Dismissed

Arup Kumar Mallick v. Contai Co- Operative Bank Limited

DRT10 Apr 2026SA/101/2025

Case brief

AI extract

What is this about?

The Debt Recovery Tribunal dismissed the SARFAESI application filed by a borrower challenging a Demand Notice and Possession Notice. The court rejected pleas regarding MSME status (raised belatedly), applicability of agricultural land exemptions, and the bank's standing to proceed under the Act.

What did the court decide?

SARFAESI Application dismissed on merits; Stay order vacated; pending Internal Applications disposed of.

Arup Kumar Mallick versus Contai Co- Operative… — Contract and Commercial Disputes | DRT (2026)

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Pagc No.

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KOLI(ATA DCBTE REGOVERY TRIBIJNAL NO. 2 ORDER SHEET (Condrturuon) Arup Kumar Mallick

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Arup Kumar Mallick

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SA 101 of 2025
'Vr
Cuo llo.
Gontai Co-opeartive Bank Ltd.
O{nc. rcilo(r wllh
Drb ObrlddrLd
of O(.rtr0r Slgneblr s[ntrod
Ordor
. rf{.. $cr
' naoaattry
Mr. Debashish Chakraborty
Mr. Agniswar Bhuniya , ld., Counsel for the Applicant.
10.04.2026
tt/r. Sanjib Dawn , Ld. Counsel for the Defendant bank.,
SAI1O1t2O25 is dismissed on merit along with any pend s
lAs
There shall be no order as to cost.
Final order / judgment is in separate sheet of 11 pages
File be consigned to record room.
Order be uploaded on the Tribunal's website.
.r---V
4,
(Arbind Madhav)
Presiding Officer
DRT-2, Kolkata
alr

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5 Al 1O1, / 2025^{-DRr -2} /^KOL

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DEBTS RECOVERY TRIBUNAL^- 2, KOLKATA Jeevansudha Bldg., 7th Floor,42tC,^{J.L. Nehru Road, Kolkata} -⁷⁰⁰⁰⁷¹

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Before Shri Arbind Madhav, Presidinq Officer

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S.A. No.101 o1 2025

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ln the matter of

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Mr. Arup Kumar Mallick, S/O Late Sushil^{Mallick, Village'Monoharchak, P.O & P'S} - Contai, Dist - Purba Medinipur,^{Pin-721401,West Bengal}

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SARFAESI Applicant

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-Versus-

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Contai Co-operative Bank Ltd., having^{its Main Branchat P O. Contai, Dist} -^Purba Medinipur, Pin - 721401 , West^Bengal

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The Authorised Officer, Contai Co-operative^{Bank Ltd.,P.O Contai' Dist.} -^Purba li/ledinipur, Pin - 721401 , West^Bengal

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SK lt/ainuddin, S/O of lsrafil, aged^{about 39 yeras, residingat Basantia, P.O- Basantia,P.S} Contai, Dist. - Purba lt/edinipur,^Pin -⁷²¹⁴⁴²

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subhasish Bera, s/o Radhashyam Bera,^{aged about 33 years, residing at Kashba EgraI} No. wand, Egra, Dist. -Purba lt/edinipur,^Pin -⁷²¹⁴²⁹

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Defendants

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Ld. Counsel for the^parties:

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For the SARFAESI Applicant

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(1) Mr. Debashis ChakrabortY

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(2) Mr. Agniswar Bhuniya

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For the Respondent Bank

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Mr. Sanjib Dawn

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JUDGMENT

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Def ivered on 1 0.04.2026

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The instant SARAFAESI application^{has been filed for quashing Section'13(2) notice dated} 23.07.2024 and the^{possessionnoticedated 21.11.2024issued under"Securitisatlonand} Reconstruction of the^{FrnancialAssetsand Enforcement of Security lnterestAct, 2002( in short} referred as SARFAESI Act)^{and alsofor stayof all the furtherproceedtngs until the disposal of the} SA.

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2.) The factual matrix as made out^{in the applicationis that applicant is an enlisted civil} contractor of the State of West Bengal,^{PanchayatsDepartment and use to work for Rural} Development Projects of the^{Panchayatsat the locality.The applicantwas in needof work capital} and approached respondent for^{financial accommodation. The loan was sanctioned in or around} 03.09.2017 for Rs.30,00,000t.^{The applicant signed and executedvarious loan documents. The} respondent further agreed to enhance the^{credit limit by sanction letter dated 24.022020- f he} applicant had signed and executed various^{loan documents.lt has been made out thatapplicant} did not admit the contents^of the^{said documents save and except only the signature. The deeds of} the schedule^property were handed over^{in good faith. lt was apprisedby therespondentthat the} scheduled^properttes were^{mortgaged with the respondent.}

