Latest Important Judgments

200. Secured creditors -- SARFAESI proceedings -- MSME – Rehabilitation of – Non-Performing Assets – Procedure of -- Revival and Rehabilitation of MSMEs -- Section 21 and Section 35A of Banking Regulation Act empower the RBI to frame the policy and give directions to the banking companies in relation to the advances to be followed by the banking companies -- Such directions have got to be read as supplement to the provisions of the Banking Regulation Act and accordingly are required to be construed as having statutory force and mandatory. -- Entire exercise as contained in the “Framework for Revival and Rehabilitation of MSMEs” is required to be carried out by the banking companies before the accounts of MSMEs turn into Non-Performing Asset. -- Whole process of enforcement of security interest as contained in Chapter III of the SARFAESI Act, could be initiated only when the borrower makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, in view of Section 13(2) of the said Act. -- Banking companies though 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. 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 companies. (SC) Decided on: 01.08.2024