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Informist, Monday, Sept. 22, 2025

 

NEW DELHI – The Supreme Court on Monday asked the Ministry of Finance to take a "serious look" at the provisions and rules regarding resumption of secured assets and bring about necessary changes to remove "glaring" inconsistencies between the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the rules formed under it. The apex court was referring to Section 13(8) of the SARFAESI Act, relating to resumption of secured assets and Rules 8(6) and Rule 9(1) of the Security Interest (Enforcement) Rules, 2002.

 

"We are, however, at our wits' end to note how the ill-wording of Section 13(8) of the SARFAESI Act has resulted in a glaring inconsistency between the aforesaid provision and the SARFAESI Rules framed in lieu thereof," said a bench of Justices J.B. Pardiwala and R. Mahadevan. It is unfortunate that the ambiguities within the statutory provisions of the SARFAESI Act and rules have left the interests of secured creditors and auction purchasers high and dry, the bench said. 

 

"The interpretative deadlock between the provision and the rules has single handedly resulted in a huge mess insofar as enforcement of security interest is concerned, giving birth to an endless pipeline of litigation clogging the specialised forums of the DRT (Debts Recovery Tribunal) and DRAT (Debts Recovery Appellate Tribunal), that are expected to expeditiously decide matters of recovery of debt," the court said. Despite a catena of amendments, the glaring anomaly in respect of Section 13(8) of the SARAFESI Act and Rules 8 and 9 of the SARFAESI Rules persists, the court said. This renders the very mandate of the provision otiose, it added.

 

Section 13(8) grants the borrower the right to redeem the secured asset by paying dues and costs before the date of publication of notice for public auction. Rule 8(6) mandates a 30-day sale notice to the borrower before taking possession and sale steps. Rule 9(1) provides that no sale of the immovable property shall take place before the expiry of 30 days from the date on which the public notice of sale is published or the notice of sale has been served to the borrower.

 

There is confusion among different stakeholders regarding whether the notices under Section 13(8) and the Rules 8(6) and Rule 9(1) refer to different notices, and there is a lack of clarity on this point. On Monday, the top court clarified that the term "notice of sale" is an umbrella term, which refers to and includes the giving of notice for sale by the secured creditor in all the forms and manner that he is obligated to do, depending upon the mode of sale elected by the secured creditor. "Thus, whenever, the secured creditor gives a notice for sale in a specific manner either under Rule 8(6), the proviso thereto read with Rule 9(1) or Rule 8(7), he is not said to be giving different or distinct notices, they all are parts of one single composite 'notice of sale'", the top court said.

 

The court remarked that it had been almost 23 years since the SARFAESI Act had remained in force. It is indeed very sad to note that even after these many years, procedural issues such as the one involved in the case at hand have continued to plague the legislation, the court said. 

 

In its verdict, the court allowed an auction purchaser to get back the property he had purchased through an auction. It set aside a Madras High Court order which allowed the original borrowers, who had mortgaged the property to a bank, to redeem their land after the loan amount was repaid. The court held that the original borrowers had paid back the amount after the publication of notice of auction of the mortgaged property, and hence they had no right to redeem the property.  End

 

Reported by Surya Tripathi

Edited by Saji George Titus

 

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