SARFAESI Act | Borrower's Right To Redeem Secured Asset Ends With Publication Of Auction Notice: J&K&L High Court

Reaffirming of the legal bar under the amended Section 13(8) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, the High Court of Jammu & Kashmir and Ladakh has held that a borrower's right to redeem a secured asset stands extinguished the moment the Auction Notice is published, if dues are not cleared before such publication.Observing 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 Division Bench of Justice Sindhu Sharma and Justice Shahzad Azeem dismissed a writ petition filed by M/s Gogi Motor Store, challenging the Tender-cum-Auction Notice issued by Citizen's Co-operative Bank for auction of the petitioner's residential house at Jammu.Justice Shahzad Azeem, who authored the judgment, anchored the decision on the legal position that the 2016 amendment to Section 13(8) fundamentally altered the nature of the borrower's right of redemption. The Court observed that once the auction notice is published, any amount even if deposited is immaterial, since the borrower loses the statutory right to redeem the secured asset thereafter.Case BackgroundThe petitioner had availed a Cash Credit Limit of ₹49 lakh in July 2019 by mortgaging his residential property. The account remained regular only till September 2022, after which it became irregular and eventually classified as a Non-Performing Asset by May 2023.The Bank issued a demand notice under Section 13(2) for ₹53,43,639/- on 20 July 2023. As the petitioner did not respond, the Bank proceeded under Section 13(4), took symbolic possession, published the possession notice and thereafter secured an order from the District Magistrate under Section 14 for taking physical possession.Despite repeated intimation including a notice the petitioner did not clear the dues. The Bank issued auction notices on 16 December 2024 and 3 April 2025, both of which failed to attract bidders. A fresh Tender-cum-Auction Notice dated 17 June 2025 was then issued and published the following day. Respondent No. 3, Mayank Gupta, was declared the successful bidder and deposited the entire bid amount. The petitioner argued that he had substantially repaid the loan, reducing the outstanding to approximately ₹19.8 lakh, and that the Bank had verbally promised restructuring of the account. He further contended improper valuation, lack of service of notices, and the disproportionate nature of auctioning a property worth over ₹2 crore for a relatively smaller outstanding.The Bank asserted that the petitioner had deliberately suppressed material facts, failed to comply with multiple statutory notices, and approached the Court only after two months of the auction notice's publication. It argued that acceptance of partial payments does not nullify SARFAESI proceedings and emphasised that the borrower's right of redemption had already been extinguished under Section 13(8).Court's Observations: Adjudicating the matter the court meticulously traced the timeline of statutory compliance and noted that the petitioner repeatedly failed to act at every stage. The Court observed, “The sequence of events… makes it conspicuous that the petitioner has thrown challenge to the Auction Notice dated 17.06.2025 which came to be duly published… and it was only after the lapse of two months from the date of publication of Auction Notice, the petitioner has filed the present writ petition.”The Court rejected the petitioner's objection regarding valuation, stating, “Mere wholesale assertion is not sufficient to dislodge the report of the approved valuer.”Turning to the central legal issue, the Court relied heavily on the Supreme Court's judgment in M. Rajendran & Ors. v. KPK Oils and Proteins India Pvt. Ltd., 2025 SCC OnLine SC 2036, quoting extensively:“A borrower has no unfettered right to tender such amount of dues… after the date of publication of notice for public auction… Where the borrower tenders such dues after the publication of the notice… the secured creditor is not bound to accept it.”The Supreme Court had further held that the amended Section 13(8), “Extinguishes 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.”Applying this, the High Court held that once the Auction Notice is published, the right of redemption of the petitioner has extinguished on 17.06.2025 and any amount even if deposited is immaterial.The Court also took note that the successful bidder had already deposited the entire consideration, reinforcing the finality of the auction process.In view of these findings the court concluded that the writ petition was an attempt to derail statutory proceedings after prolonged inaction. The bench remarked, “The petitioner has made an abortive attempt just to delay the...

SARFAESI Act | Borrower's Right To Redeem Secured Asset Ends With Publication Of Auction Notice: J&K&L High Court

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