SCI (2025.09.22) in M. Rajendran vs M/S Kpk Oils And Proteins India Pvt. Ltd [2025 INSC 1137, CIVIL APPEAL NO. 12174 OF 2025] held that;
Similarly, the stipulation under Rule 9(1) of a thirty-days gap between the date of publication of notice of sale and the date of actual sale does not impute a distinct characteristic to the public notice in the newspaper in contrast to the notice of sale that is served to the borrower. As is evident from Appendix IV-A to the SARFAESI Rules, the public notice of sale in newspaper as-well the notice of sale served to the borrower are one and the same, for the purpose of Rule 9(1).
The embargo enshrined under Rule 9(1), that no sale, in the first instance shall take place before the expiry of thirty-days, would be reckoned from the date of issuance of the “notice of sale”, which would include both the public notice of sale in the newspaper and the service thereof to the borrower, whichever is later.
Under Rule 8(6) read with Rule 9(1) both the notice of sale can be served as-well as published in the newspaper, simultaneously on the same date. All that is required under Rule 9(1) is that thirty-day gap is maintained between when the notice of sale is served, affixed and published, whichever is later, as the case may be, till the date of actual sale.
Of the various rules guiding how a legislation has to be interpreted, the one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have retrospective operation and the idea behind the rule is that a current law should govern current activities.
The right of redemption is not a contractual right, and rather a statutory right. Such right of redemption is generally governed by the TP Act, and subject to material modification or alteration by any overriding special law in this regard. Even under the SARFAESI Act, the right of redemption has been statutorily recognized and given effect to in Section 13(8) of the SARFAESI Act, albeit subject to conditions stipulated thereunder insofar as its exercise is concerned.
Thus, the contention of the borrowers that their right of redemption has to necessarily be construed in accordance with the date of when the loan was obtained is completely misconceived. Any contractual terms of arrangement in respect of loan facility obtained will have no bearing or significance in respect of application of the statutory provision of the SARFAESI Act and the rules thereunder. Since the right of redemption under the SARFAESI Act, is nothing but a manifestation of the statutory provision.
Held that where the legislature makes a conscious departure from the general law or contractual terms by providing for a particular consequence by way of a statutory provision, then the general law or contractual terms will have no application.
We make it abundantly clear that if any third party rights have been created over the said secured asset, the same would be non-est in view of this judgment. If at all we come to learn about any obstruction or resistance in handing over of the possession of the secured asset to the auction purchaser herein, either at the behest of the borrower or anyone else, we will proceed to take the strictest of actions against such person.
Blogger’s Comments; With the amended provision under section 13(8), the borrower losses right of redemption of the property from the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets, With the amended provision under section 13(8), the logic & purpose of issuing notice to the borrower under Rule 8(6) has been lost, which was to provide an opportunity to the borrower for redemption before sale of mortgaged property. The Hon'ble Supreme Court could have reconciled the legislative intent behind amended section 13(8) & Rule 8(6).
Excerpts of the order;
B. Section 13(8) of the SARFAESI Act and the Decision of this Court in Bafna Motors.
# 54. In the present lis, we are concerned with sub-section 8 of Section 13 of the SARFAESI Act referred to above. At the cost of repetition, the relevant portion of the said provision is reproduced below for convenience: -
“13. Enforcement of security interest.– (8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,-
(i) the secured assets shall not be transferred by way of lease assignment or sale by the secured creditor; and
(ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets. (Emphasis supplied)
a. Position of Law prevailing prior to the Amendment of Section13(8) of the SARFAESI Act.
# 81. Prior to the amendment to Section 13 sub-section (8) of the SARFAESI Act, the position of law that prevailed, as per the decision of Mathew Varghese (supra), was that the principle underlying Section 60 of the TP Act was extended and applied to Section 13(8) of the SARFAESI Act to hold that the borrower has absolute right to redeem the property by repaying the debt before the sale of such property.
# 82. Thus, prior to the amendment of Section 13(8) of the SARFAESI Act, this Court consistently held, that the borrower shall continue to have a right of redemption of mortgage until the execution of the conveyance of the secured asset by way of a registered instrument.
83. The reason which impelled this Court in Mathew Varghese (supra), in holding so, was because it found no inconsistency between the unamended Section 13(8) of the SARFAESI Act and the general right of redemption under Section 60 of the Transfer of Property Act. b. The 2016 Amendment to Section 13(8) of the SARFAESI Act and the Contradictory Views on the subject.
b. The 2016 Amendment to Section 13(8) of the SARFAESI Act and the Contradictory Views on the subject.
