Borrower’s Right To Redeem Assets Extinguishes Once Auction Notice Is Published U/S 13(8) SARFAESI Act: J&K And Ladakh High Court

The High Court observed that repayment attempts after the publication of the notice cannot revive the extinguished right.

The Court was hearing a writ petition filed under Article 226 of the Constitution challenging a Tender-cum-Auction Notice issued by the respondent Bank for the sale of the petitioner’s secured property under Section 13(4) of the SARFAESI Act.

The matter was heard by Justice Sindhu Sharma and Justice Shahzad Azeem, who relied on the Apex Court’s ruling in M. Rajendran v. M/s KPK Oils and Proteins India Pvt.Ltd (2025) and reiterated that “the object underlying amended Section 13 (8) of the SARFAESI Act, that the amended provisions extinguish 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”.

Advocate DS Chouhan represented the petitioner, while Senior Advocate RK Jain represented the respondents.

Background

The petitioner had availed credit facilities from the respondent Bank and secured them through a registered mortgage. The loan account turned irregular and was classified as a Non-Performing Asset. A demand notice under Section 13(2) was issued, but the borrower did not regularise the account, and symbolic possession was taken under Section 13(4).

The Bank made earlier attempts to sell the mortgaged property, which did not fructify. A third notice was issued under Rule 8(6), fixing the auction of the secured asset. The petitioner approached the Court contending that the Bank failed to consider the payments made by him and did not adhere to procedural safeguards.

In the meantime, the third respondent participated in the bid process and was declared the successful bidder. The writ petition was filed after the secured creditor had confirmed the auction and received the entire bid amount.

Court’s Observation

The J&K and Ladakh High Court examined the scope of Section 13(8), which permits a borrower to redeem the secured asset only up to the date of publication of the notice for sale. It held that the object underlying the amendment is to ensure that the process of secured asset sale is not derailed by belated tenders of dues once the sale process has begun.

The Bench applied the legal principle that the statutory right of redemption stands extinguished after publication of the auction notice, and noted the Supreme Court’s interpretation on this issue in M. Rajendran v. KPK Oils and Proteins India Pvt. Ltd., wherein the amended Section 13(8) was held to bar redemption after the publication date.

The Court recorded that the petitioner failed to make any payments before the issuance of the auction notice and approached the Court only after a successful bidder had emerged. Thus, the plea founded upon alleged payments could not revive the relationship of redemption once the statutory cut-off point had elapsed.

The Court observed that the petitioner’s reliance on payments or procedural objections was inconsequential once his right stood extinguished, stating that “any amount, even if deposited, is immaterial.” It emphasised that the petitioner allowed statutory proceedings to attain finality and only attempted to obstruct the secured creditor’s right to enforce security.

The Court held that there was no illegality in the sale process, and the rights of the auction purchaser were required to be protected. Therefore, the petitioner was not entitled to any discretionary relief under Article 226 of the Constitution.

“When all the factual and legal pleas raised by the petitioner are tested on the anvil of law, it goes without saying that the petitioner has made an abortive attempt just to delay the process after having been failed to respond to all the notices issued under the SARFAESI Act to deposit the outstanding amount, therefore, once it is found that the right of the petitioner to redeem the secured assets stand extinguished, in that event, we do not deem it necessary to go into the other grounds urged by the petitioner”, the Court concluded.

Conclusion

The writ petition was dismissed. Interim directions were vacated to enable completion of the sale process in favour of the successful bidder in accordance with the law. All connected applications were disposed of.

Cause Title: M/s Gogi Motor Store v. Citizens’ Co-operative Bank Ltd. & Anr.

Appearances:

Petitioner: Advocates D. S. Chouhan, Ashish Sharma

Respondents: R. K. Jain, Senior Advocate, with Advocates Paramveer Singh and Ajay Bakshi

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