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3.) lt has further been made^{out that applicanthas taken"recourse to the Hon'bleHigh} Court, Calcutta" for unauthorized^{delay for reahsing the payment.The said writ was mechanically}

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s Al ],}r / 2025^{-DRT -2} /^{KO L} disposed of by the Hon'ble Court^{without any cogent reasons.The applicantbecamevictim of the} circumstances.^(details of this writ^{has not been givenin the application)}

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4.) When the applicant tried to revive the^{business activitieshe receivedthe Section 13(2)} notice dated 23.O7.2024 under the^{SARFAESI Act.A demandwas made showingthe outstanding} as Rs.5,31,31,349 90/-^{(Rupees FivecroreThirty one LakhThirty one Thousand Three Hundred} Forty Nine and Ninety Paise)ⁱⁿ a^{combinedway for boththe accounts. (The notice under Section} 13(2) dated 23.07 .2024 is annexure^{'A' to the SA)}

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5.) lt has further been made out^that the^{saidSection 13(2) noticewas defective and cannotbe} sustatnable as no loan documents^{were signed and executed,has been mentionedin the said} 13(2) notice. lt has further been^{madeoul that thedescrrptionof the mortgaged properties} mentroned in 13(2)^notice was^{also incorrect.ln the said'13(2)notice the account was shown to} have been classified as^{Non PerformingAsset (NPA)on 30.04.2024 dueto default in paymentNo} evidence has been mentioned^{in the13(2) notice to substantiatethe default in repayment} 6.) The nature of default has^{not been mentioned. lf there were certain irregularities in} repayment that could have been cured^{by givingan adequate opportunityto the borrower. The} applicant did not^get such opportunity.^{The respondent also did not make any attemptby way of} restructuring the existing loan^{account that was totally contraryto the guidelinesof the RBI as bank} did not follow the^{provisions of Section 2 of the SARFAESI Act.}

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7.) Details of the outstandtng has^{not been mentioned.No statementof accountshas been} annexed. The rate of interest^{was also not disclosed in the 13(2)notice The applicant expressed} his apprehension that the^{interestwhich has been charged are totallywhimsical and not in support} of any document. g.) lt has further been made out^{thatpossession noticedated21 .11.2024was issuedand} recerved by the applicant on^{23.11.2024( the copy attached with the SA as annexure'B').The said} symbolic notice daled 21.11.2024^{has been assailedon the groundsthat it was issuedon the} ground that it violated the Rule 8(1) of the Security^{lnterest (Enforcement Rules)} {^hereinafter referred as SARFAESI Rules).^{Possession notice wasrequired to be served slmultaneouslyby} affixation. The^{possessionnotice has been served only through post therefore there is a non} compliance of the^{Rules.Said possession noticewas with respectto all the four properties All the} four^properties are distinct^{and Separate, hence,there cannot be any one possesstonnoticeThe} applicant is nol sure^{whether affixation was done separately on all the four properties.The} possession notice was not served in electronic^{mode.The personwho issuedthe possession} notice did not disclosed his designation^{and authority in the said possession notice, therefore,it} was very difficult to assess^{whether thatpersonwas authorized as per provisions of Rule2(A) of} the sARFAESI Rules^{The causeof actionhas been disclosedas 2311.2024 whenthe} possession notice was recerved.

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9.) The SA has been filed online^{on02.01.2O25 and the hard copy has beenfiled on} 14 02.2025.

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DEFENDENT'S CASE

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1O ) Affidavit-in-opposition^to this^{sA has been filed. lt has been filed on31 .07 .2025} i 1.) The case of the defendant^{bank as made outin the opposition is that applicants account} was lawfully classified as NPA due^{to his own defaults and all actions under the SARFAESI Act} ,have^{been done in strict compliancesof law. Thebrief fact as Set out in the opposittoniS that}

