAM
PRESENT: SRI.SOVAN KUMAR DASH PRESIDING OFFICER
Dated the 21st November, 2025
SA No.605/2025
Between
Kannan V.G., Aged 49 years, S/o. V.P. Gopalakrishnan, Veliyil House, Kuthirapanthi, Thiruvambady P.O., Alappuzha – 688 002. …Applicant
And
Canara Bank, Punnapra Branch, Bldg. No.VII/47 P, Sundaram Square I Floor, Punnapra, Alappuzha – 688 004, Represented by its Manager & Anr. …Defendants
F I N A L O R D E R
3 issues framed by the court
Whether securitization measures suffer from illegality due to non-compliance with RBI MSME directions?
Whether applicant failed to raise MSME objection under Section 13(3-A) bars subsequent claim of relief?
Whether possession notice is barred by limitation as challenge was not made within 45 days?
Colour shows how this judgement treated each authority
M/s Pro Knits vs. The Board of Directors of Canara Bank & Ors.Explained¶17
2024 INSC 565 · Who else cites this
Kannan V.G.
Sovan Kumar Dash
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
