Jammu and Kashmir High Court Upholds Auction Proceedings Under SARFAESI Act

Court Dismisses Petition Challenging Auction Notice; Reaffirms Borrower's Right to Redeem Ends Post Auction Notice Publication

In a significant ruling, the Jammu and Kashmir High Court has dismissed the writ petition filed by M/s Gogi Motor Store, challenging the auction of its secured assets by Citizen's Co-operative Bank Ltd. The court's decision, delivered by Justices Sindhu Sharma and Shahzad Azeem, underscores the legal principle that a borrower's right to redeem secured assets is extinguished once an auction notice is published under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

The case stemmed from the petitioner's failure to maintain its loan account, which led to its classification as a Non-Performing Asset (NPA) in May 2023. Subsequently, the bank initiated proceedings under the SARFAESI Act, culminating in a tender-cum-auction notice on June 17, 2025. Despite substantial repayments by the petitioner, the bank proceeded with the auction, and Mayank Gupta emerged as the successful bidder, depositing the full bid amount of Rs. 71,02,000.

The petitioner argued that the bank accepted payments post-auction notice and had assured restructuring of the loan, thus asserting that the auction was unwarranted. However, the court found that the petitioner failed to clear dues before the auction notice publication, which extinguished its right to redeem the secured asset.

Citing the Supreme Court's authoritative interpretation in M. Rajendran v. M/s KPK Oils and Proteins India Pvt. Ltd., the court reaffirmed that a borrower cannot tender dues after the auction notice publication. The judgment emphasized that the SARFAESI Act's provisions aim to ensure timely recovery of dues and prevent undue delays in the auction process.

The court dismissed the petition, finding it devoid of merit and vacated any interim relief granted. This ruling reinforces the legal framework for secured creditors under the SARFAESI Act, ensuring clarity in the enforcement of security interests.

Bottom Line:

SARFAESI Act, 2002 - Borrower's right to redeem secured asset extinguishes upon publication of auction notice under Section 13(8) - Bank not bound to accept dues tendered after publication of auction notice - Auction process completed in accordance with law upheld.

Statutory provision(s): Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, Sections 13(2), 13(4), 13(8); Security Interest (Enforcement) Rules, 2002, Rule 8(6).

M/s Gogi Motor Store v. Citizen's Co-operative Bank Ltd., (Jammu And Kashmir)(DB) : Law Finder Doc Id # 2819934