# 84. On 1st September, 2016, the Enforcement of Security Interest and Recovery of Debt Laws and Miscellaneous Provisions (Amendment) Act, 2016 was enacted, which inter-alia amended sub-section 8 of Section 13 of the SARFAESI Act, and substituted the words “any time before the date fixed for sale or transfer” of the original provision with “at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets”. The amended provision of Section 13 sub-section (8) of the SARFAESI Act, now reads as under: -
“13. Enforcement of security interest.– (8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,—
(i) the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and
(ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub-section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.”
# 85. Over a period of time, many orders of different courts, inconsistent with each other had accumulated on the interpretation of the amended Section 13 sub-section (8) of the SARFAESI Act, that had made it very difficult to apply the correct principles of law as regards the right of redemption by the borrower under the SARFAESI Act.
# 86. The High Court of Andhra Pradesh in Sri. Sai Annadhatha Polymers & Anr. v. Canara Bank rep. by its Branch Manager, Mandanapalle reported in 2018 SCC OnLine Hyd 178 took the view that as per Mathew Varghese (supra), under the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. The court went on to say that the amended provisions of Section 13(8) of the SARFAESI Act, however brought in a radical change inasmuch as the right of the borrower to redeem the secured asset would now stand extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the SARFAESI Rules. The relevant observations made by the High Court are reproduced hereinbelow: -
“6. In terms of the amended provisions of Section 13(8) of the SARFAESI Act, the right of redemption given to the borrower would expire upon publication of such a notice. However, Rule 8(6) of the Rules of 2002, as interpreted by the Supreme Court in Mathew Varghese v. M. Amritha Kumar [(2014) 5 SCC 610], stipulates that the thirty day notice period mentioned therein is for the purpose of enabling the borrower to redeem his property. Significantly, this provision remains unaltered. Therefore, this statutory notice period of thirty days is sacrosanct and deviation therefrom would curtail the statutory right of redemption available to the borrower. However, in terms of the amended Section 13(8) of the SARFAESI Act, once the notice under Rule 9 of the Rules of 2002 is published, the said right stands extinguished.
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20. In the light of the aforestated changes in the statutory scheme, certain crucial aspects may be noted. As per the unamended Section 13(8) of the SARFAESI Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset. Case law consistently held to the effect that a sale or transfer is not completed until all the formalities are completed and there is an effective transfer of the asset sold. In consequence, the borrower's right of redemption did not stand terminated on the date of the auction sale of the secured asset itself and remained alive till the transfer was completed in favour of the auction purchaser, by registration of the sale certificate and delivery of possession of the secured asset. The recent judgment of the Supreme Court in ITC LIMITED v. BLUE COAST HOTELS LIMITED also affirmed this legal position.
21. However, the amended provisions of Section 13(8) of the SARFAESI Act bring in a radical change, inasmuch as the right of the borrower to redeem the secured asset stands extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the Rules of 2002. In effect, the right of redemption available to the borrower under the present statutory regime stands drastically curtailed and would be available only till the date of publication of the notice under Rule 9(1) of the Rules of 2002 and not till completion of the sale or transfer of the secured asset in favour of the auction purchaser.
[...] xxx xxx xxx
23. Therefore, even after the amendment of Section 13(8) of the SARFAESI Act, a secured creditor is bound to afford to the borrower a clear thirty day notice period under Rule 8(6) to enable him to exercise his right of redemption. In consequence, a notice under Rule 9(1) of the Rules of 2002 cannot be published prior to expiry of this thirty day period in the new scenario, post amendment of Section 13(8) of the SARFAESI Act, as such right of redemption would stand terminated immediately upon publication of the sale notice under Rule 9(1) of the Rules of 2002. The judgment of the Supreme Court in CANARA BANK v. M. AMARENDER REDDY, which was rendered in the context of the unamended provisions, would therefore have no application to the post-amendment scenario in the light of the change brought about in Section 13(8). To sum up, the post-amendment scenario inevitably requires a clear thirty day notice period being maintained between issuance of the sale notice under Rule 8(6) of the Rules of 2002 and the publication of the sale notice under Rule 9(1) thereof, as the right of redemption available to the borrower in terms of Rule 8(6) of the Rules of 2002, as pointed out in MATHEW VARGHESE, stands extinguished upon publication of the sale notice under Rule 9(1).” (Emphasis supplied)
