Right of Redemption Under SARFAESI After Auction Notice: Post-Notice Payment Does Not Invalidate Sale Proceedings
- REEDLAW
- 2 hours ago
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REEDLAW Legal News Network reports: In a significant ruling on enforcement rights under the SARFAESI Act, the High Court held that the borrower’s right of redemption ceases upon issuance of an auction notice under Section 13(8). It was ruled that payments or settlement proposals made after publication of the auction notice do not invalidate the auction process nor prevent the secured creditor from completing the sale in accordance with law.
The Jammu & Kashmir and Ladakh High Court Division Bench, comprising Justice Sindhu Sharma and Justice Shahzad Azeem, while adjudicating a writ petition, held that under the SARFAESI Act, the borrower’s statutory right of redemption under Section 13(8) stands extinguished upon publication of the auction notice. It was further held that any payment or offer to settle made after issuance of the auction notice does not invalidate the auction proceedings nor restrain the secured creditor from proceeding with and completing the sale.
The Petitioner had invoked the writ jurisdiction of the Court seeking quashment of the Tender-cum-Auction Notice issued by the Respondent Bank under the SARFAESI Act and consequential proceedings, contending that despite substantial repayments, the Bank proceeded to auction the secured residential property. It was asserted that the loan account, though sanctioned as a cash credit facility and secured by mortgage, had been substantially serviced, that the outstanding liability was minimal compared to the value of the secured asset, and that the Bank had accepted further payments even after issuance of auction notices, allegedly assuring restructuring of the account. The Petitioner also questioned the service of notices, the valuation of the secured asset, and the maintainability of SARFAESI proceedings after acceptance of partial payments.
The Court noted that the loan account had been classified as a non-performing asset after persistent irregularity and that the Respondent Bank had strictly followed the statutory scheme under the SARFAESI Act by issuing a demand notice under Section 13(2), taking symbolic possession under Section 13(4) read with Rule 8 of the Security Interest (Enforcement) Rules, 2002, and thereafter invoking Section 14 through the Magistrate for taking physical possession. Upon failure of the Petitioner to clear the dues within the statutory timelines, repeated auction notices were issued, culminating in the impugned Tender-cum-Auction Notice. The Court found that the valuation of the secured asset had been conducted by an approved valuer and that mere bald assertions were insufficient to dislodge the valuation exercise undertaken by the Bank.
The Court further observed that the auction process had culminated in the declaration of a successful bidder, who had deposited the entire bid amount in accordance with the auction terms, and that the writ petition had initially been filed without impleading the auction purchaser, thereby suppressing material facts. Placing reliance on the authoritative pronouncement of the Supreme Court in M. Rajendran and Others v. KPK Oils and Proteins India Private Limited and Others, REEDLAW 2025 SC 09218, the Court reiterated that under Section 13(8) of the SARFAESI Act, the borrower’s right of redemption stands extinguished upon publication of the auction notice, and that any tender of dues after such publication does not bind the secured creditor nor invalidate the auction process.
Applying the settled legal position, the Court held that the Petitioner had failed to discharge the outstanding liability prior to publication of the auction notice and, therefore, the right to redeem the secured asset had stood extinguished on the date of publication itself. It was concluded that the writ petition was a belated and misconceived attempt to stall lawful recovery proceedings, and that once the statutory right of redemption had ceased, no further interference was warranted. Accordingly, the writ petition was dismissed as being devoid of merit, and all interim protections were vacated.
Mr. D.S. Chouhan and Mr. Ashish Sharma, Advocates, represented the Petitioner.
Mr R.K. Jain, Senior Advocate, with Mr. Paramveer Singh and Mr. Ajay Bakshi, Advocates, appeared for the Respondents.
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