Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-012174-012174 – 2025 |
| Diary Number | 20228/2023 |
| Judge Name | HON’BLE MR. JUSTICE J.B. PARDIWALA |
| Bench |
HON’BLE MR. JUSTICE J.B. PARDIWALA HON’BLE MR. JUSTICE K.V. VISWANATHAN |
| Precedent Value | Binding Authority |
| Overrules / Affirms |
Affirms Bafna Motors Overrules conflicting High Court decisions in Concern Readymix, Amme Srisailam, Pal Alloys |
| Type of Law | Statutory Interpretation / Procedural Law (Debt Recovery) |
| Questions of Law | When does a borrower’s right of redemption under amended Section 13(8) of the SARFAESI Act cease? |
| Ratio Decidendi (3–8 sentences) | The amendment to Section 13(8) curtails a borrower’s redemption right by making its exercise possible only “before the date of publication” of the notice of sale, irrespective of the chosen mode of transfer. For all sale methods under Rule 8(5) of the SARFAESI Rules, a single composite “notice of sale” under Rule 8(6) (with its Proviso, Rule 8(7) and Rule 9(1) conditions) must be given, and a 30-day interval observed before auction or other transfer. “Publication” in Section 13(8) refers to the valid composite notice—whether served on the borrower, published in a newspaper, affixed on the property or uploaded online. The special SARFAESI regime under Section 35 overrides general law, so the general right under Section 60 of the Transfer of Property Act gives way to the amended provision. |
| Judgments Relied Upon | Mardia Chemicals (2004), Narandas Karsondas (1997), L.K. Trust (2011), Mathew Varghese (2014), Dwarika Prasad (2018), Shakeena (2021), S. Karthik (2022), Bafna Motors (2024) |
| Logic / Jurisprudence / Authorities Relied Upon by the Court | Legislative scheme and object of SARFAESI Act; parliamentary records on 2016 Amendment; harmonious construction of Sections 35 & 37; purposive interpretation to expedite debt recovery; TP Act precedents on redemption; analysis of SARFAESI Rules 8 and 9. |
| Facts as Summarised by the Court | Borrowers defaulted on a ₹5 cr cash-credit and ₹0.30 cr term loan. The Bank classified the account NPA, issued notices under Sections 13(2)/(4) of the SARFAESI Act and took possession in October 2020. An auction notice was published on 22.01.2021; sale confirmed on 26.02.2021; sale certificate issued 22.03.2021. Borrowers paid dues post-auction; Madras HC quashed sale certificate and allowed redemption. Auction purchasers appealed to the Supreme Court. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | Debts Recovery Tribunals, all subordinate courts |
| Persuasive For | Other High Courts |
| Overrules | Concern Readymix v. Corporation Bank (2018), Amme Srisailam v. Union Bank (2022), Pal Alloys & Metal India v. Allahabad Bank (2021) |
| Distinguishes | Shakeena v. Bank of India (2021) |
| Follows | Bafna Motors (Mumbai) Pvt. Ltd. v. Union Bank of India (2024) |
What’s New / What Lawyers Should Note
- The borrower’s redemption right now expires upon “publication” of a single composite notice of sale under Rule 8(6), irrespective of auction, tender, quotation or private treaty.
- “Publication” in Section 13(8) embraces service to the borrower, newspaper advertisement, affixation on the property or website upload—whichever is later.
- Only one notice of sale is required; no separate auction notice with an independent 30-day period after the borrower’s notice.
- The special SARFAESI regime under Section 35 overrides the general right under Section 60 of the Transfer of Property Act.
- Lawyers can invoke this decision to oppose redemption attempts made after notice publication and to reinforce security-sale finality.
Summary of Legal Reasoning
- Legislative Purpose: SARFAESI Act enacted to expedite recovery of NPAs without court intervention; Section 13 empowers secured creditors to enforce securities.
- Redemption under SARFAESI vs TP Act: Pre-amendment Section 13(8) mirrored Section 60 TP Act—borrower could redeem until transfer completed; post-amendment it is curtailed.
- 2016 Amendment: Introduced limitation—redemption only “before the date of publication of notice” for sale.
- Conflicting High Court Views: Some held two separate notices with 30-day gaps; others applied general redemption law.
- Bafna Motors (2024): Supreme Court settled that redemption ceases upon publication of valid sale notice of any mode.
- Notice Scheme: Rule 8(6) gives a single composite “notice of sale” covering borrower service, newspaper publication (where required), affixation and web-upload; Rule 9(1) requires a 30-day gap before sale.
- Harmonious Construction: Section 35 SARFAESI overrides inconsistent laws; Section 37 preserves securities-law statutes; must interpret “publication” to effect the amendment’s object.
- Retrospectivity: Amendment applies to pending and future auctions; it is procedural and remedial, so applies to “alive” debts and notices issued after 01.09.2016.
Arguments by the Parties
Petitioner (Auction Purchasers):
- Madras HC lacked writ jurisdiction; borrowers had statutory appeal remedy.
- Issues governed by Bafna Motors—redemption right ended on notice publication.
- Appeal deserves allowance; impugned order must be set aside.
Respondent (Borrowers):
- Bafna Motors inapplicable—loan availed before 01.09.2016; amendment not retrospective.
- No legal error in HC permitting redemption post-auction.
- Appeal should be dismissed.
Factual Background
Borrowers defaulted on loans in January 2016. Bank issued SARFAESI notices under Sections 13(2)/(4), took possession in October 2020 and published an auction notice on 22.01.2021 under Rule 8 read with Rule 9. Auction confirmed on 26.02.2021; sale certificate issued 22.03.2021. Borrowers paid dues after the sale, and Madras HC quashed the sale certificate permitting redemption. Auction purchasers appealed.
Statutory Analysis
- Section 13(8), SARFAESI Act (as amended 01.09.2016): borrower may tender dues “before the date of publication of notice for public auction or inviting quotations or tender …”, else sale proceeds.
- Rule 8, SARFAESI Rules: methods of sale—quotations, tenders, public auction, private treaty; notice of sale (30 days) must be served, published (where required), affixed and uploaded.
- Rule 9: sale in first instance only after 30 days from service or publication of the composite notice.
- Section 35: SARFAESI Act overrides inconsistent laws.
- Section 37: SARFAESI Act is in addition to securities laws & RDBFI Act.
Procedural Innovations
- Establishes single composite “notice of sale” doctrine under Rule 8(6)/9(1).
- Clarifies that “publication” in Section 13(8) is notice service and any required public advertisement.
- Reconciles SARFAESI procedural rules to effect the 2016 Amendment’s object.
Alert Indicators
- 🚨 Breaking Precedent – Overrules conflicting High Court rulings on redemption notice.
- ✔ Precedent Followed – Bafna Motors (2024).
- 🔄 Conflicting Decisions – High Courts in Andhra Pradesh, Telangana, Punjab & Haryana.