# 87. The amended Section 13(8) of the SARFAESI Act was also looked into by the High Court of Telangana in the case of K.V.V. Prasad Rao Gupta v. State Bank of India reported in 2021 SCC OnLine TS 328 and relying on the aforesaid decision of the Andhra Pradesh High Court in the case of Sri. Sai Annadhatha Polymers (supra), the court held that the right of the borrower to redeem the property stands extinguished upon publication of sale notice after the expiry of thirty-days period of notice to the borrower. The relevant observations read as under: -
“21. Thus from the above judgments it is clear that under Rule 8(6) of the Rules of 2002, the petitioners are entitled for a thirty day notice period enabling them to clear the loan and to redeem the property as envisaged under Section 13(8) of the SARFAESI Act, and that if they fail to repay the amount within the stipulated period, after expiry of said period of 30 days, the secured creditor is entitled to issue publication of sale notice under Rule 9(1), and that on publication of such notice, the right of the borrower to redeem the property stands extinguished.” (Emphasis supplied)
# 88. However, in a conflicting judgement, one another Bench of the Telangana High Court in Concern Readymix v. Corporation Bank reported in 2018 SCC OnLine Hyd 783 relied upon Section 60 of the TP Act to hold that the borrower’s right of redemption would continue to exist until the execution of the conveyance. It observed that the amended Section 13(8) of the SARFAESI Act merely restricts the right of the secured creditor to proceed further with the transfer or sale of the secured asset, but not the right of redemption enjoyed by the borrower. The relevant observations read as under: -
“10. The first distinction between the unamended and amended sub-section (8) of Section 13 is that before amendment, the facility of repayment of the entire dues along with the costs, charges and expenses, was available to the debtor at any time before the date fixed for the sale or transfer. But after the amendment, the facility is available upto the time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty. The second distinction is that the unamended sub-section (8) did not provide for the contingency when the dues are tendered by the borrower before the date of completion of the sale or lease but after the issue of notice. But the amended sub-section (8) takes care of the contingency where steps have already been taken by the secured creditor for the transfer of the secured asset, before the payment was made. Except these two distinctions, there is no other distinction.
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13. What is important to note both from the amended and unamended provisions of Section 13(8) and Rule 9(1) is that both of them do not speak in express terms, about the equity of redemption available to the mortgagor. The amended Section 13(8) merely prohibits the secured creditor from proceeding further with the transfer of the secured assets by way of lease, assignment or sale. A restriction on the right of the mortgagee to deal with the property is not exactly the same as the equity of redemption available to the mortgagor. The payment of the amounts mentioned in Section 13(8) ties the hands of the mortgagee (secured creditor) from exercising any of the powers conferred under the Securitisation Act, 2002. Redemption comes later. But unfortunately, some Courts, on a wrong reading of the decision of the Supreme Court in Mathew Varghese v. M. Amritha Kumar [(2014) 5 SCC 610], have come to the conclusion as though Section 13(8) speaks about the right of redemption. The danger of interpreting Section 13(8) as though it relates to the right of redemption, is that if payments are not made as per Section 13(8), the right of redemption may get lost even before the sale is complete in all respects. But in law it is not. It may be seen from paragraphs-34 to 36 of the decision of the Supreme Court in Mathew Varghese that the Supreme Court took note of Section 60 of the Transfer of Property Act and the combined effect of Section 54 of the Transfer of Property Act and Section 17 of the Registration Act to come to the conclusion that the extinction of the right of redemption comes much later than the sale notice. Therefore, we should first understand that the right of redemption is not lost immediately upon the highest bid made by a purchaser in an auction being accepted.
14. Perhaps the Courts were tempted to think that Section 13(8) speaks about redemption, only on account of what is found in Rule 3(5) of the Security Interest (Enforcement) Rules, 2002. Rule 3(5) inserted by way of amendment with effect from 04-11 2016 states that the demand notice issued under Section 13(2) should invite the attention of the borrower to the provisions of Section 13(8), in respect of the time available to the borrower to redeem the secured assets. Today, it may be convenient for one borrower to contend that the right of redemption will be lost immediately upon the issue of notice under Rule 9(1). But if it is held so, the same would tantamount to annulling the relevant provisions of the Transfer of Property Act, which do not stand expressly excluded, insofar as the question of redemption is concerned.” (Emphasis supplied)
# 89. The aforesaid decision of Concern Readymix (supra) was carried upto and challenged before this Court by way of Special Leave Petition (C) No. 20500 of 2019, which came to be dismissed by this Court in limine, being as follows: -
“ORDER Delay condoned.
