Recently, the Bombay High Court was confronted with a sharp legal clash between two powerful statutes: the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 SARFAESI Act, which enables swift enforcement of secured assets, and the Insolvency and Bankruptcy Code, which can freeze all creditor actions the moment an interim-moratorium begins. The question that unfolded was whether a nearly completed auction sale could survive the sudden intervention of insolvency law.
Brief Facts:
The case arose from loan facilities granted by a secured creditor to the owners of a residential flat, which had been mortgaged to secure repayment. In 2023, due to defaults, the account was classified as NPA, leading to the issuance of a demand notice under Section 13(2) of the SARFAESI Act and later symbolic possession under Section 13(4). Assistance under Section 14 was thereafter obtained for taking physical possession. In 2025, a sale notice was issued under Rule 8(6) of the SARFAESI Rules, and the property was auctioned the same year. The auction purchaser paid the mandatory 25% under Rule 9(3) and proceeded to deposit the remaining instalments. Before completion of all payments, a personal insolvency application under Section 94 of the IBC was filed by one of the co-owners, triggering an interim-moratorium under Section 96. Despite this statutory bar, the bank received further instalments and issued a sale certificate under Rule 9(6). The borrowers challenged the sale before the Tribunal under Section 17 of the SARFAESI Act, after which the purchaser moved the High Court seeking possession of the flat.
Contentions of the Appellant:
The counsel for the Appellant argued that publication of the sale notice extinguished the borrowers’ right of redemption under amended Section 13(8), relying on the Supreme Court’s ruling in Celir LLP. Therefore, the interim-moratorium under Section 96, which came later, could not prevent the bank from completing the sale or handing over possession. It was submitted that the moratorium under Section 14 explicitly covers SARFAESI actions, but Section 96 does not, implying that the auction process could lawfully continue. It was further contended that the Resolution Professional could not claim any right greater than the borrower’s and that only one co-owner had filed for insolvency. Without prejudice, the appellant sought refund of the auction amount if relief was denied.
Contentions of the Appellant:
The bank supported the purchaser, asserting that enforcement under the SARFAESI Act was valid and the insolvency filing was a last-minute attempt to obstruct recovery. The Resolution Professional opposed this position, submitting that Section 96(1)(b) stays all proceedings “in respect of any debt,” making it unlawful for the bank to accept payments or issue a sale certificate after the interim-moratorium commenced. It was also pointed out that the property appeared undervalued compared to the bank’s own communication, and that the challenge to the auction was already pending under Section 17 before the Tribunal, making possession orders inappropriate.
Observation of the Court:
The Court began by examining the statutory scheme under the SARFAESI Act, noting that transfer of ownership in a statutory sale occurs only upon issuance of the sale certificate under Rule 9(6). Relying on the Supreme Court’s ruling in Indian Overseas Bank v. RCM Infrastructure Ltd. (2022), the Court reproduced the principle that “the sale would be complete only when the auction-purchaser makes the entire payment and the authorised officer… shall issue a certificate of sale,” and further, “we are unable to accept the argument… that the sale was complete upon receipt of the part-payment.” This, the Court held, made it clear that no ownership passes until full payment is lawfully received and the certificate is issued.
It then analysed the amended Section 13(8) of the SARFAESI Act, observing that although the amendment extinguishes the borrower’s right of redemption upon publication of the sale notice, it does not extinguish ownership. The judgment records verbatim that “the amendment has only altered the date on which the right of redemption is lost… and it does not alter the position that the sale is only completed upon issuance of sale certificate.” To support this, the Court relied on Narayan Deorao Javle v. Krishna (2021), noting the Supreme Court’s clarification that “the equity of redemption is a right which is subsidiary to the right of ownership,” meaning ownership remains intact until the statutory transfer is complete.
Turning to the Insolvency and Bankruptcy Code, the Court reiterated the breadth of Section 96, relying on Dilip B. Jiwrajka v. Union of India (2024), where the Supreme Court held that an interim-moratorium stays “any legal action or proceeding in respect of any debt.” Emphasising the phrase “in respect of any debt,” the Court observed that the moratorium operates automatically and bars all continuation of SARFAESI enforcement steps, including acceptance of auction payments or issuance of a sale certificate after the moratorium begins. The Court noted that this interpretation aligns with Sanjay Dhingra v. IDBI Bank (Delhi High Court, 2024), which applied the same principle to SARFAESI sale proceedings.
Applying these principles, the Court concluded that “if the sale certificate is not issued prior to the interim-moratorium coming into effect, the auction purchaser cannot be said to be the owner of the secured asset.” Since multiple instalments and the sale certificate itself were issued after the moratorium took effect, the statutory bar under Section 96 directly intervened, preventing completion of the sale in the eyes of law.
The decision of the Court:
The Court held that the sale under the SARFAESI Act had not been completed, as several payments and the sale certificate were issued after the interim-moratorium under Section 96 of the IBC began. Consequently, the auction purchaser had not acquired ownership of the secured asset and was not entitled to possession. The writ petition seeking delivery of the flat was therefore dismissed.
Case Title: Arrow Business Development Consultants Pvt Ltd vs Union Bank of India & Ors
Case No.: Writ Petition No. 11132 of 2025
Coram: Hon’ble Mr Justice Farhan P. Dubash and Hon’ble Mr Justice R.I. Chagla
Counsel for the Appellant: Sr. Advocate G.S. Hegde a/w Advocates P.M. Bhansali, Arafat Siddique, Juhi Pandey
Counsel for the Respondent: Advocate Mable Soans of Mable & Associates; Advocate Shrirang Katneshwarkar; Advocates Gajendra Rajput, Shubham Kahite
Senior Advocate Naushad Engineer (Amicus Curae) along with Advocates Sharad Bansal, Yoham Limathwalla
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