SARFAESI | Supreme Court Explains "Publication Of Notice" Which Extinguishes Borrower's Redemption Right Under Section 13(8)

The Supreme Court held that the publication of notice, which will extinguish a borrower's right to redeem the mortgage as per Section 13(8) of the SARFAESI Act, is not confined to newspaper publication alone. For the purpose of the amended Section 13(8) of the SARFAESI Act, the expression “before the date of publication” used, has to be construed to refer and mean the publication of a valid “notice of sale” for the secured asset, although such publication may vary depending upon the mode of sale chosen by the secured creditor."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. Wherever, the chosen mode of sale requires the secured creditor to effectuate the “notice of sale” in any or all of the aforesaid manner, as the case may be, 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, as per the applicable rules, 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."Interpreting the phrase "before the date of publication of notice” used in Section 13(8), the Court said that a borrower can exercise its right of redemption of mortgage till the date of publication of notice of sale in the newspaper for “auction” where such notice is required, “or inviting quotations” where no such notice is required, “or tender from public” where such publication of notice is required, “or private treaty”, where again, no such notice is required to be published.The Court noted that the Security of Enforcement Rules provided for different modes of notice for different modes of sale- whether by public auction, tender, or private treaty.The Court further noted that, as per proviso to Rule 8(6), newspaper publication is needed only if the sale of the secured asset is by way of a public auction. For all other remaining modes of sale, namely, by obtaining quotations or private treaty, there is no requirement to publish the notice of sale.The following are the different notices are contemplated as follows :Rule 8(6) - notice by creditor to the borrower regarding sale of the asset.Proviso to Rule 8(6) - newspaper publication of the notice if the sale is by way of public auction or tender.Rule 9(1) - no sale can take place before the expiry of 30 days from the publication of public notice in the newspaper.Rule 8(7) - affixure of sale notice on the conspicuous parts of the property.The bench comprising Justice JB Pardiwala and Justice R Mahadevan observed :"The term “notice of sale” is an umbrella term, which refers to and includes the giving of notice for sale by the secured creditor in all the forms and manner that he is obligated to do, under the relevant SARFAESI Rules, depending upon the mode of sale elected by the secured creditor. Thus, whenever, the secured creditor gives a notice for sale in a specific manner either under Rule 8(6), the Proviso thereto read with Rule 9(1) or Rule 8(7), he is not said to be giving different or distinct notices, they all are parts of one single composite “notice of sale”. Until the secured creditor has given the “notice of sale” in all forms and manner that he is required to give under the SARFAESI Rules, including the thirty-days gap between the date when the notice of sale is served, affixed and published, whichever is later, as the case may be, till the date of actual sale, the “notice of sale” for the secured creditor would remain incomplete.""It is only after, the secured creditor has given the “notice of sale” in all forms and manner that he is required to give under the SARFAESI Rules, and maintained a period of thirty-days from the date on which he served, affixed or published the notice of sale, whichever is later, would such “notice of sale” be considered valid in the eyes of law."Upon harmoniously construing the provisions, the judgment authored by Justice Pardiwala clarified :“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. Wherever, the chosen mode of sale requires the secured creditor to effectuate the “notice of sale” in any or all of the aforesaid manner, as the case may be, 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, as per the applicable rules, 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...

SARFAESI | Supreme Court Explains "Publication Of Notice" Which Extinguishes Borrower's Redemption Right Under Section 13(8)

Yash Mittal

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