Petitioner's Right of Redemption Extinguished Due to Non-Compliance with Loan Repayment in SARFAESI Case
The Jammu and Kashmir High Court, in a recent judgment, dismissed a petition filed by Nazir Ahmad Bhat challenging the auction process initiated by J&K Bank under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The petitioner, a borrower who defaulted on his loan, alleged that the bank did not comply with the statutory requirements for notice before auctioning the secured assets.
The case, heard by Justices Sanjeev Kumar and Sanjay Parihar, revolved around the contention that the bank failed to provide the mandatory 30-day notice period as per Rule 9(1) of the Security (Enforcement) Interest Rules, 2002. The petitioner argued that this non-compliance deprived him of the opportunity to redeem the mortgaged property.
Upon reviewing the case details, the court found that the petitioner had been given multiple opportunities to clear his outstanding dues, which he failed to do. It was noted that the bank had initially issued an auction notice on June 6, 2023, followed by a second notice on July 28, 2023, providing ample time for the petitioner to settle his debts. The court observed that despite having over three months to redeem the secured assets, the petitioner did not make the necessary payments.
The judgment highlighted the significance of the 2016 amendment to Section 13(8) of the SARFAESI Act, which limits the borrower's right of redemption to before the date of publication of the auction notice. The court cited the Supreme Court's decision in M. Rajendran v. KPK Oils and Proteins Private Limited, which clarified that the right of redemption is extinguished on the date of publication of the auction notice.
In dismissing the petition, the court concluded that the petitioner had no reasonable cause to maintain the petition, having failed to act within the ample time provided. This decision reaffirms the legal position that borrowers must adhere to statutory timelines to exercise their rights under the SARFAESI Act.
Bottom Line:
SARFAESI Act, 2002 - Right of redemption extinguished on the date of publication of auction notice. Compliance with 30 days' statutory period required under Rule 9(1) of Security (Enforcement) Interest Rules, 2002 for notice of sale.
Statutory provision(s): SARFAESI Act, 2002 Section 13(8), Rule 9(1) of Security (Enforcement) Interest Rules, 2002, SARFAESI Act, 2002 Section 13(4), Rule 8(1) of the Security (Enforcement) Interest Rules, 2002
