Supreme Court clarifies borrower redemption rights under SARFAESI Act Section 13(8), flags rule conflict.
Case in NewsThe Supreme Court flags inconsistency in SARFAESI Act 2002 Section 13(8) and Rules on borrower’s redemption rights . |
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Case Overview
Case Name: Rajendran & Ors. vs. M/S KPK Oils And Proteins India Pvt. Ltd. & Ors.
On September 22, a bench of Justice JB Pardiwala and Justice R Mahadevan examined a major conflict under the SARFAESI Act 2002 . The case arose when the Madras High Court allowed borrowers to redeem mortgaged property even after publication of the auction notice . The Supreme Court set aside this decision, holding that the borrower’s right is strictly limited by the 2016 amendment to Section 13(8).
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Key Aspects
The Court analyzed both facts and procedural issues leading to the inconsistency between the Act and Rules. Some of the key issues included :
- Madras High Court quashed auction sale certificate and allowed borrower redemption .
- Section 13(8) (post-2016 amendment) limits redemption rights only up to publication of auction notice .
- Rules 8 and 9 of the SARFAESI Rules still allow borrower participation beyond auction notice .
- This contradiction created heavy litigation before DRTs and DRATs, delaying debt recovery .
Legal Insights
The Court relied on statutory interpretation of Section 13(8) SARFAESI Act 2002, which extinguishes redemption rights once a “notice of sale” is published. It also examined Rule 8(6), Rule 8(7) and Rule 9(1) of the SARFAESI Rules, 2002 :
- Section 13(8) restricts redemption strictly before notice publication .
- Rules 8 & 9 envisage composite notice, including service to borrower, affixation, newspaper publication and uploading online .
- Rule 9(1) requires a thirty-day gap between publication and sale, counted from the latest valid mode of publication .
Court’s Verdict
The Supreme Court overturned the High Court’s ruling, clarifying that redemption ends with publication of the valid “notice of sale.” It described the inconsistency between Section 13(8) and the SARFAESI Rules as a “glaring anomaly” and urged the Ministry of Finance and Ministry of Law & Justice to amend the provisions . The Court also directed circulation of this judgment to all High Courts, noting that such ambiguities defeat the very objective of speedy recovery under the SARFAESI Act 2002 .
Source – Supreme Court of India
Read also – Redemption
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