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sA/10u202s-DRT-2/KO^L

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respondent bank initially sanctioned^{a working capitalfacility of Rs.30,00,000F (RupeesThirty} Lakhs) to the applicant in or about^{September 2017. Thereafter,uponthe applicant'srequest and} after due assessment of^{his business profile and requirements,therespondent bank enhanced the} credit limits in stages. An Overdraft^{(OD) facilitywas sanctionedin August2018 lor} Rs.2,50,00,000/-^{(Rupees TwoCrore Fifty Lakhs), evidenced by a sanction letter dated 08.08.2018} duly accepted by the applicant.^{The sanctioned OD amount was disbursed on 21.08.2018 ( inter} alia by issuance of a cheque^{thatwas used to liquidatethe applicant's earlier outstanding loan with} UBl, Contai branch). Subsequently,^{on theapplicant'sfurtherrequest,the OD limit was enhanced} to RS.4,5O,OO,0O0|^{(RupeesFour Crore Fifty Lakhs)in February 2019 (sanction letterdated} 16.03.2029) and the enhanced^{amountwas disbursedon 30.03.2019.Again in 2020,the applicant} sought a considerable^{increase in limits and he appliedfor an enhancement to Rs6,60,00 000/-} and the bank sanctioned an^{OD limit of Rs.5,40,00,000/- (RupeesFive Crore Forty Lakhs)on} 24.02.2020^(sanction letter^{issuedon 18.03.2020).The enhanced amountof Rs.5.40 crore was} disbursed on 24.O3.2020.^{Each of thesesanction,terms and disbursements was accepted by the} applicant, and he duly executed^{the necessary loan documents and security documents for each} enhancement as^per the^{Bank's standardpractice.}

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ln order to secure the^{aforesaid credit facilitiesthe applicant created morgages over several} immovable^properties owned^{by him. He voluntarily depositedthe title deeds of his properties with} intent to creat an equitable^{mortgagein favour of the bank and also executed Memoranda of} Equitable tvlortgage/ registered^{mortgagedeeds as requiredfor each enhancement The detailsof} the mortgaged^{properties are as follows .Land measuringa total of 285.724 decrmals} (approximately 2.857 acres) owned^by the^{applicant, comprisedof}

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a. Land in Mouza Kishorenagar,^{J.L No 265,P S Contai} -^{area about 7} decimals, with specific^{plot nos. and recorded as homestead/dhosa land}

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b. Land in Mouza Uttar Darua,^{J.L. No. 475,P.S} Oontai -^{totalling about} 92.5 decimals^{(spread over several plots as perthe title deeds)}

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c. Land in Mouza Khar, J.L^{No. 84, P.S Pataspur} -^{totalling aboul186.224} decimals(comprisingmultipleplots'largelyclassifiedaS..Jal',orwaterbodyland).

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13). All these^properties together^{(kishorenager,Uttar Darua and khar landsaggregatingto} 2gS 724 decimals) were mortgaged^{as securityfor the applicant'soverdraft accountThe} mortgaged was created^{initially for the Rs. 2.50 cr facility (mortgage deed no 7674daled} 13 08.2018) and extended^{/ modifiedfor subsequentenhancements (e.g. mortgagedeed no. 2481} dated 25.03.2019 for^{Rs. 4.50 Cr and mortgage deed no. 247 6 dated 20.03.2020 for Rs. 6 Cr')'} Thus, the applicant's^loan was^{secured by valid mortgages,executed with his full knowledge and} consent. The applicant's^{sweeping denial of the legalityand validityof the mortgageand the} documents he signed^rs false and^{baseless. He handed over the titledeeds to the bank at the time} of sanction and executed^{mortgage documentsin presenceof the Registrar/ authorizedofficer.} The documentation was done^{in accordancewith law, and the mortgageis perfectlyvalid and} enforceable. lt does not lie^{in the mouthof the applicant} -^{and after having availeda series of} enhancements totalling^{croresof rupees to now claim that he did not understandthat his properties} were berng mortgaged. The bank^{expresslydisputes and deniesthe applicant's allegation that the} mortgage is illegal or invalid^{in any manner.All necessary chargeshave been createdand} 7----^{recorded the mortgagedocuments bear the applicant'ssignatures, and the transactions were done} 42'

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5A/101/202s-DRT-2/KO^L

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with transparency. The description^{of the secured assetsin the loanand security documentsis} accurate, and the same^{descriptions were carriedintothe statutory notices.}

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14). lt is pertinent that the applicant's^{accountdid not remain standardfor long afterthe final} enhancement. Despite the^{generous limits granted, the applicant failed to maintain financial} disciplineⁱⁿ the operation^{of the overdraft account. Repeated notices and reminderswereissued} by the bank when the account^{showed signs of stress. ln fact, between 2021 and 2024, lhe} respondenl bank sent multiple reminders/letters^{to the applicant regarding irregularities and} overdue amounts.

