SARFAESI | Borrower's Right Of Redemption Ends On Publication Of Sale Notice, Not On Completion Of Sale: J&K&L High Court

A Division Bench of Justice Sanjeev Kumar and Justice Sanjay Parihar made it clear that under the amended statutory regime, once the secured creditor complies with the composite notice requirements prescribed under the Act and the Rules of 2002, the borrower cannot defeat recovery proceedings by raising belated procedural objections.

These observations came in a writ petition filed by a borrower challenging the recovery action initiated by J&K Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

Background:

In the instant case the petitioner availed a cash credit facility from J&K Bank secured by hypothecation of fruit, fruit crops, book debts and receivables, along with land and third-party guarantees, but on failing to service the loan the account was declared an NPA in 2019.

Despite a composite demand notice dated 27 June 2019 under Section 13(2) of the SARFAESI Act, followed by a possession notice dated 13 April 2023 under Section 13(4) read with Rule 8 of the Rules of 2002, the dues remained unpaid, leading to e-auction of the secured assets, issuance and registration of a sale certificate in favour of the successful bidder, and only thereafter did the petitioner approach the High Court.

The principal contention raised by the petitioner was that he was never afforded the mandatory statutory period of thirty days under Section 13(8) of the SARFAESI Act read with Rules 8 and 9 of the Rules of 2002 to redeem the mortgaged property. Relying on Mathew Varghese v. M. Amritha Kumar it was argued that any sale conducted without strict adherence to the notice requirements would be vitiated.

Court's emphasis on the post-2016 SARFAESI framework

After hearing the parties, the High Court held that the issue must be examined strictly in the light of the amended Section 13(8) and the law declared in M. Rajendran. The Bench noted that the amendment had fundamentally altered the borrower's right of redemption.

In a significant observation, the Court recorded,

“The radical change brought about by amendment to Section 13(8) was to the extent that right of the borrower to redeem the secured asset stands extinguished, thereunder on the very date of publication of the notice for public auction issued under Rule 9(1) of the Rules of 2002.”

Relying on the Supreme Court's exposition, the Bench explained that the term “publication” under Section 13(8) has a wide connotation and is not confined to newspaper advertisements alone.

Quoting the Supreme Court at length, the Court highlighted the binding interpretation that,

“The word 'publication' used in Section 13(8) of the SARFAESI Act has to be understood to mean and include the service, publication in newspaper, and the affixation and uploading of the 'notice of sale', as may be required under the SARFAESI Rules.”

The High Court further underlined the Supreme Court's clarification that all modes of giving notice, service to the borrower, affixation, uploading, and publication form part of a single composite notice of sale.

The Bench emphasised the consequence flowing from this interpretation by noting,

“The expiry of thirty-days as required under Rule 9(1) from the day when the secured creditor complies with the requirement of giving the notice of sale… would be the date on which the secured creditor is said to have validly published the 'notice of sale' and it would be this date on which the right of redemption of the borrower would stand extinguished.”

The Court categorically rejected the petitioner's reliance on Mathew Varghese, observing that the said judgment was rendered in the context of Section 13(8) as it stood prior to the 2016 amendment.

The Bench observed that prior to the amendment, the borrower's right of redemption was aligned with Section 60 of the Transfer of Property Act and continued till the date fixed for sale or transfer. However, the statutory position changed decisively after 2016.

As the Court noted,

“The position however underwent a change after the 2016 Amendment. The right of redemption available to the borrower under the amended statutory regime now stands substantially curtailed and would be available only till the date of publication of notice under Section 9(1) of the Rules of 2002 and not till the completion of sale or transfer of secured asset.”

Examining the facts, the High Court acknowledged that the petitioner had far more than the minimum statutory period to redeem the secured assets but failed to do so. In a categorical finding, the Bench held,

“It cannot by any stretch of reasoning be said that the petitioner was deprived of an opportunity of 30 days to deposit the dues. The petitioner had more than three months instead of 30 days as stipulated in Rule 9(1) of the Rules of 2002 to deposit the dues and get the secured assets redeemed.”

The Court also noted that under Rule 8(6) and the proviso to Rule 9(1), once an initial sale attempt fails, a shorter notice period is permissible for subsequent auctions.

In light of the amended SARFAESI framework and the binding precedent of the Supreme Court, the High Court found no illegality in the recovery process undertaken by the Bank. Holding that the petitioner had repeatedly defaulted and failed to avail the opportunities granted to him, the Court dismissed the writ petition.

Case Title: Nazir Ahmad Bhat Vs Chairman/ Managing Director J&K Bank Corporate Office

Citation: 2026 LiveLaw (JKL)

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