Borrower’s Right to Redeem Secured Asset Ends on Publication of Notice u/s 9(1) of SI Rules, Not After Sale Completion | SC

Case Details: Celir LLP vs. Sumati Prasad Bafna - [2024] 169 taxmann.com 381 (SC)

Judiciary and Counsel Details

• J.B. Pardiwala & Manoj Misra, JJ.

Facts of the Case

In the instant case, original borrower availed credit facility from bank against which, a simple mortgage was created over a land and buildings (secured asset) belonging to borrower vide a mortgage deed.

Borrower defaulted in repayment of said loan amount and accordingly, bank issued a demand notice under section 13(2) of SARFAESI Act, 2002, for repayment of principal amount along with interest, cost, charges, etc.

Later, Bank issued a possession notice under section 13(4) and took symbolic possession of secured asset – Bank decided to put secured asset to auction – Pursuant to 9th notice of sale, auction proceedings were conducted.

In said 9th auction conducted by bank, petitioner submitted its bid and was declared as highest bidder. Bank sent a sale confirmation letter to petitioner, declaring him as highest bidder in auction of secured asset.

Consequently, Sale certificate was issued to petitioner. Later, borrower filed a writ petition before High Court seeking directions to bank to permit them to redeem mortgage of secured asset – High Court by impugned order permitted borrower to redeem mortgage.

Supreme Court Held

The Supreme Court observed that right of borrower to redeem secured asset would be available only till date of publication of notice under Rule 9(1) of SARFAESI Rules and not till completion of the sale or transfer of secured asset in favour of auction purchaser.

Since no challenge had been laid to 9th auction proceedings on ground of it being either fraudulent or vitiated by inadequate pricing or underbidding, the Supreme Court held that the auction could not be said to suffer from any fundamental procedural error, and as such did not warrant the interference of instant Court.

Thus, sale of secured asset to petitioner was confirmed and title conferred through sale certificate was declared to be absolute. Also, borrower would also unconditionally withdraw securitisation application pending before DRT.

Further, the subsequent Transferee would hand over peaceful physical possession of Secured Asset along with its original title deeds to Bank. Also, bank would refund amount paid by borrower towards redemption of mortgage without any interest.

List of Cases Referred to