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The bank^gave him sufJicient^{time and multiple opportunities (through reminders and} discussions) to regularize the^{account.The applicant, however,failed to regularizethe overdraft or} even substantially^reduce the^{outstanding despite these indulgences.}

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16). Therefore, in^{line with} the^{Reserve Bankof lndia (RBl) guidelineson asset classification, the} applicant's oD account was^{ultimately classifiedas a Non} -^{PerformingAsset (NPA)on} 30.04.2024 when it became^{evident that the overdue interest and overdrawnamount had remained} unpaid for more than 90 days.^{The saidclassificationwas done as per section 2(1)(o) of the} SARFAEST Act^(which adopts^{the RBI's prudential norms for rdentifying NPAs)lt is specifically} denied that the Bank acted^{in contravention of the definitionof NPA in Section 2(o)} -^{in fact, the} bank strictly followed the^{criteria therein. By3O'h April 2024,lheapplicant's account was "out of} order" for over 90 days^{(there were no credits sufficient to cover interest sinceat least upto}

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January 2024, and the outstanding^{remained continuouslyin excessof the sanctionedIimit),} thereby meeting the^{definitron of an NPA.}

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17). Section 13⁽²⁾ of the SARFAESI^{Act doesnot mandatedetailedreferenceof the loan} agreement or the execute date^{in the demand notice.The noticeclearly referredto theapplicant's} loan OD account and LT Business^{loan account and specified the outstandingamountThe} applicant himself executed the^{documents across 2018 lo 2020.}

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Even after the expiry^of the^{period from the demand notice, notice undersection1 3(4) of the} Act was issued and^{possession noticedated21.11 .2024 as per Rules was issued and duly served'} 19) lt is admitted by the applicant^{that notice was duly served.The affixation was alsomade.} The copies of^possession notice,^{photographs of affixation and postal receipts with track reportare} annexed with the^opPosition.

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The applicant has^{not pointed out any Rule or serious fact regarding measures laken} wherever not in accordance^{with the SARFAESIAct or the SARFAESI Rules. On the above} grounds prayer has been made to^{dismissthe SA.}

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Along with the opposition^{the copies of the detailed account statement has also been filed.} copy of representation dated^{18.09.2024 under 13(3A) has also been annexed and reply to} representation dated 26.09.2024^{has also been annexed.}

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SUPPLEMENTARY A^{FFIDAVIT TO THESA}

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One supplementary affidavit^{has been filed onlineon 24.02.2026 andthe hard copywas} filed on 25.02.2026. lt is^{made out that this supplementary affidavit has been filed in view of the} liberty granted by Hon'ble^{High Court by order dated 20 02'2026}

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lt is made out that applicant^{is a registered Micro,small and [/edium Enterpriserunning} various business operations^{in the construction sector.The busrness of the applicantwas} registered under tiISME^{and in furtheranceof such registration,the UDYAM Registration} 4r certificate^{was issued to the applicant bearing UDYAM RegistrationNo. -UDYAM-WB-12-} (----.'

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OO71443.^(the copy of the registration^{certificate has been annexed). The applicantfor expansion} of his business operations approached^{the respondent cooperative bankfor credit facilities.The} bank after thorough verification^{of the business profile of the applicant and also the title and nature} of the immovable^property that^{wereproposedfor security, initiallysanctioned a workingcapitalof} Rs. 30,00,000!⁽ Rupees Thirty^{Lakhs) and subsequently an additional security the bank granted} an overdraft of Rs. 5,40,00,0001^{(Rupees Five Crore Forty Lakhs) and alsoa fixed depositof Rs l} crore lt has further been^{madeout that for outstandingaforesaid credit facilitysecuritywas} created out of such immovable^{propertyand majorityare in agricultural in nature. (Photographsof} the assets has been annexed).

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lt has further been made out^{that during the pendency of the SARFAESI applicationone} notice was received by the^{applicant from the Advocate Commissioner for taking possessionof the} secured asset. The bank had^{also issued various Sale notices which are also pending} considerations from the^Tribunal.

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lt is made out that as^{the propertiesare agriculturalland whichts exempted under lhe} SARFAESI Act The^{measurestaken against such secured assets are bad.}

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Affidavit-in-opposition to^{that supplementaryaffidavit daled 24.02.2026has alsobeen} filed lt has been made out that^{properties thatwere offeredas securityfor commercial credit were} not intended or use for agricultural^{purpose The bank never admitted that loan qualifiesas} agricultural loan. The description^{recorded iS not conclusivefor taking the advantageof} exemptions under Section 31^{(i) of the SARFAESI Act. The determinationas to the agricultural} lands depends upon the nature of^{the loanat the time of creation of security interest.The loan in} question was not sanctioned for agricultural^purpose and the^{applicant cannot take protection on} the ground of the revenue record entry^{as'JAL". lt is further madeout that MSME framework} notification dated 29.05.2015 is of a binding^{nature but the borrower must invokeit in time and} properly

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l.As

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Applicant has also filed certain^{lAs including1N309512025with one supplementary This lA} has been preferred for setting astde^{the order dated12.09.2025passed by ld. ACJM, Contai,} purba lVledinipur under Section 14 of the Act. Another lA challenging the sale scheduled^on 07 01.2026 was atso filed. One^{lN57O4l2O26was filed by the applicantto impleadthe auction} purchaser. The application was allowed and auction^{purchaserwas impleaded as defendant no 3} &4.