The Special Leave Petition is dismissed”
# 90. Additionally, this Court in Shakeena & Anr. v. Bank of India & Ors. reported in (2021) 12 SCC 761 while dealing with the unamended provision of Section 13(8) of the SARFAESI Act stated that as a result of the amended provision, a more stringent condition has been stipulated whereby the borrower, in order to redeem the mortgage, is now required to tender all dues to the secured creditor before the date of publication of notice for auction. The relevant observations read as under: -
“15. Be it noted that on 1-9-2016 amendment to Section 13(8) of the 2002 Act came into force as a result of which the dues of the secured creditor together with all costs, charges and expenses incurred by him are required to be tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets.
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30. A fortiorari, it must follow that the appellants have failed to exercise their right of redemption in the manner known to law, much less until the registration of the sale certificate on 18-9 2007. In that view of the matter no relief can be granted to the appellants, assuming that the appellants are right in contending that as per the applicable provision at the relevant time [unamended Section 13(8) of the 2002 Act], they could have exercised their right of redemption until the registration of the sale certificate — which, indisputably, has already happened on 18-9 2007. Therefore, it is not possible to countenance the plea of the appellants to reopen the entire auction process. This is more so because, the narrative of the appellants that they had made a valid tender towards the subject loan accounts before registration of the sale certificate, has been found to be tenuous. Thus understood, their right of redemption in any case stood obliterated on 18-9 2007. Further, the amended Section 13(8) of the 2002 Act which has come into force w.e.f. 1-9-2016, will now stare at the face of the appellants. As per the amended provision, stringent condition has been stipulated that the tender of dues to the secured creditor together with all costs, charges and expenses incurred by him shall be at any time before the "date of publication of notice" for public auction or inviting quotations or tender from public or private deed for transfer by way of lease assessment or sale of the secured assets. [...]” (Emphasis supplied)
# 91. However, in S. Karthik and Ors. v. N. Subhash Chand Jain and Ors. reported in (2022) 10 SCC 641 a three-Judge Bench of this Court placing reliance on Mathew Varghese (supra) once again noted that under Section 13 sub-section (8) of the SARFAESI Act, the mortgagor, i.e. the borrower, retains full right to redeem the property by tendering all the dues to the secured creditor at any time before the date fixed for sale or transfer. The relevant observations read as under: -
“53. It could thus be seen that this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 :(2014) 3 SCC (Civ) 254] observed that the equity of redemption is not extinguished by mere contract for sale and that the mortgagor's right to redeem will survive until there has been completion of sale by the mortgagee by a registered deed. This Court further observed that applying the principles stated with reference to Section 60 of the Transfer of Property Act in respect of a secured interest in a secured asset in favour of the secured creditor under the provisions of the SARFAESI Act and the relevant Rules applicable, a free hand is given to a secured creditor to resort to a sale without the intervention of the court or tribunal. It has, however, been held that under Section 13(8), it is clearly stipulated that the mortgagor i.e. the borrower, who is otherwise called as a debtor, retains his full right to redeem the property by tendering all the dues to the secured creditor at any time before the date fixed for sale or transfer.
54. This Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254] further held that if the tender is made by the borrower at the last moment before the sale or transfer, the secured asset should not be sold or transferred by the secured creditor. This Court held that there was no reason as to why the general principle laid down by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247] with reference to Section 60 of the Transfer of Property Act could not have application in respect of a secured interest in a secured asset created in favour of a secured creditor. It has been held that the said principles will apply on all fours in respect of a transaction as between the debtor and secured creditor under the provisions of the SARFAESI Act.
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115. Even if viewed from another angle, the claim of the appellants is not sustainable. The two-Judge Bench of this Court in Mathew Varghese [Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 : (2014) 3 SCC (Civ) 254], has heavily relied on the judgment of the three-Judge Bench of this Court in Narandas Karsondas . It has been held by this Court in Narandas Karsondas [Narandas Karsondas v. S.A. Kamtam, (1977) 3 SCC 247], that the right of redemption, which is embodied in Section 60 of the Transfer of Property Act, is available to the mortgagor unless it has been extinguished by the act of parties. It has been held, that only on execution of the conveyance and registration of transfer of the mortgagor's interest by registered instrument, that the mortgagor's right of redemption will be extinguished.
