The Jammu & Kashmir and Ladakh High Court has definitively held that a borrower’s right to redeem a secured asset under Section 13(8) of the SARFAESI Act is extinguished upon publication of the auction notice, barring any post-auction tender of dues. This ruling reinforces the statutory balance between creditor enforcement and borrower remedies, with critical implications for banking practices and property recovery proceedings.
Background & Facts
The Dispute
The petitioners, Abdul Rouf Bhat, Aijaz Ahmad Bhat, and Imtiyaz Ahmad Bhat, availed a loan facility of Rs. 20.00 lakhs from Jammu and Kashmir Bank Ltd. under a sanction letter dated 18.02.2013. The loan was secured by hypothecation of stocks and an equitable mortgage of immovable property. The account became irregular, and despite multiple reminders, the petitioners failed to regularize payments. The loan was classified as a Non-Performing Asset (NPA) with effect from 31.03.2017.
Key Facts
- Loan sanctioned: 18.02.2013
- NPA classification: 31.03.2017
- Demand notice under Section 13(2) SARFAESI Act issued: 04.04.2018
- Possession notice under Section 13(4) issued: Following demand notice
- Physical possession of mortgaged property obtained: Prior to auction
- Redemption notice issued: 25.03.2024
- Redemption notice published in Urdu daily: 04.04.2024
- Redemption notice published in English daily: 05.04.2024
- Auction notice (Tender Cum Sale Notice) published: 19.04.2024
- Highest bid received: Rs. 75.00 lakhs from respondent No. 4, Ms. Masarat Tabasum
- Sale confirmed by Bank: 17.05.2024
- Sale certificate issued: 07.06.2024
- Notice for removal of articles served on petitioners: 06.07.2024
- Civil suit filed by petitioners: Muzaffar Ahmad Bhat v. Aijaz Ahmad Bhat, pending before 1st Additional Munsiff, Srinagar
- Interim order obtained in civil suit: Prior to writ petition filing
Procedural History
- 04.04.2018: Demand notice issued under Section 13(2) SARFAESI Act
- 25.03.2024: Redemption notice served and published
- 19.04.2024: Auction notice published in newspapers
- 17.05.2024: Bank confirmed sale to Ms. Masarat Tabasum
- 07.06.2024: Sale certificate issued
- 06.07.2024: Notice for removal of articles served on petitioners
- WP(C) No. 1866/2024 filed: Challenging auction notice and sale certificate
- 05.03.2026: Judgment reserved
- 23.03.2026: Judgment pronounced
Relief Sought
The petitioners sought quashing of the auction notice dated 19.04.2024 and the sale certificate dated 07.06.2024, and restoration of their right to redeem the secured property by tendering the outstanding dues.
The Legal Issue
The central question was whether a borrower retains the right to redeem a secured asset under Section 13(8) of the SARFAESI Act after the publication of the auction notice, and whether such right survives once the sale certificate has been issued and possession delivered to a bona fide purchaser.
Arguments Presented
For the Petitioner
The petitioners contended that they were never served with notices under the SARFAESI Act and were unaware of the auction proceedings. They argued that the Bank failed to comply with procedural requirements under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, and that their right to redeem under Section 13(8) remained open until actual sale completion. They also relied on the pendency of a civil suit as grounds for judicial intervention.
For the Respondent
The Bank submitted that all notices - including demand, possession, redemption, and auction notices - were duly served and published in both English and Urdu newspapers, with postal receipts preserved. It further submitted that respondent No. 4, Ms. Masarat Tabasum, was a bona fide purchaser who paid full consideration and was lawfully put in possession. The Bank argued that the petitioners’ failure to redeem before publication of the auction notice extinguished their right under Section 13(8), and that the writ petition was an abuse of process due to concealment of the pending civil suit.
The Court's Analysis
The Court examined the statutory framework under Section 13(8) of the SARFAESI Act, which permits a borrower to tender the outstanding dues at any time before the publication of the auction notice. The Court relied on the binding precedent in M. Rajendran and ors. v. M/s KPK Oils and Proteins India Pvt. Ltd. (2025 SCC Online SC 2036), wherein the Supreme Court held:
"To put it simply, as per sub-section (8) of Section 13 of the SARFAESI Act, a borrower can tender the amount due to the secured creditor along with all costs, charges and expenses, at any time, before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty, as the case may be. A borrower has no unfettered right to tender such amount of dues... after the date of publication of notice for public auction... because the restriction on the secured creditor, from transferring the secured asset... would only be attracted, if the dues are tendered prior to the publication of notice..."
The Court emphasized that the amendment to Section 13(8) was intended to extinguish the borrower’s right of redemption once the auction process is publicly initiated. The publication of the auction notice on 19.04.2024 marked the point of no return. The fact that the sale certificate was issued on 07.06.2024 and possession delivered to respondent No. 4 further solidified the finality of the transaction.
The Court also addressed the petitioners’ failure to disclose the pending civil suit and the interim order obtained therein. Citing Udyami Evam Khadi Gramodyog Welfare Sanstha v. State of U.P. (2008) 1 SCC 560, the Court held that the writ jurisdiction under Article 226 is equitable and discretionary, and petitioners must come with clean hands. Concealing material facts and re-litigating the same dispute through multiple forums amounted to an abuse of process.
The Verdict
The writ petition was dismissed. The Court held that the petitioners’ right to redeem the secured asset under Section 13(8) of the SARFAESI Act was extinguished upon publication of the auction notice on 19.04.2024. The sale to respondent No. 4, Ms. Masarat Tabasum, was upheld, and the sale certificate dated 07.06.2024 stands valid. Possession remains with the auction purchaser. The petitioners’ attempt to challenge the auction and sale was found to be misconceived, and the Court imposed costs for abuse of process.
What This Means For Similar Cases
Redemption Right Is Time-Bound
- Practitioners must advise borrowers that the window to redeem under Section 13(8) closes at the moment the auction notice is published - not when the sale is confirmed or possession is handed over.
- Banks must ensure clear documentation of the publication date of auction notices in both vernacular and English newspapers to establish compliance.
Concealment of Civil Proceedings Is Fatal to Writ Petitions
- Any pending civil suit involving the same property must be disclosed in a writ petition under Article 226.
- Failure to disclose such proceedings invites dismissal on grounds of abuse of process, even if the substantive claim has merit.
Bona Fide Purchasers Are Protected
- Once full consideration is paid and possession delivered, the auction purchaser’s title is immune from collateral attack via writ petitions.
- Courts will not interfere with completed SARFAESI transactions absent procedural fraud or non-compliance, which the petitioners failed to prove.
