In a recent decision, the Bombay High Court turned down a request from Radhika George, Director of M/s Ray Projects Pvt. Ltd., who was looking for help against Canara Bank's actions to get back money owed. The court decided that the bank followed the right steps according to the SARFAESI Act.
Background of the Case
Radhika George, speaking for Ray Projects Pvt. Ltd., filed a request against Canara Bank. The company, known as a Micro, Small, and Medium Enterprise (MSME), said that the bank's actions to get their money back went against the MSME Notification from May 29, 2015.
Banking History and Loan Issues
- Long-term Banking Relationship: Ray Projects had been doing business with Canara Bank for 14 years.
- Loan Problems: The company's loan account was labeled as a Non-Performing Asset (NPA) several times, with the latest on October 20, 2024. Even though they tried to fix the account, they didn't meet conditions like keeping a recurring deposit.
Legal Actions Taken
- SARFAESI Notices: The bank sent a demand notice under Section 13(2) of the SARFAESI Act, followed by a notice to take possession under Section 13(4).
- Request Filed: George filed the request on February 22, 2025, trying to stop the bank's actions to get their money back, including a sale planned for September 26, 2025.
Arguments Presented
- Petitioner's Stand: Lawyer Mr. Mathews Nedumpara argued that the bank didn't follow MSME rules for identifying stress and taking corrective action before labeling the account as NPA.
- Bank's Defense: The bank, represented by Ms. Vaishali Bhilare, said that Ray Projects didn't provide the necessary paperwork to claim MSME benefits before the account was labeled as NPA.
Court's Decision
- Judgment by Justices R.I. Chagla and Farhan P. Dubash: The court stressed that MSMEs need to actively provide paperwork to banks. The judges found no reason to support the request, pointing out that the MSME procedures were not followed before the NPA classification.
"The Petitioners’ account was declared as NPA on 20th October 2024... at this belated stage, the Petitioners cannot now seek any protection under the MSME Notification."
The court dismissed the request, emphasizing the need for MSMEs to follow the rules for dealing with financial stress. This case shows how important it is to follow regulatory guidelines on time for managing finances.