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118. It is further relevant to note that this Court in Dwarika Prasad [Dwarika Prasad v. State of U.P., (2018) 5 SCC 491] and in Shakeena [Shakeena v. Bank of India, (2021) 12 SCC 761] held that the right to redemption stands extinguished on the sale certificate getting registered.” (Emphasis supplied)
# 92. A similar view as Concern Readymix (supra) was taken by the Punjab & Haryana High Court in Pal Alloys and Metal India Private Limited & Ors. v. Allahabad Bank & Ors. reported in 2021 SCC OnLine P&H 2733. The court therein looked into the Report of the Joint Committee on the 2016 Amendment to arrive at the conclusion that under the amended Section 13(8) of the SARFAESI Act, the right of redemption of mortgage would continue till the execution of conveyance or issuance of sale certificate. It further observed that the decision in Shakeena (supra) was not applicable inasmuch as it did not examine the provision of Section 13(8) of the SARFAESI Act through the lens of Section 60 under the TP Act. The relevant observations read as under: -
“78. It is interesting to note that para 24 of the Report of the Joint Committee referred to above deals with the proposed amendment to Section 13(8) of the SARFAESI Act and gives a heading “Provisions to stop secure creditor to lease or assignment or sale in the prescribed conditions-Amendment to Section 13(8) of the SARFAESI Act.
79. Thus the amendment was proposed w.r.t. when to stop the secured creditor from selling/transferring the secured asset. The words ‘when to stop the exercise of right of redemption by the borrower/mortgagor’ were not used.
80. In the said Report, at pg.12, Clause 11(ii) of the Bill which proposed to amend Section 13(8) of the SARFAESI Act is noted. After extracting the existing Section 13(8) of the Act which stands as under: — “If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of that secured asset.”
81. The proposed modification to Section 13(8) is set out also at pg.12 as under:— “(8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for lease, assignment or sale of the secured assets,-
(i) the secured assets shall not be leased, assigned or sold by the secured creditor; and
(ii) in case, any step has been taken by the secured creditor for lease or assignment or sale of the assets before tendering of such amount under this sub- section, no further step shall be taken by such secured creditor for lease or assignment or sale of such secured assets.”
82. Strangely, on the next page at page 13, the following is stated:-
“The Committee after examining the proposed amendment and the existing Rules in this regard decide to modify proposed Clause 11(ii) [section 13(8) of the principal Act] as under: “ (8) Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets,-
(i) the secured assets shall not be transferred by way of lease, assignment or sale by the secured creditor; and
(ii) in case, any step has been taken by the secured creditor for transfer by way of lease or assignment or sale of the assets before tendering of such amount under this sub- section, no further step shall be taken by such secured creditor for transfer by way of lease or assignment or sale of such secured assets.”
83. Nothing is mentioned as to why the proposal indicated in Page 12 was changed on page-13 differently.
84. Admittedly, what is stated in page-13 was passed in the Lok Sabha and the Rajya Sabha and then it became the Act 44 of 2016 and came into effect on 01.09.2016.
85. But the important thing to note is that this Report does not indicate that the Committee had even considered Section 60 of the Transfer of Property Act, 1882, which provides the general law of right to redeem a mortgaged asset of a mortgager vis-a-vis the provisions of the SARFAESI Act.
86. It no where says that there was an intention to bring about a change with regard to the time before which a mortgagor can exercise his right to redeem the mortgage.
87. Even the heading of Para 24 of the Report which says “Provisions to stop secure creditor to lease or assignment or sale in the prescribed conditions - Amendment to Section 13(8) of the SARFAESI Act” seems to suggest that the focus of the Committee was on the date when the secured creditor's right to lease or assignment or sale would stop.
88. In our considered opinion, it is clear that the legislature did not have any intention to deal with the right of mortgagor to redeem the mortgage when they amended Sec.13(8) or to modify it in any manner; and amendment cannot be said to have intended to modify the existing law which continued even when the un amended Section 13(8) of the SARFAESI Act was in force. The amended Sec.13(8) was intended to only deal with the date when the secured creditor's right to transfer the secured asset should stop and nothing more.
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93. The view taken by the High Court for the State of Telangana and Andhra Pradesh in M/s. Concern Ready Mix [(2019) 3 ALD 384 : Law Finder Doc Id # 1380151] commends itself to us and we accept and approve the same.
c. Effect of the 2016 Amendment on the Right of Redemption underSection 13(8) of the SARFAESI Act.
# 100. The final conclusion drawn by this Court in Bafna Motors (supra) reads thus: -
“110. We summarise our final conclusion as under: -
110.1. The High Court was not justified in exercising its writ jurisdiction under Article 226 of the Constitution more particularly when the borrowers had already availed the alternative remedy available to them under Section 17 of the Sarfaesi Act.
110.2. The confirmation of sale by the Bank under Rule 9(2) of the 2002 Rules invests the successful auction-purchaser with a vested right to obtain a certificate of sale of the immovable property in the form given in Appendix V to the Rules i.e. in accordance with Rule 9(6) of the Security Interest (Enforcement) Rules, 2002.