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28\ Dunng the^pendency of the^{SA, one Writ being wPA2112 of 2026 was filed and the copyof} the order daled 20.02.2026 has been^{annexedwith the supplementary.TheHon'bleCourt has} passed order observing the issues -

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(a) the action perpetrated by the bank is against^{a property, classifiedas an agricultural} land and hence squarety barred under^{Section 31(i) of the SARFAESIAct, 2002(hereinafter} referred to as the^'said Act').

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(b) The petitioner, being a MSlvlE, is entitled to^{be guided by the frameworkespoused} under the notificatlon. The bank has^{not followed the said Notification on account whereof the act} of commissron and/ or omission^of the^{bank is grosslyillegal;}

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initrate any action under the said^Act.

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Hon'ble High Court has further observed that^{petitioner wouldbe at liberty to take all the} aforesaid three issues before the Tribunal in the^pending Section^{17 Application anda direction} was issued to this Tribunal to take up this matter^{expeditiously andcomplete the hearing and pass} Judgment^{by lvlarch,5\h2026. The time was later on extended up lo 27.03.2026The matter was} finally heard and reserved on 19.03.2026.

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ISSUES

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29\ After hearing the^parties and on consideration^{of the record following issues arise for the}

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consideration -

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(A) The petitioner, being a I\ilSIVlE, is entitled to be^guided by the^{frameworkespoused} under the notification. The bank has^not followed^{the said Notification on account whereoftheact} of commission and/ or omission^of the^{bank is grosslyillegal;}

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(B) The action perpetrated by the bank is against a^property, classified as^{an agricultural} land and hence squarely barred under Section 31(i) of^{the SARFAESIAct,2002(hereinafter} referred to as the^'said Act')

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(C) Respondent no.3 itself rs not a scheduled bank, on account^{whereofit had no nght to} initiate any action under the said Act

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(D) Whether the order^passed by the ld. ACJM, Contai, Purba^{lVledinipurdated12 09.2025} and the sale notice dated 02.12.2025^{are in accordance with the procedure.}

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(E) to what relief or reliefs ?

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ISSUE NO. A

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Learned counsel for the applicant,^{tVlr. DebashishChakraborty submits that applicant ts a} registered IVlicro, Small & [/edium Enterprise running^{various business operationsin the} construction sector and the business was^{registered undertheI\ISMEcategory of the Government} of lndia and in furtherance lo such^registration the UDYAM^{Registration Certificate was issued to} the applicant bearing UDYAT/ Registration^{No. - UDYAM-WB-12-OO71443. The questionof l\ilSftilE} was raised in reply to the demand notice issued under^{Section 13(2) of the SARFAESIAct.} Therefore, the bank is mandatorily^bound to^{look into such claim keeping further actionunder the} SARFAESI Act rn abeyance^and to^{actin terms thereto for securing revivaland rehabilitationof the} defaulting borrower. Mr. Chakraborty^{in support of his case has relied upon certain judgments} -

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a M/s Pro Knits V/s The Board of^{Directorsof Canara Bank & Ors reported in 2024SCC} Online Sc 1864.

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b. Shri Shri Swami Samarth Construction^{and Private Ltd. V/sthe Board of Directors of} NKGDB CO-OP. Bank Ltd. and ors.^passedin writ^{Petition(civil) No.684of 2025 dated} 28 07.2025.

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Learned counsel for the defendant^{bank,t\Ir. sanjib Dawn submits that bankhadno} knowledge of the appltcant being a^{MSI/E enterprise. Thefirst time borrower has set out the pornt} of t/SME Enterprise in^para 8^{in his representationdated 18.09.2024whichis annexure 'B' to the} opposition. He reproduced^{para8 whichis as follows} -

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As you are aware that the borrower^{is a registered MSME enterprise} and therefore, the retevant^{guidelinespaftening to an Enterprise} registered as an MSME, shoutd be followed^{by the secured creditor} before declaring the account of the^{borrower as NPA ln such} circumstances, lt ls sfated that the^{declaration of NPA by the secured} creditor on 30.04.2024 ls not sustalnatr^{te on accountof the failure of}

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the secured creditor to follow proper guidelines governing the same. Therefore, ft ls stated that since, the declaration of NPA is bad in law, the subsequent, purpofted proceedings are also vitiated and are thus, not binding upon the borrowers.

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That point has been made in reply dated 26.09.2024 and it was made clear in reply that MSI/E guidelines do not absolve the borrower from their repayment obligation and it was made clear that the borrower has not disclosed his identity as MSME to the bank at any time

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After perusal of the record it appears that loans were sanctioned during the period 20'172O2O. The account has become Non Performing Asset(NPA) frcm 30.O4.2O24. Demand notrce was issued on 23.07 .2024 and possession notice was issued on 21.11.2024.

