J.Jeyaprakash vs. The Authorized Officer

Facts

The petitioner, J. Jeyaprakash, approached the Madurai Bench of the Madras High Court challenging orders passed by the Debt Recovery Tribunal (DRT) in SA No. 272 of 2025. The petitioner had availed four loans from HDB Financial Services Ltd. amounting to approximately Rs. 2,15,00,000/-. Following defaults, his accounts were declared Non-Performing Assets (NPA) on 03.12.2024. The DRT initially granted an installment scheme for repayment, which the petitioner failed to adhere to. Subsequent extensions were also not fully complied with, leading to the rejection of further extension requests by the DRT on 13.10.2025. The petitioner argued his status as a Micro, Small, and Medium Enterprise (MSME) entitled him to rehabilitation benefits, a ground not raised before the DRT.

Held

The Court held that it was not appropriate to intervene in the impugned orders as the Debt Recovery Tribunal (DRT) had not had the occasion to consider the petitioner's claim of being an MSME. The Court noted that this crucial ground was not raised before the DRT, and there was no specific communication sent to the bank indicating the petitioner's MSME status, despite the petitioner producing a Udhayam Registration Certificate. The Court acknowledged the petitioner's reliance on Supreme Court and High Court judgments concerning MSME rehabilitation but found that the factual basis for such a claim was not presented to the original adjudicating authority. Therefore, the Court did not decide on the merits of the MSME claim. The Court granted liberty to the petitioner to take additional grounds before the DRT, which would be considered in light of evidence produced by the parties. The impugned orders were confirmed. Regarding the allegations of coercive recovery tactics, the Court directed the petitioner to approach the police with a complaint, and if filed, the authorities were to register and investigate it in accordance with law.

Key Issues

1. Whether the petitioner, claiming to be an MSME, is entitled to rehabilitation benefits under the Framework For Revival and Rehabilitation of MSME, thereby seeking a stay on coercive recovery proceedings? (Question of law and fact, turning on the interpretation and application of the MSME rehabilitation framework and the petitioner's status). Petitioner's arguments: The petitioner contended that as an MSME, he is entitled to rehabilitation as per RBI Master Directions and Supreme Court/High Court precedents (Pro Knits vs. Board of Directors of Canara Bank and Others, A.K.Karthikeyan vs. The Authorized Officer, Canara Bank, Trichy and Another, WP(MD)No.14439 of 2025). He argued that coercive action should be stopped pending rehabilitation. He also presented evidence of alleged coercive recovery tactics. Revenue/State's arguments: The judgment records no specific arguments from the respondent (HDB Financial Services Ltd.) on the MSME issue. However, it notes that the petitioner concedes the MSME ground was not raised before the DRT, and the respondent bank was not provided with specific communication regarding the petitioner's MSME status.