I. The Central Tension

The MSME Revival and Rehabilitation Framework is now authoritatively established as mandatory and bilateral: banks must follow it before NPA classification, and MSMEs must actively participate in it to claim its protection. See Pro Knits v. Board of Directors Canara Bank, (2024) 10 SCC 292. What the settled jurisprudence has not resolved is a more consequential question for insolvency practitioners: what is the precise legal relationship between an MSME's rights under the Framework and the adjudicating authority's jurisdiction under the IBC once a Section 7 application is filed? The three judgments under review in this piece — Pro Knits, (2024) 10 SCC 292, Shri Shri Swami Samarth Construction, 2025 SCC OnLine SC 1566, and Damara Gold, 2026 SCC OnLine NCLAT 848 — each address a fragment of this question but leave the core open.

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II. First Open Question: Does MSME Non-Compliance with the Framework Extinguish the Defence, or Merely Weaken It?

The courts have consistently held that where an MSME has failed to participate in the Framework process — whether by not asserting MSME status before NPA classification or by refusing stock audit cooperation — it cannot invoke the Framework to obstruct enforcement or CIRP admission.  In Damara Gold, the NCLAT declined to stay CIRP admission even though the MSME's restructuring proposal had been submitted prior to the Section 7 application, because the MSME had not cooperated in the consequent stock audit. 

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The unanswered question is: does the MSME's non-cooperation constitute a complete forfeiture of the Framework's protection for purposes of IBC adjudication, or is it merely evidentiary weight against the MSME? If the former, a diligent MSME that fully cooperates with the bank's audit process, yet sees the bank still file a Section 7 application, would have a cognisable defence that the adjudicating authority is bound to consider before admission. No judgment in this line has yet ruled on that scenario. The NCLAT in Damara Gold disposed of the appeal purely on the facts of non-cooperation, leaving open whether a cooperative and diligent MSME could successfully resist or delay Section 7 admission.

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III. Second Open Question: The Adjudicating Authority's Jurisdiction to Examine Pre-CIRP Framework Compliance

The Innoventive Industries test, as applied in Damara Gold, confines the adjudicating authority's enquiry under Section 7 to whether debt and default are established — once those twin elements are satisfied, admission is non-discretionary. This sits in an unresolved tension with the Framework's mandatory character. If the Framework is truly binding on banks with the force of statute — as Pro Knits holds — then a bank that classifies an MSME account as NPA without following the Framework has, arguably, acted in violation of a statutory obligation. Yet neither the Supreme Court nor the NCLAT has determined whether such a violation can be raised as a ground before the adjudicating authority to resist Section 7 admission, or whether it must exclusively be channelled through other forums.

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In Shri Shri Swami Samarth Construction, the Court observed that the enterprise would remain at liberty to pursue its remedy under Section 17 of the SARFAESI Act. This strongly implies that Framework violations are not cognisable within IBC proceedings — but the point remains obiter. The doctrinal question of whether the adjudicating authority has any jurisdiction to examine pre-CIRP Framework compliance as a condition of Section 7 admission is unresolved.

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IV. Third Open Question: MSME Creditors Within the Resolution Plan

The judgments are entirely silent on the treatment of MSMEs as creditors — rather than corporate debtors — within an approved resolution plan under Section 31 of the IBC. The Framework creates obligations in the creditor-debtor relationship between banks and MSME borrowers, but the IBC's waterfall under Section 53 does not specifically carve out a preferential tier for MSME operational creditors. No judicial guidance has yet addressed whether the policy basis of MSME protection under the MSMED Act should inform the Committee of Creditors' commercial wisdom in structuring resolution plans, or whether a resolution plan's treatment of MSME operational creditors can be challenged on grounds of MSME-specific legislative policy.

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V. Conclusion

The emerging jurisprudence has successfully performed one doctrinal task: it has confined the MSME Framework to the pre-NPA, pre-CIRP stage, and denied it the status of a shield against IBC proceedings where MSME non-cooperation is established. What it has not yet done is define the positive legal space that a diligent, cooperative MSME occupies at the CIRP threshold; the jurisdictional competence of the adjudicating authority to examine Framework compliance; and the Framework's relevance, if any, to creditor treatment within approved resolution plans.

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