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The enterprrse was registered as UDYAM. The copy of the registration certificate has been attached with the supplementary affidavit to the SA filed on 25.02.2O26 (Annexed as^'B' in the supplementary to the SA filed by the applicants). The classified order in the UDYAM certificate is for the year 2025-2026 for lilicro on Q1.04.2025 and for the yeat 2024-2025 for "Small" on 30.05.2o24.Therefore, it apparent that the enterprise was registered as MSME "UDYAM" on 30.05.2024

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Loan account become Non Performing Asset (NPA) due to non operation / default from 30.04.2024, therefore, the registration as MSME was made during the period of default and perhaps after the account was classified as NPA on 30.04.2024. The restructuring of MSITIE account rs not automatrc and is subject to eligibility, viability and the bank's policy. There is a specific assertion in reply dated 26.09.2024 to the representation under Section 13(3A) that the borrower never disclosed his identity as MSME to the bank at any time. The assertion appears correct in the fact of the case.

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The applicant never claimed benefit before the demand notice was issued. lt is only set out in the representation dated 18.O9.2024 as referred above where it is claimed that guidelines as a MSME should be followed by secured creditor before declaring the account of the borrower as NPA. lt has been set out in para 8 of the representation that declaration of NPA by the secured creditor on 30.O4.2024 is not sustainable on account of the failure of the secured creditor to follow proper guidelines covering the same. Therefore, classification as NPA is bad.

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On the basis of the above assertions made in the representation under Section 13(3A) the question is whether the It/lSNilE guidelines can be invoked or not. The enterprise was registered as UDYAM, IvISIVIE on 30.05.2024, therefore, the answer can only be in the negative.

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Hon'ble Supreme Court in the case of Shri Shri Samarth Construction & Finance Solution & Anr. V/s The Board of Directors of NKGSB Co-op. Bank Ltd. & Ors. examined the issue. The relevant portion from para 6 is reproduced here -

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para 6. - ... if such borrower in ils response under Section 13(34) of the SARFAES/ Act asseds that it an MSME and claims the benefit of the FRAMEWORK citing reasons suppofted by an affidavit, the lending banUsecured creditor would then be mandatorily bound to look into such claim keeping fufther action under the SARFAES/ Acf in abeyance, and, should the claim be found to be wofthy of acceptance within the framework of the FRAMEWORK, to act in terms ' thereof for securing revival and rehabilitation of the defaulting borrower. para 7. - As has been noted above, the petitioning enterprise does not seem to have ever claimed the benefit of the terms of the FRAMEWORK after the demand

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notice under Section 13(2) of the SARFAES/ Acl was issued. /t ls at the stage of compliance w h an order passed by the relevant Magistrate under Section 14 of the SARFAES/ Acl that this writ petition has been presented before this Coutt claiming benefits of the FRAMEWORK to restrain the respondent no.2 and its officers from proceeding further under the SARFAES, Act and other enactments except in the manner contemplated under the said Notification. We find the bona fides of the petitioning enterprise to be suspect.

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para 8. - Pro-Knits (supra) is a decision of a coordinate Bench of this Court holding, inter alia, that the Notificalion is binding on the lending banks/secured creditors. Finding to the contrary by the High Coutt of Bombayⁱⁿ the iudgment and order under challenge in the appeal was, thus, quashed. Though while stress/rg that the terms of the FRAMEWORK need to be followed by the^lending bank secured creditors before the account of an MSME is classified as NPA,^thls decision a/so /ays stress on the obligation of the MSMEs by holding that^{'it would} be equally incumbent on the pafi of the MSMEs concerned to be vigilant^{enough to} follow the process laid down under the said Framewo*, and bring to the^notice ol the Banks concerned, by producing authenticated and^verifiable documents/material to show its eligibility to^get the benefit of the^{saidFramework".} It was cautioned that "if such an Enterprise allows the entire^processfor enforcement of security interest under the SARFAESI Act to be over, or^{it having} challenged such action of the banucreditor concerned in the couft of^law/tribunal and having failed, such an Enterprise could not be^{permitted to mlsuse lhe process} of law for thwafting the actrcns taken under the^{SARFAES/Act by raising the plea} of berng an MSME at a belated stage'l Ihls decision. however,^{left unsaid} something which we have explained hereinabove^{while construing the terms} consistently to prevent undermining of^{rights that one central enactment confersby} another.

