PRO Knits Vs Board of Directors of Canara Bank & Ors. (Supreme Court of India)
Supreme Court held that Banks/ Non-Banking Financial Companies (NBFCs) are obliged to adopt restructuring process of MSME as contemplated in Notification dated 29th May 2015 prior to classification of account as Non-Performing Assets (NPA).
Facts- The Appellants claim themselves to be the Micro, Small and Medium Enterprises (MSMEs) registered under the Micro, Small and Medium Enterprises Development Act, 2006, have challenged the impugned common order dated 11.01.2024 passed by the High Court of Judicature at Bombay, whereby the High Court has dismissed the said Writ Petitions by holding that the Banks/ Non-Banking Financial Companies (NBFCs) are not obliged to adopt the restructuring process as contemplated in the Notification dated 29th May, 2015 issued by the Ministry of Micro, Small and Medium Enterprises, on its own without there being any application by the Petitioners/ MSMEs. The High Court without expressing any opinion on the merits or the factual aspects of the writ petitions granted leave to the Appellants – Writ Petitioners to agitate the other issues by adopting alternative remedies as may be available to them under the law.
Conclusion- Held that the findings recorded by the High Court in the impugned order that the Banks are not obliged to adopt the restructuring process on its own or that the Framework contained in the Notification dated 29.05.2015, as revised from time to time could not be said to be mandatory in nature, are highly erroneous and cannot be countenanced. The Instructions/Directions issued by the Central Government under Section 9 of the MSMED Act and by the RBI under Section 21 and Section 35A have statutory force and are binding to all the Banking.
