Borrower’s Right Of Redemption Extinguishes On Publication Of Auction Notice U/S 13(8) Of SARFAESI Act: Jammu & Kashmir And Ladakh High Court

The Court was hearing a writ petition challenging the recovery proceedings initiated by a secured creditor under the SARFAESI Act, including the auction of mortgaged property and issuance of a sale certificate in favour of the auction purchaser.

A Division Bench comprising Justice Sanjeev Kumar and Justice Sanjay Parihar examined whether the petitioner–borrower had been deprived of the statutory opportunity to redeem the secured asset before the auction sale, and held that “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”.

The right of redemption available to the borrower under the amended statutory regime, the Bench explained, “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 in favour of the auction purchaser”.

The petitioner was represented by Advocate Tariq M. Shah, while the respondent Bank was represented by Advocate Insha Rashid.

Background

The petitioner had availed of cash credit facilities from the respondent Bank, which were later enhanced. Due to persistent defaults in repayment, the loan account was classified as a Non-Performing Asset. Demand notice under Section 13(2) of the SARFAESI Act, 2002 was issued, followed by possession notice under Section 13(4) read with Rule 8 of the Rules of 2002.

Subsequently, the secured asset was put up for auction through e-auction notices. The initial auction did not culminate in a sale. A fresh e-auction notice was thereafter issued, followed by an addendum extending the date of the auction. Upon completion of the auction process, the highest bidder was declared successful, and a sale certificate was issued and registered.

Aggrieved, the petitioner approached the High Court contending that the auction was vitiated as he was not afforded the mandatory period of thirty days to redeem the secured asset, as contemplated under Section 13(8) of the SARFAESI Act read with Rules 8 and 9 of the Rules of 2002.

Court’s Observation

The High Court examined the scope of Section 13(8) of the SARFAESI Act, 2002, in light of its amendment by Act 44 of 2016. It noted that prior to the amendment, the borrower could redeem the secured asset at any time before the date fixed for sale or transfer, a position that had been considered by the Supreme Court in Mathew Varghese v. M. Amritha Kumar.

The Court observed that the legal position had undergone a radical change after the 2016 amendment. Relying on the recent decision of the Supreme Court in M. Rajendran v. KPK Oils and Proteins Private Limited (2025), the Bench held that under the amended regime, the borrower’s right of redemption is substantially curtailed and stands extinguished on the date of publication of the notice of sale.

The Court explained that the expression “publication” under Section 13(8) must be understood in a composite sense, encompassing service of notice to the borrower, publication in newspapers, affixation, and uploading of the notice of sale, as required under the Rules of 2002. The expiry of thirty days from compliance with these requirements constitutes the date of publication for the extinguishment of the right of redemption.

Applying these principles to the facts of the case, the Court noted that although the initial auction notice granted only fifteen days, the subsequent e-auction notice and the addendum together afforded the petitioner a period well in excess of thirty days to clear the outstanding dues before the date of auction.

The Court further observed that the petitioner had knowledge of the proposed auction for more than three months before its conduct, yet failed to redeem the secured asset by discharging the outstanding liability.

In these circumstances, the Bench held that it could not be contended that the petitioner was deprived of the statutory opportunity of redemption and that the auction process was conducted in conformity with the amended statutory framework.

Conclusion

Finding that the petitioner had been afforded sufficient opportunity to redeem the secured asset and had failed to do so, the Court dismissed the writ petition and upheld the auction sale and consequential proceedings.

Cause Title: Nazir Ahmad Bhat v. Chairman–Managing Director, J&K Bank & Others (Neutral Citation: 2025:JKLHC-SGR:409)

Appearances

Petitioner: Tariq M. Shah, Advocate, with Zahid Ahmad, Advocate

Respondents: Insha Rashid, Advocate; Taniya, Advocate

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