Summary: The SC has laid down the law on the right of redemption under the SARFAESI Act and clarified that (a) once a bank publishes an auction notice under the SARFAESI Act, the borrower permanently loses the right to redeem the mortgage; (b) the amendment to Section 13(8) of the SARFAESI Act in 2016 applies to all the loans declared as non-performing assets after September 1, 2016, regardless of when the loan was availed; and (c) the term “publication” in Section 13(8) refers to a single composite notice that encompasses all modes including service of notice, newspaper publication, affixation, and uploading on the website, rather than merely newspaper advertisements.
The Supreme Court (“SC”) in its recent judgment dated September 22, 2025 [M. Rajendran & Ors. vs M/S KPK Oils and Proteins India Pvt. Ltd. & Ors.],[1]has reaffirmed that the right of redemption of the borrowers under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”), is extinguished on the date of publication of the auction notice and has further clarified the meaning of the term “date of publication” under the SARFAESI Act.
Brief Facts
KPK Oils and Proteins India Pvt. Ltd. (“KPK Oils”) availed loan facilities from M/s. Tamil Nadu Mercantile Bank Limited (“Bank”) on January 6, 2016. To secure repayment the Respondents created an equitable mortgage over immovable properties. Upon default, the Bank classified the loan account as a non-performing asset (“NPA”) on December 31, 2019. KPK Oils and Respondent Nos. 2 to 4 are collectively referred to as “Respondents”.
The Bank issued statutory notices under Sections 13(2) and 13(4) of the SARFAESI Act and published an auction sale notice under Rule 8(6) read with Rule 9 of the Security Interest (Enforcement) Rules, 2002 (“SARFAESI Rules”). Objections were filed challenging the notice under Section 13(4) and the auction notice before the Debt Recovery Tribunal, Coimbatore (“DRT”). The DRT dismissed these objections, and the secured assets were auctioned to M. Rajendran, M. Velusamy, M. Mani, M. Selvamani, V. Rajeshwari, R. Amirthaveni, R. Sanjay, R. Surya, and M. Palaniammal, i.e., the appellants (“Auction Purchasers”) on February 26, 2021, for Rs. 1,25,60,000/-. The Auction Purchasers deposited sale consideration, and a sale certificate was issued on March 22, 2021 (“Sale Certificate”).
Challenge before Madras High Court (“Madras HC”)
The Respondents subsequently filed a writ petition, challenging the decision of the DRT and the Sale Certificate before the Madras HC. By an order dated January 24, 2023, the Madras HC directed that a status quo be maintained, as the Respondents were ready to repay the outstanding amount.
The Madras HC, by order dated April 24, 2023 (“HC Order”), inter alia held that the issue of right of redemption under Section 13(8) of the SARFAESI Act (“Section 13(8)”) was no longer res integra in view of the SC’s decision in S. Karthick vs N. Subhash Chand Jain,[2] which also referred to Mathew Varghese vs Amritha Kumar and Ors.[3]The Madras HC allowed the writ petition, set aside the Sale Certificate, and permitted the Respondents to discharge the debt and redeem the secured assets.
Issues before SC
Aggrieved by the HC Order, the Auction Purchasers preferred an appeal. While setting aside the HC Order, which permitted the Respondents to redeem the mortgage, the SC relied on the judgment passed in Celir LLP vs Bafna Motors (Mumbai) Private Ltd.[4] (“Bafna Motors Case”).
In the Bafna Motors Case, the SC analysed the amendment made to Section 13(8), which took effect on September 1, 2016 (“2016 Amendment”), curtailing the borrower’s right of redemption. Prior to the 2016 Amendment, the established precedents in Narandas Karsondas vs S. A. Kamtam & Anr.[5]and L. K. Trust vs EDC Limited & Ors.[6] held that redemption rights under Section 60 of the Transfer of Property Act, 1882 (“TP Act”), could only be extinguished upon the execution and registration of a conveyance deed, and the same principle was generally applied by the courts to Section 13(8). The 2016 Amendment significantly changed this position, and the borrower’s right of redemption extinguished on the date of publication of the auction notice.
