The total abdication of the responsibility under the MSMED Act on the part of Advait Sethna, counsel for the Central government/senior officers of the Ministeries/Departments of MSMED/Finance, RBI, to support the legislative intention behind the MSMED Act and the notification dated 29.5.2015 providing for the nursing and care of MSMEs – reg.

The total abdication of the responsibility under the MSMED Act on the part of Advait Sethna, counsel for the Central government/senior officers of the Ministeries/Departments of MSMED/Finance, RBI, to support the legislative intention behind the MSMED Act and the notification dated 29.5.2015 providing for the nursing and care of MSMEs – reg.

Mathews J Nedumpara

01.10.2024

To,
Hon’ble Prime Minister
Law minister
Finance minister
Minister for MSMEs
Secretaries to the Govt of India in the depts/ministries of legal affairs, banking, MSMEs.

Hon’ble Prime Minister/Sirs/Mesdames

Sub: The total abdication of the responsibility under the MSMED Act on the part of Advait Sethna, counsel for the Central government/senior officers of the Ministeries/Departments of MSMED/Finance, RBI, to support the legislative intention behind the MSMED Act and the notification dated 29.5.2015 providing for the nursing and care of MSMEs – reg.

I address the Hon’ble Prime Minister/Ministers and Secretaries of the Government of India, as a lawyer who has been relentlessly fighting for the cause of MSMEs who are denied what they are entitled in law, namely, a protection against coercive recovery action without being provided an opportunity of revival which the Act and the notification makes mandatory. The notification dated 29.5.2015 contemplates a mechanism for resolution of stress, keeping in mind the legislative policy to not allow MSMEs to die but afford them an opportunity of nursing, care and revival, and where such revival is found to be not feasible, to allow recovery. The notification casts the responsibility for implementing such a mechanism on the board of directors of the Reserve Bank and the bank or financial institution concerned. It would be shocking to the Hon’ble Prime Minister and the high dignitaries I address, that not a single bank has ever constituted a committee as contemplated under the notification dated 29.5.2015. Giving scant regard to the said notification which has received the assent of both houses of the Parliament and thus, is the will of the people, banks and financial institutions invoke the SARFAESI Act and take forceful possession of the residential homes and units of even micro and small enterprises and render them homeless, depriving the means of livelihood of thousands of workers.

The framework for resolution of stress which contemplates the constitution of a committee consisting of senior officers of the bank, a subject expert, representative of state government etc. is akin to the BIFR. The committee is reposed of the duty of revival of a unit, if it is so feasible, and to otherwise permit recovery. The MSMED Act and the notification was enacted keeping in mind that with the repeal of the SICA and the enactment of the SARFAESI Act, MSMEs, which is the very lifeline of our economy, become vulnerable because of the lack of financial and other resources, face the threat of premature death because there exists no legal framework to protect them. Banks being given the responsibility of resolution of stress, the notification has equally kept in mind the health of the financial sector, which requires hassle free recovery of debt.

In our constitutional framework, it is the duty of the courts to enforce the laws enacted by the Parliament fearlessly and independently. It is the duty of the courts to construe the laws when it is aimed at the benefit of weaker sections and priority sectors like the MSME, benevolently, namely, to further the legislative intention, namely, that no MSME should be allowed to die without atleast one attempt at revival of the unit. Our higher judiciary is manned by men and women of great integrity who have the constitutional ethos, particularly that of a welfare state committed to the welfare of the common man and the poor. However, I am afraid to say that, in the case of the MSMEs, the courts and tribunals in this country has failed to live up to our constitutional ethos. For obvious reasons, I do not wish to elaborate. Suffice to say that, in the innumerable cases where I have been exposing the cause of the micro and small entrepreneurs who had put everything they have, their blood sweat and tears, mortgaged their residential homes and landed in distress for no fault of their own, but for vagaries of the economic situations, they are often denied justice.

With a great amount of hesistation, I beg to state that the courts and tribunals would often refuse to even record my very plea that the recovery proceedings are rendered void ab intio, for it has been initiated without constituting a committee and without the MSME being afforded an opportunity for revival.

Keeping in mind the need to be brief, I would beg to state that the Bombay High Court was ultimately gracious enough to admit my plea seeking protection under the MSMED Act and directed the Government of India and Reserve Bank of India by order dated 5.7.23 to file an affidavit explaining their stand. The Reserve Bank did not enter appearance. An affidavit purportedly on behalf of the Union of India came to be filed after the High Court gave an ultimatum, at the hands of one A.R.Gokhe , a junior officer at the MSME Department, Mumbai.

Nothing could be more laughable than the said affidavit. It did not even contain a whisper about the protection which the MSMEs had sought before recovery action can be taken. It instead spoke of something entirely unrelated- the favourable measures provided under Chapter V of the Act to enable MSMEs to recover the amounts due to it. The unkindest cut of all was the submission by Shri. Sethna, who represented the Union of India. For reasons difficult to be fathomed, he argued against the Act and the letter of the notification and that banks and financial institutions are under no obligation to constitute a committee in terms of the notification before recovery action can be initiated.

I must hasten to add that my purpose is not to make any kind of allegations against Sri. Sethna or the total lack of transparency in the appointment of Central Government Standing Counsels and the resultant miscarriage of justice. That is a subject on which I have addressed the law ministry innumerable times, demanding selection based on merit.

My purpose in referring to Advait Sethna, Central Government standing counsel, opposing what the MSMEs are legitimately entitled to under the notification, without there being an affidavit in support of his stand or at least anything to that effect in writing.

I do not wish to use strong expressions, I only wish to say that the consequences were catastrophic. It meant repeal of the entire notification. The division bench of the Hon’ble High Court, relying on the aforesaid oral submissions of Shri. Sethna, was pleased to hold that the benefit can only be extended to MSMEs who have themselves applied for the constitution of a committee. Shri. Sethna had argued that the notification also provides for voluntary application by the MSME in distress. What the notification contemplated, in unmistakable terms, going by its letter, is to obligate the banks to mandatorily identify the incipient stress of a micro, small or medium entrepreneur, reach out to it, prevent it from falling such, and where it has fallen sick, to revive it, and where such revival is not seen to be feasible, to permit recovery, at the same time keeping intact the public interest of facilitating easy recovery by banks and financial institutions.

As aforesaid, my purpose in addressing the instant letter is not to find fault with anyone but to find an immediate solution, for what is at stake is the lives and livelihood of lakhs of MSMEs, the protection of which is eminently in public interest. I consider it the good fortune of the common man that we find a leader in Shri Narendra Modi, who is deeply concerned about them. The injustice which resulted from the judgement of the Bombay High Court in the cases of MSMEs could be remedied without any difficulty. It can be remedied even by instituting a review petition by the government of India.

I would be grateful if the instant letter at my humble hands receives urgent consideration at the hands of the Hon’ble Prime Minister/Ministers/Secretaries.

With most respectful regards,

Yours Sincerely,

MATHEWS J. NEDUMPARA