110.3. In accordance with the unamended Section 13(8) of the Sarfaesi Act, the right of the borrower to redeem the secured asset was available till the sale or transfer of such secured asset.
In other words, the borrower's right of redemption did not stand terminated on the date of the auction-sale of the secured asset itself and remained alive till the transfer was completed in favour of the auction-purchaser, by registration of the sale certificate and delivery of possession of the secured asset. However, the amended provisions of Section 13(8) of the Sarfaesi Act, make it clear that the right of the borrower to redeem the secured asset stands extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the 2002 Rules. In effect, the right of redemption available to the borrower under the present statutory regime is drastically curtailed and would be available only till the date of publication of the notice under Rule 9(1) of the 2002 Rules and not till the completion of the sale or transfer of the secured asset in favour of the auction-purchaser. 110.4. The Bank after having confirmed the sale under Rule 9(2) of the 2002 Rules could not have withheld the sale certificate under Rule 9(6) of the 2002 Rules, and entered into a private arrangement with a borrower.
110.5. The High Court under Article 226 of the Constitution could not have applied equitable considerations to overreach the outcome contemplated by the statutory auction process prescribed under the Sarfaesi Act.
110.6. The two decisions of the Telangana High Court in Concern Readymix [Concern Readymix v. Corporation Bank, 2018 SCC OnLine Hyd 783 : (2019) 3 ALD 384] and Amme Srisailam [Amme Srisailam v. Union Bank of India, 2022 SCC OnLine AP 3484] do not lay down the correct position of law. In the same way, the decision of the Punjab and Haryana High Court in Pal Alloys [Pal Alloys & Metal India (P) Ltd. v. Allahabad Bank, 2021 SCC OnLine P&H 2733] also does not lay down the correction position of law.
110.7. The decision of the Andhra Pradesh High Court in Sri Sai Annadhatha Polymers [Sri Sai Annadhatha Polymers v. Canara Bank, 2018 SCC OnLine Hyd 178] and the decision of the Telangana High Court in K.V.V. Prasad Rao Gupta [K.V.V. Prasad Rao Gupta v. SBI, 2021 SCC OnLine TS 328] lay down the correct position of law while interpreting the amended Section 13(8) of the Sarfaesi Act.” (Emphasis supplied) C. How the decision of this Court in Bafna Motors should be understood?
C. How the decision of this Court in Bafna Motors should be understood?
# 169. From the above discussion, we have no hesitation in holding the following: -
(i) Rule(s) 8(6), the Proviso thereto, Rule 8(7) and Rule 9(1) of the SARFAESI Rules do not speak of any separate or distinct notice of sale that is required to be issued by the secured creditor for the transfer of the secured asset by way of lease, assignment or sale in accordance with any of the methods enumerated in Rule 8(5).
(ii) The different manner in which the notice of sale has to be served, caused, published, affixed, uploaded as stipulated in Rule(s) 8(6) and 8(7) of the SARFAESI Rules, do not constitute separate notices of sale by themselves, they are part and parcel of one single composite intended “notice of sale” of the secured asset by the secured creditor, by any of the mode of sale listed in Rule 8(5). All of the aforesaid rules are concerned with a single composite “notice of sale”, and the only distinction between the said rules, is the manner in which the said “notice of sale” has to be given, on the basis of which relevant rule or rules are applicable, as the case may be.
(iii) Similarly, the stipulation under Rule 9(1) of a thirty-days gap between the date of publication of notice of sale and the date of actual sale does not impute a distinct characteristic to the public notice in the newspaper in contrast to the notice of sale that is served to the borrower. As is evident from Appendix IV-A to the SARFAESI Rules, the public notice of sale in newspaper as-well the notice of sale served to the borrower are one and the same, for the purpose of Rule 9(1).
(iv) The embargo enshrined under Rule 9(1), that no sale, in the first instance shall take place before the expiry of thirty-days, would be reckoned from the date of issuance of the “notice of sale”, which would include both the public notice of sale in the newspaper and the service thereof to the borrower, whichever is later.
(v) Under Rule 8(6) read with Rule 9(1) both the notice of sale can be served as-well as published in the newspaper, simultaneously on the same date. All that is required under Rule 9(1) is that thirty-day gap is maintained between when the notice of sale is served, affixed and published, whichever is later, as the case may be, till the date of actual sale.
iii. What is the import of the expression “before the date of publication” used in Section 13(8) of the SARFAESI Act.
