In a significant judgment, the Bombay High Court dismissed a writ petition filed by Manoj Lalwani, Director of Ritu Automobiles Pvt. Ltd., challenging the recovery proceedings initiated by HDFC Bank under the SARFAESI Act. The Court emphasized that the onus to initiate revival measures under the MSME framework lies on the borrower.
The bench, comprising Justices M.S. Karnik and N.R. Borkar, held that once liquidation proceedings begin under the Insolvency and Bankruptcy Code (IBC), all powers of the Board of Directors stand transferred to the appointed liquidator. The Court remarked:
“The petitioner, as a former director, has no statutory authority to pursue the writ.”
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Lalwani had sought several reliefs, including directions to enforce the MSMED notification dated 29.05.2015 and to quash actions taken under SARFAESI and IBC. He also challenged the constitutional validity of several recovery provisions and requested compensation for alleged harm caused by the bank.
The petitioner argued that his company, being an MSME, was entitled to protection and corrective mechanisms under the MSMED Act before any NPA classification. He alleged that the bank violated the RBI’s 2015 notification, which mandates a corrective action plan for stressed MSMEs.
However, the Court rejected this claim, observing that no record suggested the petitioner approached the bank for relief under the MSME framework prior to his loan account being classified as a Non-Performing Asset on October 21, 2019.
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“The burden to initiate MSME revival proceedings lies with the borrower,”
the bench stated, citing the Supreme Court's decision in Pro Knits vs. Canara Bank and Others.
HDFC Bank, supported by RBI and Union of India, asserted that due process was followed, including issuance of demand notices and compliance with RBI prudential norms. The Court was convinced that alternate statutory remedies had been availed by the petitioner, and the challenge before the High Court was merely an attempt to stall the ongoing auction scheduled for June 21, 2025.
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The Court also noted that the petitioner’s contentions were already pending before the NCLT and NCLAT, and that any grievance about the classification or auction should be pursued before those forums. Accordingly, the writ petition was dismissed with no order as to costs.
“We are satisfied that this petition and the application is only an attempt to stall the recovery proceedings,”
the bench concluded.
Case Title:- Manoj Lalwani v. Reserve Bank of India & Others Writ Petition (L) No. 31676 of 2024
