Right Of Redemption Ends Once Auction Notice Is Published Under SARFAESI: Bombay High Court
The Bombay High Court on Tuesday reiterated that once an auction notice is published under the SARFAESI Act, the borrower's right of redemption stands extinguished and the Debt Recovery Tribunal cannot set aside the auction sale in a manner that effectively permits redemption.
The Court observed that passing such an order in the teeth of Section 13(8) of the Act and binding Supreme Court precedents constitutes a jurisdictional error. Relying on the precedents, the court reiterated that redemption is not permissible after publication of the auction notice.
"Thus, it is abundantly clear that once the auction sale notice is published, the borrower completely loses the right to seek redemption of the mortgage by operation of Section 13(8) of the Securitisation Act, as amended, and in the light of the clear position of law laid down by the Supreme Court in the aforementioned judgments."
A division bench of Justices Manish Pitale and Shreeram V. Shirsat was hearing two writ petitions filed by HDFC Bank and the auction purchaser challenging an order of the Debt Recovery Tribunal (DRT), which had set aside an auction sale of a secured asset and directed a refund of the bid amount while permitting the guarantors to deposit the bid amount.
The borrower company had availed of loan facilities and created a mortgage over the property, which was later classified as a non-performing asset, leading to proceedings under the SARFAESI Act and eventual auction of the secured asset. The petitioners contended that the DRT had acted without jurisdiction by granting relief that effectively allowed redemption of the mortgage after publication of the auction notice, contrary to Section 13(8) of the SARFAESI Act.
The High Court first examined the objection regarding the maintainability of the writ petitions in view of the alternative remedy before the Debt Recovery Appellate Tribunal. It held that the availability of an alternative remedy does not operate as an absolute bar to the maintainability of a writ petition, particularly where a jurisdictional error is demonstrated.
The Court noted that the auction notice had been published on 16 May 2025, and by operation of Section 13(8) of the SARFAESI Act, the right of redemption stood extinguished on that date.
The Court found that the DRT, by setting aside the auction and permitting deposit of the bid amount by the guarantors, had effectively allowed redemption of the mortgage, which was impermissible in law. It held that such an order, being contrary to statutory provisions and settled law, is rendered without jurisdiction.
The Court also held that the DRT committed a fundamental procedural irregularity by granting final relief at the interim stage and by granting relief not even prayed for in the securitisation application. It noted that there was no specific prayer for setting aside the auction sale, yet such relief was granted, thereby exceeding jurisdiction. Further, the Court observed that the borrower, through its liquidator, had consented to the sale, and the guarantors had remained inactive for several years despite being aware of the proceedings.
Holding that the impugned order suffered from jurisdictional error and was unsustainable, the High Court allowed the writ petitions and quashed the order of the DRT.
For Petitioners: Senior Advocate Kevic Setalvad with Advocates Sidharth Samantaray, Abdullah Qureshi and Nalvika Sachiv, instructed by India Law LLP, for the petitioner in WP/1457/2026 and for respondent no.2 in WP/1211/2026.
Senior Advocate Zal Andhyarujina with Advocates Shrey Sancheti, Carl Patel and Sanaea Umrikar, instructed by Carl Patel, for the petitioner in WP/1211/2026 and for respondent no. 4 in WP/1457/2026.
For Respondents: Advocates Mohamedali M. Chunawala and Ashutosh Mishra for respondent no.1 (Union of India) in both petitions.
Advocates Anirudh Hariani, Rohit Agarwal, Kruti Bhavsar, Pratik Barot and Angel Pandey for respondents nos.2 and 3 in WP/1457/2026 and respondents nos. 3 and 4 in WP/1211/2026.
Advocates Amir Arsiwala and Vaishnavi Dhure for respondent no. 5 in both petitions.