# 177. Thus, for the purpose of the amended Section 13(8) of the SARFAESI Act, the expression “before the date of publication” used therein, has to be construed to refer and mean the publication of a valid “notice of sale” for the secured asset, although such publication may vary depending upon the mode of sale chosen by the secured creditor.
# 178. The word “publication” used in Section 13(8) of the SARFAESI Act, has to be understood to mean and include the service, publication in newspaper, and the affixation and uploading of the “notice of sale”, as may be required under the SARFAESI Rules. Wherever, the chosen mode of sale requires the secured creditor to effectuate the “notice of sale” in any or all of the aforesaid manner, as the case may be, the expiry of thirty-days as required under Rule 9(1) from the day when the secured creditor complies with the requirement of giving the notice of sale, as per the applicable rules, would be the date on which the secured creditor is said to have validly published the “notice of sale” and it would be this date on which the right of redemption of the borrower would stand extinguished.
D. Whether, the Amended Section 13(8) of the SARFAESI Act is retrospective in nature?
# 179. We now proceed to deal with the principal contention raised on behalf of the borrowers that the unamended Section 13(8) of the SARFAESI Act would apply in the present case since the loan was obtained on 06.01.2016 and that the amendment to the said provision came into effect on 01.09.2016.
# 180. We do not find any merit in the principal contention raised on behalf of the borrowers referred to above. The amended provision extinguishes 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. This unambiguous language used in the amended provision of Section 13(8) furthers the object and reasons of the SARFAESI Act for which it was enacted i.e., to ensure that the lender is able to enforce his security interest at the earliest and with least possible intervention of the courts.
# 181. In the case on hand, indisputably, the loan account of the borrowers came to be classified as NPA on 31.12.2019. The Auction Notice was published by the Bank on 22.01.2021 and the secured assets were successfully auctioned on 26.02.2021.
# 182. The Auction Sale amount was deposited on 20.03.2021 and the Sale Certificate was issued by the Bank in favour of the appellants herein on 22.03.2021.
# 183. In such circumstances referred to above, the right to redeem the secured asset stood extinguished on 22.01.2021. The borrowers could be said to have failed to pay the outstanding debt before the publication of the auction notice dated 22.01.2021 by which date the amended Section 13(8) of the SARFAESI Act had already come into force.
# 184. In the aforesaid context, we may refer to and rely upon a decision of this Court in the case of M.D. Frozen Foods (supra) wherein this Court observed that the SARFAESI Act was brought into force with the object of providing expeditious procedure for recovery of large debts in NPAs. It held that the Act applied to all the claims which were alive when SARFAESI Act was into force. Certain Non- Banking Financial Companies (NBFCs) were notified at various dates between 2002-2016 (when judgement came). The judgement says for the NBFC it would be similarly applicable.
# 185. Thus, logically from the above, if the claim is alive on 01.09.2016 when the Section 13(8) is amended and the notice for auction is issued after 01.09.2016, then the amended section should apply otherwise an absurd situation would be created, that the Act which applied retroactively to "alive claims" prior to the Act coming into force on 2002, but the amendment in it like in Section 13(8) would apply prospectively. That would create absurd situations.
# 186. The SARFAESI Act intends to provide a remedy in respect of pre-existing loans and the interpretation that it would apply only to future debts would defeat the very purpose of that law, which was to reduce non-performing assets.
# 187. It is no more res-integra that the presumption against retrospection does not apply to the legislation concerned merely with matters of procedure or of evidence ; on the contrary, provisions of that nature are to be construed as retrospective unless there is a clear indication that such was not the intention of Parliament.
# 188. We may summarize the principles on retrospective application of legislations as under: -
(i) Presumption against retrospectivity is not applicable to enactments which merely affect procedure or change forum or are declaratory;
(ii) Retroactive/retrospective operation can be implicit in a provision construed in the context where it occurs ;
(iii) Given the context, a provision can be held to apply to cause of action after such provision comes into force, even though the claim on which the action may be based may be of an anterior date ; and
(iv) A remedial statute applies to pending proceedings and such application may not be taken to be retrospective if application is to be in future with reference to a pending cause of action ;
(v) SARFAESI Act is a remedial statute intended to deal with problem of pre-existing loan transactions which need speedy recovery."
# 189. A legislation, be it a statutory Act or a statutory Rule or a statutory Notification, may physically consist of words printed on papers but conceptually, it would be a great deal more than ordinary prose. Of the various rules guiding how a legislation has to be interpreted, the one established rule is that unless a contrary intention appears, a legislation is presumed not to be intended to have retrospective operation and the idea behind the rule is that a current law should govern current activities.