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The fact of the^present case is different. The enterprise was^{registered as MSIVIE during the} period of default and during the period it became NPA. The assertion made in the representation under Section 13(3A) is that as the enterprise is MSME, therefore, classification^{as NPA is bad.No} reasons have been assigned or were supported by an affidavit.^{The generalstatement madein the} Section 13(3A) representation will not suffice the^invoking of^{"MSMEDAct". The MSMEis brought} into to address the stress that borrowers are facrng and^give a^{resolution whichwill make them} come back to some form and attain status that they were earlier^{running lt is likea guardrails, the} protective conceptual barriers. The object behind enacting MSMED Act^is to^protecttand safeguard the interest of MSMEs, enabling to operate^{in a fair businessenvironment and ensuring} that legitimate claim is not frustrated.

¶111

Hon'ble Apex Court in the^judgment of M/s Pro^Knits V/s^{The Boardof Directorsof Canara} Bank & Ors reported in (2024) 10 SCC 292 has heldⁱⁿ

¶112

¶113

para 18. - We may hasten to add that under the^"Framework for Revival and Rehabilitation of MSMEs", the hanks or creditors are^{required to identifythe} incipient sfress in the account of the Micro, Small and^{MediumEnterprises,} before their accounls turn into non-peiorming assefs,^{by creating three sub-} categories under the^"special Mention^{Account" category, however, while}

¶114

¶115

s A/ to1./ 202s -DRr^-2 / KOL 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.

¶116

Para 19. - The said Framework also enables the Micro, Small or Medium Enterprise to voluntarily initiate the proceedings under the said Framework, by filing an application along with the affidavit of an authorised person.

¶117

para 20. - Therefore, the stage of identification of incipient slress ln the loan account of MSME; and categorisation under the Special Mention Account category, before the loan account of MSME turns into NPA is a very crucial stage, and therefore it would be incumbent on the paft of the MSME concerned also to produce authenticated and verifiable documents/ material for substantiating its claim of being MSME, before its account rs c/assifled as NPA. lf that is not done, and once the account is classified as NPA, the banks i.e., secured creditors would be entitled to take the recourse to Chapter lll of the SARFAESI Act for the enforcement of the security interest.

¶118

para 21 . - /f is a/so peftinent to note that sufficient safeguards have been provided under the said Chapter for safeguarding the interest of the defaulters - borrowers for giving them oppoftunities 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 banucreditor 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 SARFAES/ Act to be over, or it having challenged such action of the banUcreditor concerned in the coutt of law/tribunal and having failed, such an Enterprise could not be permitted lo misuse the^process of law for thwaning the actions taken under the SARFAES/ 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^pai of the Banks to follow the lnstructions/Directions issued by the Central Government and the Reserye Bank of lndia with regard to the Framework for Revival and Rehabilitation of MSMEq it would be equally incumbent on the^paft of the MSMEs concerned to be vigilant enough to follow fhe^process laid down under the said Framework, and bring to the notice of the Banks concerned, by producing authenticated and verifiable documents/material to show its eligibility to get the benefit of the said Framework.

¶119

Taking into consideration the above^judgments it is clear that process of enforcement of security as contained in Chapter lll of the SARFAESI Act can be initiated only when the borrower makes any default in repayment and the account becomes NPA in view of the section 13(2) of the Act. However, in the present case, the borrower has failed to submit authenticated and verifiable documents before the account is classified as NPA. lnstead, the UDYAM registration was^done only dunng the^period of default and NPA.

¶120

41\ lt appears that MSME point has not specifically been taken in the SARFAESI apphcation.^lt was raised only in the supplementary affidavit on 25.O2.2026. The order of the Hon'ble High Court,

¶121

1.0

¶122

sA/ tot/ 2075^-DRr-2 I KOL

¶123

Calcutta as referred in pa,a 7 of the main SARFAESI application has not been filed nor the details of the case number has been^given. Whether the MSME^point was raised in that Writ^{is not} clear. 42) lt has been made out that supplementary affidavit in which MSME^point was raised was filed in view of the liberty given by the Hon'ble High Court, Calcutta by order daled 20.02.2026, therefore, the point MSME has been raised recently. The applicant has not raised^his claim^before the Committee under the framework. lt was^raised onlyⁱⁿ the representation.^{MSME status cannot} be applied retrospectively; the subsequent registration does not affect the legal^{status. Therefore,} in view of the above discussions, the issue is decided against the SARFAESI applicant.

¶124

ISSUE NO. B

¶125

lt has been submitted that the secured assets are agricultural lands and it^is protected under Section 31(i) of Chapter Vl of the SARFAESI Act which^provides that provisions of the Act shall not apply to any SARFAESI interest created in agricultural land. Photographs of the land have been annexed with the supplementary affidavit as annexure 'C' series and in the revenue record it describes as "JAL" land. For that purpose possession notice dated 21 .11.2024 was referred whereunder a different nature of the land was shown as^"JAL" lands.

