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by Admin
05 December 2025 12:07 PM
“Redemption right ends with auction publication, not with conveyance deed — SARFAESI overrides Section 60 of the Transfer of Property Act”: In a significant reaffirmation of the limited scope of judicial review under Article 226 in SARFAESI proceedings, the Karnataka High Court dismissed an intra-court appeal challenging the e-auction sale of a mortgaged industrial property by State Bank of India, reiterating that once a sale certificate is registered, the borrower’s right of redemption is extinguished under Section 13(8) of the SARFAESI Act.
The Division Bench of Justice Anu Sivaraman and Justice Vijaykumar A. Patil refused to interfere with the sale of property worth ₹15 crore auctioned for ₹5.78 crore, observing that no fraud, undervaluation, or procedural illegality had been established by the borrower.
“SARFAESI is a special law and overrides general redemption rights under the Transfer of Property Act”
The Bench categorically held:
“The right to redemption under Section 60 of the Transfer of Property Act, 1882 is overridden by amended Section 13(8) of the SARFAESI Act. The right to redeem ceases upon publication of the auction notice, and certainly cannot survive once the sale certificate is registered.”
The Court drew upon the authoritative pronouncement in CELIR LLP v. Sumati Prasad Bafna, where the Supreme Court in 2024 laid to rest the conflict between Section 13(8) of the SARFAESI Act and Section 60 of the Transfer of Property Act, holding that:
“The SARFAESI Act is a special law… The right of redemption is clearly restricted till the date of publication of the sale notice. Section 13(8) overrides Section 60 of the 1882 Act in light of Section 35 of the SARFAESI Act.” [CELIR LLP, (2024) 2 SCC 1]
Borrowers Approached DRT, Lost Twice – Writ Petition Filed After Registered Sale
The appellants — Sri T.S. Nataraj and others — had availed a cash credit limit of ₹2 crore and a term loan of ₹30 lakh from SBI, but defaulted in 2017. Following classification of the account as NPA, the Bank initiated SARFAESI proceedings by issuing notice under Section 13(2), and later took symbolic possession under Section 13(4).
Despite being offered a One-Time Settlement (OTS), the borrowers failed to avail it. The Bank then attempted to auction the property four times between 2018 and 2021, gradually reducing the reserve price from ₹9.37 crore to ₹5.78 crore due to lack of bidders. Eventually, the fifth e-auction held on 29.09.2021 was successful, with Respondent No.4 purchasing the property for ₹5.82 crore — above the reserve price.
The sale certificate was issued on 07.10.2021, registered on 11.10.2021, and physical possession was handed over on 12.10.2021. The writ petition was filed on 28.10.2021, after all statutory steps were completed.
The High Court found that at the time of filing the writ petition, no right to redeem the mortgaged property subsisted under law.
High Court Reaffirms Limited Jurisdiction Under Article 226 in SARFAESI Matters
Invoking settled precedent from United Bank of India v. Satyawati Tondon and Authorized Officer, State Bank of Travancore v. Mathew K.C., the Court held that writ jurisdiction should not be exercised when an effective alternate remedy exists under Section 17 of the SARFAESI Act.
“It is a matter of serious concern that despite repeated pronouncement of the Supreme Court, High Courts continue to ignore the availability of statutory remedies… and exercise jurisdiction under Article 226.” — Satyawati Tondon, (2010) 8 SCC 110
The Court noted that the borrowers had already invoked remedies under S.A. No. 174/2018 and S.A. No. 212/2019 before the DRT, both of which were dismissed in 2020. In light of this, the Court held that no exceptional circumstance existed to justify bypassing the statutory appellate mechanism
Allegation of Undervaluation Rejected: “Reserve Price Reduced Only After Repeated Failed Auctions”
Rejecting the appellants’ allegation that the ₹15 crore property was sold at a “fraudulently low” price of ₹5.78 crore, the Division Bench found that:
“We do not find any procedural error in the actions undertaken by the respondent-Bank. The contention of the appellants that the Bank sold the property for a meagre sum is meritless. Every action was duly noticed, published, and complied with under Rules 6, 8, and 9 of the Security Interest (Enforcement) Rules, 2002.”
OTS Is Not a Right – Bank’s Commercial Discretion Prevails
The borrowers had also sought a mandamus directing the Bank to consider their OTS proposal, claiming that their financial difficulty due to market conditions justified such relief.
However, relying on the latest decision in Bijnor Urban Cooperative Bank Ltd. v. Meenal Agarwal, (2023) 2 SCC 805, the Court held:
“No writ of mandamus can be issued by the High Court to compel a financial institution to accept a One-Time Settlement. Grant of OTS lies solely within the commercial discretion of the Bank. Borrowers have no enforceable legal right to demand OTS.”
The Court found that the appellants were not eligible under the Bank’s OTS scheme, and had refused a previous OTS offer, further weakening their case.
Court Dismisses Plea to Sell Partial Property: “Bank Was Justified in Selling Entire Secured Asset”
The appellants contended that the Bank ought to have sold only a portion of the secured asset to recover dues.
The Court firmly rejected this argument, holding that:
“The Bank made efforts between 2018 and 2021 to realise the dues through piecemeal sale but received no response. The Bank was justified in selling the entire property to recover its dues after lawful procedure.”
In this judgment, the Karnataka High Court has reaffirmed key principles governing recovery under the SARFAESI Act:
With a strong emphasis on rule-based banking, statutory compliance, and commercial prudence, the Court has reinforced that public funds cannot be indefinitely blocked by litigation after due process is followed.
Date of Decision: 18 November 2025
