The Supreme Court allowed the appeal filed by auction purchasers, setting aside the Madras High Court’s order authorizing post-auction redemption, and held that the borrower’s right to redeem under Section 13(8) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 stands extinguished upon publication of the statutory sale notice.
The case arose when, after a series of defaults in loan repayments, the borrower’s account was classified as a non-performing asset by the Bank. The Bank proceeded under the SARFAESI Act, issuing all mandatory notices, taking possession of the secured asset, and eventually selling it via public auction, with the appellants emerging as successful bidders.
This was followed by Debt Recover Tribunal (DRT) and Debt Recover Appellate Tribunal (DRAT) proceedings, where the Bank’s process was upheld. However, the borrowers (respondents) directly approached the High Court through a writ petition, citing “extraordinary circumstances,” which was admitted by the Court.
The Madras High Court, relying on Mathew Varghese vs Amritha Kumar[1], had permitted the original borrower to redeem the property even after the auction was conducted and the sale certificate was issued; in effect, undoing the auction sale. The purchasers sought to overturn the High Court’s judgment and affirm that the right of redemption does not subsist past the statutory milestones in the SARFAESI regime.
The core dispute revolved around whether the respondents could redeem the secured asset post-auction sale and issuance of the sale certificate, especially after all SARFAESI procedures were complied with and most of the outstanding dues were paid. The High Court, relying on pre-amendment jurisprudence under Section 13(8) SARFAESI Act and principles from property law and the Transfer of Property Act, allowed for redemption even after the auction sale.
The appellants argued that the legislative intent and the language of Section 13(8) post 2016 amendment explicitly restrict redemption rights to the period before publication of the statutory auction sale notice. They relied principally on the recent Supreme Court ruling in Celir LLP vs Bafna Motors Mumbai Pvt. Ltd.[2], which crystallizes the amended regime. The respondents countered that their rights to redeem remained alive, especially given the substantial payments made, and attacked the retrospective application of amended Section 13(8).
The Bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan clarified that under the amended provision, the cut-off for exercising the right to redeem or discharge is crystal clear: it is extinguished on publication of the sale notice. Only a single, composite notice is required, and the notion of multiple staggered notices was rejected. The Court also clarified that “publication” is the statutory marker, not the transfer or registration of the sale certificate. The object of the law is to foster speed and certainty in banking recovery processes and to secure the interests of bona fide third parties such as auction purchasers.
The Bench thus unequivocally clarified that once the sale notice is published, the borrower cannot redeem the property, even if the sale certificate has not been formally registered. The legal fiction of “right extinguished on hammer fall” was rejected and replaced with a statutory cut-off tied strictly to publication. The Court dismissed arguments against the retrospective application of the statute, finding that the sales in question were governed by the amended regime.
The Court relied on the Supreme Court’s judgement in the case of Bafna Motors, and clarified the distinction with Mathew Varghese, thereby harmonizing SARFAESI’s economic objectives with procedural fairness, and safeguarding the position of auction purchasers.
In result, The Supreme Court reversed the Madras High Court’s decision that allowed the original borrowers to redeem mortgaged property post-auction and post-sale certificate. The Court held that the auction purchasers, having acquired the property pursuant to a process that complied with all statutory prerequisites, obtain a good title not susceptible to challenge on grounds of late redemption.
Cases discussed:
1. Mardia Chemicals Ltd. & Ors. v. Union of India & Ors. reported in (2004) 4 SCC 311
2. United Bank of India v. Satyawati Tondon & Ors. reported in (2010) 8 SCC 110
3. Madras Petrochem Ltd. & Anr. v. Board for Industrial and Financial Reconstruction & Ors. reported in (2016) 4 SCC 1
4. Mathew Varghese v. Amritha Kumar and Ors. reported in (2014) 5 SCC 610
5. Celir LLP v. Bafna Motors (Mumbai) Private Ltd. reported in (2024) 2 SCC 1
6. Narandas Karsondas v. S.A. Kamtam & Anr. reported in (1997) 3 SCC 247
7. K. Trust v. EDC Limited & Ors. reported in (2011) 6 SCC 780
8. Dwarika Prasad v. State of Uttar Pradesh reported in (2018) 5 SCC 491
9. Allokam Peddabbayya & Anr. v. Allahabad Bank & Ors. reported in (2017) 8 SCC 272
10. Sai Annadhatha Polymers & Anr. v. Canara Bank rep. by its Branch Manager, Mandanapalle reported in 2018 SCC OnLine Hyd 178
11. V.V. Prasad Rao Gupta v. State Bank of India reported in 2021 SCC OnLine TS 328
12. Concern Readymix v. Corporation Bank reported in 2018 SCC OnLine Hyd 783
13. Shakeena & Anr. v. Bank of India & Ors. reported in (2021) 12 SCC 761
14. Karthik and Ors. v. N. Subhash Chand Jain and Ors. reported in (2022) 10 SCC 641
15. Pal Alloys and Metal India Private Limited & Ors. v. Allahabad Bank & Ors. reported in 2021 SCC OnLine P&H 2733
16. Amme Srisailam v. Union Bank of India, Regional Office, Guntur, rep. by its Region Head & Deputy General Manager, Andhra Pradesh & Ors. reported in 2022 SCC OnLine AP 3484
17. M/s Venshiv Pharma Chem (P) Ltd. & Anr. v. State Bank of India & Ors. reported in 2018 SCC OnLine Hyd 39
18. Indian Overseas Bank v. RA Pure Life Science Ltd. & Ors. reported in 2023 SCC OnLine TS 634
19. Canara Bank v. M. Amarender Reddy reported in (2017) 4 SCC 735
20. Authorized Office, Central Bank of India v. Shanmugavelu reported in 2024 INSC 80
Appearances:
For Petitioner(s): Mr. K. S. Mahadevan, Adv.; Ms. Swati Bansal, Adv.; Mr. R. Rangarajan, Adv.; Mr. Aravind Gopinathan, Adv.; Mr. Rajesh Kumar, AOR; Ms. Praveena Gautam, AOR; Mr. Vijay Balu S B, Adv.; Mr. Pawan Shukla, Adv.; Ms. Tissy Annie Thomas, Adv.; Mr. Rohan Bansla, Adv.
For Respondent(s): Mr. S. Gowthaman, AOR; Mr. S. Thananjayan, AOR; Mr. K. S. Mahadevan, Adv.; Ms. Swati Bansal, Adv.; Mr. R. Rangarajan, Adv.; Mr. Aravind Gopinathan, Adv.; Mr. Rajesh Kumar, AOR
[1] (2014) 5 SCC 610
[2] (2024) 2 SCC 1
