Recently, the Jammu & Kashmir High Court was called upon to examine a borrower’s challenge to a tender-cum-auction notice issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) Act. The Petitioner alleged that despite substantial repayments and ongoing communication, the bank moved ahead with auctioning his residential property in a manner he claimed was arbitrary and premature. The case placed before the Court raised important questions on the scope of a borrower’s redemption rights and the legality of the statutory steps taken by the bank.
Brief Facts:
The case arose from a cash-credit facility availed by the borrower against the mortgage of a residential house. For a brief period, the loan account was maintained, but eventually it turned irregular and was classified as NPA. After the borrower failed to respond to communications urging regularisation, the bank initiated SARFAESI proceedings by issuing a demand notice and later taking symbolic possession. Public notices were published, and even the Magistrate was approached for assistance in taking physical possession. Multiple auction notices were issued, but earlier attempts failed due to lack of bidders. Meanwhile, the borrower deposited certain amounts and simultaneously requested restructuring of the cash-credit limit, allegedly based on representations by bank officials. Eventually, a fresh auction notice was issued, and a third party was declared the successful bidder after depositing the full bid amount. At that stage, the borrower approached the Court and sought to restrain further action.
Contentions of the Petitioner :
The counsel for the Petitioner contended that substantial repayments had already been made and the liability stood drastically reduced. The counsel argued that despite the bank accepting further deposits even after issuing the auction notice, the Respondent proceeded with coercive steps contrary to verbal assurances of restructuring the account. The Petitioner alleged improper valuation, absence of valid notice, and argued that once payments were accepted, the SARFAESI action ought to have been halted. The Petitioner asserted that auctioning a property allegedly worth several crores to recover a comparatively minor outstanding amount was arbitrary and disproportionate.
Contentions of the Respondents :
The counsel for the Respondent asserted that the borrower repeatedly defaulted despite multiple opportunities. Notices under Section 13(2), symbolic possession, and public possession notices were duly issued. Failure to respond led to the initiation of steps under Section 14 for taking physical possession. Since no satisfactory repayment or compliance was forthcoming, the bank resorted to auction. It was emphasised that the borrower deposited money only after commencement of the auction process and that renewal of the cash-credit facility was denied due to non-compliance with formalities and continued default. The successful bidder argued that the petitioner suppressed material facts by not impleading him initially. Since he had deposited the entire bid amount, any interference would severely prejudice his rights. The counsel further contended that once the auction notice is published, the borrower’s right of redemption extinguishes.
Observation of the Court:
The Court observed that the bank had adhered to each statutory step under the SARFAESI Act, beginning with issuance of notices under Sections 13(2) and 13(4), publication of possession notices, and later invoking Section 14 when the borrower did not respond despite repeated opportunities. The record clearly reflected that the petitioner “did not comply, thereby compelling the respondent-Bank to resort to Section 14 of the SARFAESI Act.”
A central legal issue concerned the borrower’s right of redemption after the publication of an auction notice. To address this, the Bench relied upon the Supreme Court’s decision in M. Rajendran & Others v. KPK Oils & Proteins India Pvt. Ltd. & Others, which is now considered the definitive interpretation of Section 13(8). The High Court reproduced the Supreme Court’s position “A borrower can tender the amount of due… at any time, before the date of publication of notice for public auction… A borrower has no unfettered right to tender such amount… after the date of publication of notice… the secured creditor is not bound to accept it.”
This binding interpretation made it clear that the right of redemption is extinguished the moment the auction notice is published, rendering any subsequent payments ineffective in law. Since the petitioner did not repay dues before publication of the notice , the statutory right had already lapsed.
The allegation of undervaluation was also found hollow. The property had been valued by an empanelled valuer, and the Court noted that “mere wholesale assertion is not sufficient to dislodge the report of the approved valuer.”
The timing and manner of the litigation further suggested an intent to obstruct the process, as reflected in the observation that the petition was “an abortive attempt just to delay the process after having been failed to respond to all the notices issued under the SARFAESI Act.”
On this reasoning, the Court concluded that the borrower no longer possessed a legally enforceable right capable of being protected in writ jurisdiction once the auction notice had been issued and the successful bidder had already deposited the full consideration.
The decision of the Court:
The Court dismissed the writ petition, holding that it did not withstand legal scrutiny. It concluded that the borrower’s right to redeem the property had been extinguished on the date of publication of the auction notice, and therefore no interference was warranted with the auction proceedings. Any interim order earlier granted stood vacated.
Case Title: M/s Gogi Motor Store Vs Citizen's Co-operative Bank
Case No.: WP(C) No. 2274/2025
Coram: Hon’ble Mr Justice Sindhu Sharma and Hon’ble Mr Justice Shahzad Azeem
Counsel for the Appellant: Adv. D.S Chouhan, Adv. Ashish Sharma,
Counsel for the Respondent: Sr. Adv. R.K Jain , Adv. Paramveer Singh, Adv. Ajay Bakshi
Read Judgement @LatestLaws.com
Picture Source :