¶126

Learned counsel for the defendant bank referring to the^{judgmentsof the Hon'ble} Supreme Court reported in (2018) 15 SCC 99⁽ ITC Ltd, V/s^{Blue Coast Hotels Ltd.),} submtts that the loan was^granted for commercial^{purpose and theseare not agricultural} land and rt cannot be protected. Hon'ble Supreme Court held in^para 38 of^{the judgment} which read as follows -

¶127

It is undisputed that these lands were mortgaged in favour of^the creditor under a deed dated 26.02.2010. Obviously,^{since no secuity} interest can be created in respect of agricultural lands and^{yet it was so} created, goes fo show that the^pafties did not^treat the^{land as} agicuttural land and that the debtor offered the^{land as security on the} basis. Ihe undisputed^position is that the total land on^whichtheGoa Hotet was located admeasures 182225 sq. m. Of these,²³³⁵ sq^{m are} used for growing vegetables, fruits, shrubs and^{trees for captive} consumption of the hotel. There is no substantial^{evidence aboutthe} growing of vegetables but what seems to be on the land are sorne lrees beaing curry leaves and coconut. This amounts^{to about 12.8% of the} total area.

¶128

Classification of land in revenue records as^{"JAL"is not dispositive or conclusiveof} the question whether the SARFAESI Act does or does^{not apply. Oncethe secured} property is put as a security by way of mortgage meaning thereby that the same^wasnot treated as agricultural land, that^property cannot be^said to^{be examined from the} provisions under Section 31(i) of the Act. The evidence is also deficient^{whether the} property was in question whether actually put to use for agricultural^{purposeand the} agricultural operation was^going on at the time of creation^{of mortgageand continuanceof}

¶129

¶130

s A / 10 1, / 2O2s^-D Rr^{- z} I^{KO L}

¶131

agricultural operations till the date. ln the description of the land as^{made out in the} possession notice (Annexure "C" to the opposition) it is mentioned as land and building and some of them, nature of the land was vastu & dhosa. Therefore, the^{protection of} Section 31(i) cannot be claimed. On the above the issue^no.B is^{decided in the} negative.

¶132

ISSUE NO. C

¶133

This issue has not been^pressed. Moreover, answer to^{whetherthe cooperative} bank has a right to initiate action under the SARFAESI^Act or^{not must be in the} affirmative. lt is well settled that cooperative^{banks fall withinthe definition of the "Bank"} under the Act and they are allowed to enforce security.^{As the recovery is an essential part} of the banking and it can be invoked under the SARFAESI^{Act. Therefore,the issueNo. C is} decided against the SARFAESI applicant.

¶134

ISSUE NO. D

¶135

The secured creditor has followed strict^{procedure for takingmeasuresunder} Sectron 13 of the SARFAESI Act.^The account^{was classifiedas NPA,thereafterSection} .l 3(2) notice was issued and thereafter the notice under section 1 3(4) was issued. sale notice was issued and sale was successfully conducted.^{An order has also been passed} under Section 14 of the Act by ld. ACJM. The applicant^{has failedto point out any defect} and while passing the order the DM/ ACJM has only^{to dischargeministerialfunction and} not the adjudicatory function and he is not required to^{delve deepinto the legal nicetiesof} the transaction.

¶136

Therefore, the applicant has failed to bring forth any defect^{in the sale notice as well} as in the order^passed by the ld. ACJM under Section^{14 of the Act.Hence,the issueno.} D is also decided against the applicant.

¶137

ORDERED

¶138

I do not find merit in the application ,hence, the SARFAESI^{Application is dismissed on} contest. SARFAESI applicant^{is not entitled} to^{any reliefsin the instant SA}

¶139

There shall be no order as to costs.

¶140

The pending lAs being 1N853t2026, lAl3O53l2O25,^{1N305412025, 1N309212O25'} tLt3o95t2o25, lAJ3396/2026, 1At5447120?6,^{1N544812026,1N5704t2026& 1tu5952/2026 stand} disposed of.

¶141

The SA being SA/101 of 2025 stands disposed of.

¶142

Stay order, if any, is vacated.

¶143

File be consigned to Record Room.

¶144

This order is dictated and corrected by the undersigned^{and pronounced on this the} 1Oth day of April, 2026.

¶145

Copy of the Order be uploadedⁱⁿ the Tribunal's^Website.

¶146

A/bt",)^NDt' (Arbind Mad ) Presiding Officer DRT - 2, Kolkata

Arup Kumar Mallick v. Contai Co- Operative Bank Limited

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Arup Kumar Mallick v. Contai Co- Operative Bank Limited

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