The Jammu & Kashmir & Ladakh High Court asserted that the amended provisions of Section 13 (8) of the SARFAESI Act extinguish the right of redemption of the borrower in the event he fails to repay his dues and redeem the asset before publication of the Auction Notice. Since, in the present case, the right of the petitioner to redeem the secured assets stands extinguished, he cannot defer the auction notice and proceedings under the SARFAESI Act.
The assertion came in sequence of the events which make it conspicuous that the petitioner has thrown challenge to the Auction Notice which came to be duly published in the newspapers, and it was only after the lapse of two months from the date of publication, the petitioner has filed a writ admitting his liability, and has thrown the challenge to the action of the respondent-Bank in initiating the proceedings under the provisions of the SARFAESI Act.
Reference was made to the decision of the Apex Court in the case of M. Rajendran vs M/s KPK Oils and Proteins India Pvt Ltd. [2025 SCC Online SC 2036], wherein it was held that “A borrower has no unfettered right to tender such amount of dues, as stipulated in Section 13(8), after the date of publication of notice for public auction or inviting quotations or tender from public or private treaty”.
The Court therefore, reiterated that where the borrower tenders his loan dues after the publication of the notice stipulated in Section 13(8) of the SARFAESI Act, the secured creditor is not bound to accept it, and can continue to proceed with the transfer of the secured asset, by way of lease, assignment or sale.
The Division Bench comprising Justice Shahzad Azeem and Justice Sindhu Sharma observed that once the Auction Notice is published, the right of redemption of the petitioner-borrower stands extinguished, and any amount, even if deposited, would be immaterial.
Since the petitioner has failed to repay his dues till the publication of the Auction Notice, and the third respondent was not only declared as a successful bidder but has deposited the entire consideration as per the terms of the Auction Notice with the respondent Bank, the Bench emphasised that the petitioner has made an abortive attempt just to delay the process after having been failed to respond to all the notices issued under the SARFAESI Act to deposit the outstanding amount.
The Bench stated that the petitioner has made a half-hearted attempt to impress upon the point that the valuation of the property is not properly done, as the record depicts that the respondent-Bank has done the valuation of the secured assets from its empanelled valuer, depicting the valuation under different heads after taking into account the area and all the aspects of the secured assets.
Briefly, the petitioner has availed a Cash Credit Limit (CCL) to the tune of Rs. 49 lacs from the respondent-Bank, which was sanctioned by keeping a residential house property as a primary mortgage security. Till some time, the petitioner maintained his loan account, but finally, it was classified as an NPA, which led to the initiation of proceedings under the SARFAESI Act. Ultimately, it culminated in the issuance of Tender-cum-Auction Notice.
The third respondent was declared as a successful bidder in the auction process, and he had deposited the entire bid amount to the tune of Rs. 71 lacs. As the same was not fructified, the matter landed before the High Court.
Appearances:
Advocates D.S. Chouhan and Ashish Sharma, for the Petitioner
Senior Advocate R.K. Jain, along with Advocates Paramveer Singh and Ajay Bakshi, for the Respondent
