SARFAESI Sale Certificate Need Not Certify Physical Possession Or No Encumbrances: Calcutta High Court

The Calcutta High Court on 28 July held that a sale certificate issued under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act need not record that the auctioned property is free from encumbrances or that physical possession has been delivered, as physical possession can be obtained even after issuance of the sale certificate.

A Division Bench of Justices Sabyasachi Bhattacharyya and Supratim Bhattacharya modified the Civil Judge's order dated 1 December 2025 and granted interim protection to Refulgent Buildcon LLP by restraining K.N. Wire Pvt Ltd and other respondents from interfering with its possession or access to the property. It observed:

“Since physical possession can be taken even after the sale certificate being issued, the certificate need not necessarily contain an averment as to the property being free from encumbrances on that date and/or physical possession being handed over. Thus, such objection, though apparently attractive, is without any legal basis.”

The dispute arose after K.N. Wire Pvt Ltd defaulted on loans secured by a mortgage over the property. Reliance Estate Reconstruction Company issued an e-auction notice on 10 July 2025 under the SARFAESI Act. Refulgent Buildcon LLP emerged as the successful bidder on 19 August 2025, received the sale certificate on 20 August 2025 and obtained a registered sale deed on 21 August 2025.

After clearing the Kolkata Municipal Corporation dues, Refulgent Buildcon obtained physical possession of the property. The respondents challenged the sale certificate, arguing that it was invalid since it did not state that physical possession had been delivered or that the property was free from encumbrances. They also contended that possession had not been lawfully handed over.

The Court rejected the objection and held that Refulgent Buildcon's possession was acquired within the framework of the SARFAESI Act. It observed that symbolic possession taken under the Act had subsequently been converted into physical possession after the auction purchaser cleared the municipal dues. It held:

“Thus, the possession of the property was taken within the ambit of the SARFAESI Act itself. Initially symbolic, such possession was converted into actual physical possession as a follow-up of such symbolic possession. In the process, the appellant merely removed the encumbrance on the said property by repaying the KMC dues.”

The respondents had argued that the sale certificate did not comply with Appendix V of the Security Interest (Enforcement) Rules, 2002, which prescribes the format for a sale certificate issued after auction of secured assets. The Bench rejected the argument, holding that the format under Appendix V is not mandatory and that physical possession can be taken after issuance of the sale certificate.

It noted that the Trial Court had already found a prima facie case, urgency and balance of convenience in favour of Refulgent Buildcon, and held that a mere status quo order would not adequately protect its possession.

Accordingly, the High Court modified the Trial Court's order and restrained the respondents from trespassing upon Refulgent Buildcon's possession or interfering with its access to the property until the temporary injunction application is decided.

For Appellant: Siddhartha Banerjee, Shounak Mukhopadhyay, Soni Ojha, Pranit Biswas, Advocates

For Respondents: Jaydip Kar, Sauvik Nandy, Senior Advocates, Srijib Chakraborty, Aditya Mondal, Dyutimoy Paul