Bengaluru, May 6 (KNN) The High Court of Karnataka has ruled that benefits of loan restructuring or revival schemes for non-performing assets (NPAs) are legally available only to functioning micro, small and medium enterprises (MSMEs).

This determination came as Justice M. Nagaprasanna rejected a petition from M/s Metro Steel Section challenging recovery proceedings initiated by the State Bank of India for approximately Rs 18.5 crore in outstanding loans.

The petitioner-firm had argued that the bank should have considered loan rectification and restructuring options as provided in the Reserve Bank of India’s (RBI) 2015 notification under Section 19 of the MSME Development Act, 2006, before pursuing recovery under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

However, the High Court determined that benefits outlined in the RBI’s notification and interpreted by the Supreme Court in the case of Pro Knits vs. Board of Directors of Canara Bank would not apply to the petitioner-firm since it had ceased operations before the bank initiated recovery proceedings, as stipulated in the 2015 RBI notification.

The court noted that during the petition proceedings, the firm had informed the bank that it had wound up its business and closed operations two years prior.

“If the firm has wound up the business and closed the operations two years ago, it cannot take the benefit of the firm being a MSME and the notifications issued under the MSMED Act or even the judgement of the apex court in Pro Knits case,” Justice Nagaprasanna stated.

(KNN Bureau)