Despite having settled the law in the Bafna Motors Case, the SC felt the need to clarify the meaning and purport of the words “the date of publication of the notice” to ascertain the precise point of time when the borrower’s right of redemption under Section 13(8) extinguishes, particularly where the mode of sale of the secured asset is by means other than a public auction.
One Single Composite Notice Requirement
While addressing the ambiguity, the SC observed that no artificial distinction could be drawn between the right of redemption under Section 13(8) and different modes of transfer.
It observed an inconsistency between the SARFAESI Act and SARFAESI Rules. Rule 8(6) requires issuing a notice to the borrower before the sale of immovable assets by obtaining quotations, inviting tenders, holding auction or private treaty, and publishing a notice in two leading newspapers in case of public auctions or tenders. Rule 8(7) requires affixing the sale notice on the immovable property under Rule 8(5). Rule 9(1) prohibits sale before 30 days from the publication of the public notice or service to the borrower. This created inconsistency about the specific notice Section 13(8) refers to.
After examining the various provisions and judicial precedent, the SC inter alia summarised the law as under:
- Rules 8(6), the proviso thereto, Rule 8(7), and Rule 9(1) of the SARFAESI Rules do not mandate separate notice of sale for transfer of secured assets under Rule 8(5). All modes of serving, publishing, affixing, and uploading notices form part of a single composite “notice of sale”. The term “publication” in Section 13(8) encompasses all notice modes – service to borrower, newspaper publication, affixation, and uploading on the website – as required under the SARFAESI Rules, not merely newspaper advertisements;
- The 30-day gap requirement under Rule 9(1) does not create distinct characteristics between public notice in newspapers and notice served to the borrower. These 30 days are calculated from the date of issuance of the “notice of sale”, i.e., publication of public notice or service to the borrower. The critical date is whichever is later between these two events; and
- The secured creditors may serve and publish the notice of sale simultaneously provided the 30-day gap is maintained from the notice, publication, or affixation. The borrower’s right of redemption is extinguished after the 30-day period following complete compliance with all applicable notice requirements.
This principle eliminates confusion about multiple notice requirements, provides clarity to the secured creditors, and streamlines the enforcement process under the SARFAESI Act.
Retrospective Application of 2016 Amendment
KPK Oils argued that the 2016 Amendment could not operate retrospectively since the loan was availed on January 6, 2016, prior to the 2016 Amendment.
The SC held that Section 13(8) applies retrospectively to all existing claims effective September 1, 2016, with the determining factors being the date of default and the classification of the account as NPA. The 2016 Amendment applies to loans obtained before its commencement where default occurred after September 1, 2016. Since KPK Oils’ account was classified as NPA in December 2019, the 2016 Amendment applies to the present case.
The SC summarised the principles on retrospective application of legislation and stated that the presumption against retrospectivity does not apply to procedural or remedial enactments. The SARFAESI Act, being a remedial statute for speedy recovery, applies to pending proceedings without violating the rule against retrospectivity. The SC also held that the Madras HC erred by entertaining the writ petition when an alternative statutory remedy was available before the Debt Recovery Appellate Tribunal.
Conclusion
This landmark judgment establishes the crucial principle of a single composite notice and clarifies the operation of Section 13(8) after the 2016 Amendment. The decision, read with the Bafna Motors Case, streamlines/clarifies enforcement under the SARFAESI Act.
The ruling that the 2016 Amendment applies to pre-2016 loans where default occurred after amendment ensures all pending matters are governed by the amended provision. This enhances legal certainty for lenders, borrowers, and auction purchasers while reducing litigation and promoting efficient debt recovery.
However, the SC expressed grave concerns regarding procedural infirmities that continue to afflict the SARFAESI Act 23 years post-enactment. The SC remarked that the poor drafting of Section 13(8) created inconsistencies between statutory provisions and subordinate rules, prejudicing secured creditors’ and auction purchasers’ interests while causing protracted litigation. The SC urged the Ministry of Finance to examine these provisions and implement necessary amendments so that the process is streamlined and unnecessary prolonged litigation which defeats the fast-tracked recovery under the SARFAESI Act can be avoided.
[1] 2025 SCC OnLine SC 2036
[2] 2022 (10) SCC 641
[3] (2014) 5 SCC 610
[4] (2024) 2 SCC 1
[5] (1997) 3 SCC 247
[6] (2011) 6 SCC 780