# 190. If legislation confers a benefit on some persons without inflicting a corresponding detriment on some other person or on the public generally, and where to confer such benefit appears to have been the legislators object, then the presumption would be that such legislation, giving it a purposive construction, would warrant a retrospective effect.
# 191. Even otherwise, as held in Narandas Karsondas (supra) and L.K. Trust (supra), the right of redemption is not a contractual right, and rather a statutory right. Such right of redemption is generally governed by the TP Act, and subject to material modification or alteration by any overriding special law in this regard. Even under the SARFAESI Act, the right of redemption has been statutorily recognized and given effect to in Section 13(8) of the SARFAESI Act, albeit subject to conditions stipulated thereunder insofar as its exercise is concerned.
# 192. Thus, the contention of the borrowers that their right of redemption has to necessarily be construed in accordance with the date of when the loan was obtained is completely misconceived. Any contractual terms of arrangement in respect of loan facility obtained will have no bearing or significance in respect of application of the statutory provision of the SARFAESI Act and the rules thereunder. Since the right of redemption under the SARFAESI Act, is nothing but a manifestation of the statutory provision.
# 193. In this regard, reference may be made to the decision of this Court in Authorized Office, Central Bank of India v. Shanmugavelu reported in 2024 INSC 80 wherein one of us, J.B. Pardiwala J., held that where the legislature makes a conscious departure from the general law or contractual terms by providing for a particular consequence by way of a statutory provision, then the general law or contractual terms will have no application.
VI. FINAL CONCLUSION
# 194. During the course of hearing, it was brought to our notice that that third party rights were being attempted to be created over the secured asset by the borrower, to the prejudice and detriment of the auction purchaser herein, in order to bypass the sanctity of the auction conducted and in a blatant disregard of the dignity of the proceedings before this Court.
# 195. We make it abundantly clear that if any third party rights have been created over the said secured asset, the same would be non-est in view of this judgment. If at all we come to learn about any obstruction or resistance in handing over of the possession of the secured asset to the auction purchaser herein, either at the behest of the borrower or anyone else, we will proceed to take the strictest of actions against such person.
# 196. Before we close this judgment, we would like to say something as regards the litigation which has unfolded before us. The RDBFI Act was the first legislative enactment that came into force in 1993. It was brough in order to facilitate expeditious recovery of debts by the bank, in order to ensure adequate liquidity and an overall healthy growth-oriented economy.
# 197. However, due to the continuing rise in number of non-performing assets and a pathetically poor rate of loan recovery, the SARFAESI Act was enacted. The SARFAESI Act was envisioned as a watershed legislation and a panacea to the failure of the existing legislation in addressing the major problems that were being faced by banks and financial institutions in India with respect to the recovery of bad debts, by introducing enforcement of debt without intervention of courts through securitisation and asset reconstruction, a need highlighted by several committees. Various amendments have been made to the SARFAESI Act over the years to ensure that the Act continues to be potent in bringing about meaningful change to the poor credit culture prevailing in the country and put a check on the debt evasive acts of scrupulous borrowers.
# 198. It has been almost twenty-three years, since the SARFAESI Act has remained in force. It is indeed very sad to note that even after these many years procedural issues such as the one involved in the case at hand, have continued to plague the legislation.
# 199. Despite a catena of amendments, the glaring anomaly that we have come across in respect of Section 13(8) of the SARAFESI Act and Rule(s) 8 and 9 of the SARFAESI Rules persists. The same renders the very mandate of the provision otiose.
# 200. We are, however, at our wit’s end to note how the ill-wording of Section 13(8) of the SARFAESI Act has resulted in a glaring inconsistency between the aforesaid provision and the SARFAESI Rules framed in lieu thereof. It is unfortunate that the ambiguities within the statutory provisions of the SARFAESI Act and Rules thereunder have left the interests of secured creditors and auction purchasers high and dry. The interpretative deadlock between the provision and the rules has single handedly resulted in a huge mess insofar as enforcement of security interest is concerned., giving birth to an endless pipeline of litigation clogging the specialized forums of the DRT and DRAT, that are expected to expeditiously decide matters of recovery of debt.
# 201. We humbly urge the Ministry of Finance to take a serious look at these provisions and bring about necessary changes, before it is too late in the day.
# 202. In the result, both the appeals succeed and are hereby allowed. The impugned judgment and order passed by the High Court is hereby set aside. The pending applications if any shall stand disposed of.
# 203. The Registry shall forward one copy each of this judgment to all the High Courts across the country and also to the Principal Secretary, Ministry of Finance and the Principal Secretary, Ministry of Law & Justice.
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