Supreme Court Clarifies Borrower's Right of Redemption Under Amended Section 13(8) of SARFAESI Act
SC holds that right to redeem mortgage extinguishes upon publication of auction notice; single composite sale notice under SARFAESI Rules clarified; urges legislative reform to resolve ambiguities.
In a landmark judgment delivered on 22nd September 2025, the Supreme Court of India in M. Rajendran v. M/s KPK Oils and Proteins India Pvt. Ltd. set aside the Madras High Court’s order that had permitted borrowers to redeem their mortgaged property post-auction sale. The apex court comprehensively examined Section 13(8) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), particularly focusing on the 2016 amendment which altered the timeline for a borrower’s right to redeem.
The borrowers had availed credit facilities in 2016, defaulted, and the secured asset was auctioned in early 2021 after issuance and publication of requisite notices. The High Court had quashed the sale certificate in favor of auction purchasers and allowed borrowers to redeem by paying outstanding dues, relying on the pre-amendment interpretation of Section 13(8).
The Supreme Court, led by Justices J.B. Pardiwala and R. Mahadevan, emphatically held that the amended Section 13(8) restricts the right of redemption to any time before the publication of the auction notice. The Court clarified that the right to redeem ceases upon the publication of the notice inviting public auction or quotations or tenders, marking a departure from the earlier regime under the Transfer of Property Act (Section 60) where redemption could continue till execution of the sale deed.
Further, the Court addressed the controversy over the “notice of sale” requirements under Rules 8 and 9 of the SARFAESI Rules. The Court dispelled the misconception that two separate notices with a 30-day gap (one to the borrower and another published in newspapers) are required. Instead, it held that there is only a single composite notice of sale, which must be served to the borrower, published in newspapers (where applicable), affixed on the property, and uploaded on the secured creditor’s website. The 30-day period is counted from the date of issuance of this composite notice till the sale date.
The Court rejected the borrowers’ contention that the pre-amended Section 13(8) applies to them on the ground that the loan was sanctioned before the amendment. It emphasized that since the auction notice and sale occurred after the amendment came into force on 1st September 2016, the amended provision governs, consistent with the SARFAESI Act’s remedial purpose to enable speedy recovery of non-performing assets.
The judgment highlighted the persistent difficulties and ambiguities caused by inconsistent drafting of Section 13(8) of the SARFAESI Act and the related Rules, which has resulted in protracted litigation and uncertainty affecting secured creditors, borrowers, and auction purchasers alike. The Court urged the Ministry of Finance to undertake legislative reforms to harmonize and clarify these provisions to prevent further litigation and ensure the Act’s efficacy.
In conclusion, the Supreme Court allowed the appeals filed by auction purchasers, quashed the High Court’s writ petition order, and upheld the sanctity of the auction sale under the amended law. The decision reinforces the principle that the borrower’s statutory right of redemption under SARFAESI Act is curtailed to the period before publication of the sale notice, thereby ensuring expeditious enforcement of security interests without undue delays.
Bottom Line:
Under the amended Section 13(8) of the SARFAESI Act, 2002, the borrower's right of redemption of the secured asset stands extinguished on the date of publication of the notice for public auction or inviting quotations or tender from public or private treaty; the right to redeem is not available after the publication of such notice, unlike the pre-amendment position where redemption was allowed until completion of sale by registration.
Statutory provision(s): Section 13(8) of the SARFAESI Act, 2002; Rules 8 and 9 of the Security Interest (Enforcement) Rules, 2002; Section 60 of the Transfer of Property Act, 1882; Sections 35 and 37 of the SARFAESI Act, 2002
M. Rajendran v. M/s KPK Oils and Proteins India Pvt. Ltd., (SC) : Law Finder Doc Id # 2782287
