Supreme Court of India · 21 September 2023
CELIR LLP v. Bafna Motors (Mumbai) Pvt Ltd
2023 INSC 838 · (2024) 2 SCC 1
Court
Supreme Court of India
Bench
2-Judge Bench (Dr D.Y. Chandrachud CJI & J.B. Pardiwala J.)
Date
21 September 2023
Citation
2023 INSC 838
Background & Facts
CELIR LLP v. Bafna Motors (Mumbai) Pvt Ltd is a 2023 Supreme Court judgment that settles when the borrower's right of redemption of a secured asset comes to an end under the post-2016 Section 13(8) of the SARFAESI Act, and the extent to which a confirmed SARFAESI sale should be protected from interference. Bafna Motors (Mumbai) Pvt Ltd had availed a lease rental discounting facility from Union Bank of India and defaulted; the account was declared an NPA. After eight failed auctions, the Bank published a ninth auction notice on 14 June 2023 at a reserve price of Rs. 105 crore. CELIR LLP bid Rs. 105.05 crore, was declared the highest bidder, received a sale confirmation letter and paid the full bid amount.
After the auction notice had been published and the auction held in favour of CELIR LLP, the borrowers applied to the DRT to redeem the mortgage and, while orders were reserved, filed a writ petition in the Bombay High Court. The Bank, which had opposed redemption before the DRT, agreed before the High Court to accept the borrowers' higher offer, and the High Court under Article 226 permitted the borrowers to redeem on payment of Rs. 129 crore. CELIR LLP, the auction purchaser, appealed to the Supreme Court contending that the borrowers' right of redemption had already stood extinguished and that the confirmed sale ought not to have been defeated.
The case is of practical importance because it fixes the precise statutory moment at which the borrower can no longer redeem the secured asset under the amended Section 13(8). That moment determines the certainty of title available to auction purchasers and, in turn, market confidence in SARFAESI enforcement and the prices bid at such auctions.
Key Issues Before the Court
Holdings of the Court
Holding 1 — Redemption Ends on Publication of the Auction Notice
The Supreme Court held that under the amended Section 13(8) of the SARFAESI Act (Act 44 of 2016, in force from 1 September 2016), the right of the borrower to redeem the secured asset “stands extinguished thereunder on the very date of publication of the notice for public auction under Rule 9(1) of the Rules of 2002” (para 105(iii)). In the Court's words, the right of redemption under the present regime is “drastically curtailed”.
Holding 2 — Departure From the Pre-2016 Position and Section 60 TPA
The Court contrasted the amended provision with the pre-2016 position. Under the unamended Section 13(8), the borrower's right of redemption remained alive till the transfer was completed in favour of the auction purchaser, by registration of the sale certificate and delivery of possession (para 105(iii)) — the position earlier explained in Mathew Varghese v. M. Amritha Kumar by applying the principles of Section 60 of the Transfer of Property Act. The 2016 amendment advanced the cut-off to the date of publication of the auction notice.
Holding 3 — No Redemption by Belated Tender After the Notice
Because the right of redemption is extinguished on publication of the auction notice, the Court held that the borrower cannot defeat the sale by offering to pay the dues after that point. A belated tender, made once the redemption right has ended, does not entitle the borrower to recover the secured asset from the auction purchaser. The certainty introduced by the amended Section 13(8) cannot be undone by a late offer to settle.
Holding 4 — Article 226 Should Not Defeat a Confirmed SARFAESI Sale
The High Court was not justified in exercising its writ jurisdiction under Article 226 when the borrowers had already availed the alternative remedy under Section 17, and it could not apply equitable considerations to overreach the outcome of the statutory auction process (para 105(i) and (v)). Confirmation of sale under Rule 9(2) invests the successful auction purchaser with a vested right to obtain a sale certificate under Rule 9(6), and the Bank, having confirmed the sale, could not withhold the certificate and enter into a private arrangement with the borrower (para 105(ii) and (iv)). The appeals were allowed: the Bank was to refund the Rs. 129 crore paid by the borrowers, and on CELIR LLP paying an additional Rs. 23.95 crore, issue the sale certificate (para 108).
Practical Implications for Creditors, Borrowers & Auction Purchasers
CELIR LLP v. Bafna Motors fixes a clear, early cut-off for redemption under the amended Section 13(8): publication of the auction sale notice. Secured creditors gain certainty that, once the notice is validly published, the borrower cannot frustrate the auction by a later tender of dues, and the rights of the successful auction purchaser are protected. This advances confidence in SARFAESI auctions and the prices bid at them.
For borrowers, the practical consequence is that the window to redeem the secured asset is narrower than under the pre-2016 position. A borrower who wishes to retain the asset must redeem before the auction notice is published — not at the later stage of registration of sale, as Section 60 of the Transfer of Property Act might once have suggested. After the notice is published, the redemption right is gone, and a writ petition under Article 226 should not be expected to unsettle a confirmed sale.
Relevant Statutory Provisions
Practical Application Note
Whether you are a bank conducting a SARFAESI auction, an investor considering a bid, or a borrower whose secured asset is being auctioned, the CELIR LLP v. Bafna Motors ruling defines when the right of redemption ends. Under the post-2016 Section 13(8), borrowers must redeem before the auction notice is published; after that, a confirmed sale is protected. Our partner-led team advises on all aspects of SARFAESI enforcement — from issuance of Section 13(2) notices to applications before the DRT. This note is general legal information, not legal advice; outcomes turn on the specific facts of each matter.