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IN ITS CIVIL APPELLATE JURISDICTION
WRIT PETITION NO.11132 OF 2025
Arrow Business Development Consultants Pvt. Ltd. ...Petitioner
JUDGMENT
1. Union Bank of India
2. Neha Punit Agarwal, Insolvency Professional & Company Secretary
3. Ravindra Chaudhari...Respondents Mr. G.S.Hegde (Senior Advocate) a/w. Ms. P.M.Bhansali, Mr. Arafat Siddique and Ms. Juhi Pandey, Advocates for the Petitioner Ms. Mable Soans of M/s. Mable & Associates, Advocate for Respondent No.1- Bank Mr. Shrirang Katneshwarkar, Advocate for Respondent No. 2 – Resolution Professional Mr. Gajendra Rajput a/w. Mr. Shubham Kahite Mr. Naushad Engineer (Senior Advocate) – Amicus Curiae a/w. Mr. Sharad Bansal and Mr. Yohann Limathwalla CORAM: R.I. CHAGLA AND FARHAN P. DUBASH, JJ.
RESERVED ON: 24th NOVEMBER 2025 PRONOUNCED ON: 10th DECEMBER 2025 Order dated 10th December 2025 JUDGMENT ( Per Farhan P. Dubash, J) TABLE OF CONTENTS: A] Factual overview…………………………………………………… 4 – 7 B] Submissions of the Petitioner……………………………………… 8 – 10 C] Submissions of Respondent No. 1/Bank…………………………… 10 D] Submissions of Respondent No. 2…………………………………… 11 – 12 E] Submissions of Respondent No. 3…………………………………… 12 F] Submissions of the Amicus Curiae…………………………………… 13 – 15 G] Analysis of SARFAESI Act & SARFAESI Rules…………………… 15 – 20 H] Transfer of ownership of secured asset – when complete? ………… 20 – 26 I] Decision in Indian Overseas Bank (supra) ………………………… 26 – 30 J] Effect of interim-moratorium……………………………………… 30 – 34 K] Decision in Celir LLP (supra) ……………………………………… 34 – 37 L] Findings……………………………………………………………… 37 – 39 M] Operative Order……………………………………………………… 39
1. The issue before this Court relates to an interplay between the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and Insolvency and Bankruptcy Code, 2016 (IBC). On the one hand, the bank and successful auction purchaser seek possession of the secured asset in furtherance of the sale certificate issued under the SARFAESI Rules, whilst, on the other, the Borrower contends that due to the prior imposition of interim --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------moratorium under Section 96 of the IBC, possession cannot be handed over to them. In this background, the interesting question that needs to be determined in the present Writ Petition is whether, post amendment to Section 13(8) of the SARFAESI Act, the Borrowers’ ownership right in the secured asset, also stands extinguished, upon issuance of the sale notice under Rule 8(6) of the SARFAESI Rules?
2. The present Writ Petition has been filed by a successful auction purchaser, seeking a writ from this Court directing the Bank to hand over physical possession of a residential flat bearing no. 201 and situated on the 2nd floor of the El Castillo building located at Plot No. 23/B & 23/C in Sector- 6 on Palm Beach Road, Nerul West, Thane, Navi Mumbai - 400 706 (secured asset) to it notwithstanding the lodging of an application for personal insolvency under Section 94 of the IBC by its erstwhile owners, alleging that their rights stood extinguished on the date of publication of the auction notice by the Bank.
3. The successful auction purchaser (Petitioner) and the Bank (Respondent) were the original parties to the present Writ Petition. The interests of both parties were aligned inasmuch as, they sought implementation of the measures taken under the SARFAESI Act, to the exclusion of the provisions of the IBC. In these circumstances, this Court requested Mr. Naushad Engineer, Senior Advocate for assistance and appointed him as Amicus Curae in the matter. Subsequently, upon hearing him, we directed the Petitioner to implead the Resolution Professional (RP) representing Ms. Vandana Choudhari, and also Mr. Ravindra Choudhari as party Respondents to the present Writ Petition, in their capacity as the Guarantors and Co-Owners of the secured asset, which has since been done and they have been added as party Respondent Nos. 2 and 3 herein. A ] FA C T U A L O V E R V I E W
4. In order to properly appreciate and adjudicate the disputes raised in the present Writ Petition, it is necessary to consider the below-mentioned events and the corresponding dates on which they took place: 4(a) Certain financial facilities were provided by Respondent No.1/Bank to Vandana Chaudhari and Ravindra Chaudhari (Borrowers). The Borrowers are the owners of the secured asset which was mortgaged by them, as security for the said facility availed from Respondent No. 1/Bank. 4(b) On 16th April 2023, on account of defaults stated to have been committed by the Borrowers, their accounts were classified as a non-performing asset by Respondent No.1/Bank. 4(c) On 24th April 2023, Respondent No.1/Bank issued a notice of demand under Section 13(2) of the SARFAESI Act interalia calling upon the Borrowers to make payment of a sum of Rs. 49,33,11,763.61/-. 4(d) On 1st September 2023, Respondent No.1/Bank obtained symbolic possession of the secured asset under Section 13(4) of the SARFAESI Act. 4(e) On 11th November 2024, an order came to be passed by the Chief Judicial Magistrate, Thane, interalia allowing the application filed Respondent No. 1/Bank under Section 14 of the SARFAESI Act and providing assistance to Respondent No.1 in taking physical possession of the secured asset. 4(f) On 9th May 2025, Respondent No.1/Bank issued a auction sale notice (sale notice) as per Appendix IV-A read with Rule 8(6) of the Security Interest (Enforcement) Rules, 2002 (SARFAESI Rules) in respect of the secured asset. 4(g) On 30th May 2025, an auction of the secured asset was conducted by Respondent No.1/Bank whereat, the Petitioner was declared as the successful auction purchaser for its bid of Rs. 9,12,25,000/-. 4(h) In accordance with the provisions of the SARFAESI Act, the Petitioner proceeded to make payment of the entire auction bid/amount to the Respondent No. 1/Bank on the following dates: (i) 30th May 2025 – Rs. 91,12,500/- (ii) 31st May 2025 – Rs. 1,37,00,000/- (iii) 18th June 2025* – Rs. 95,00,000/- (iv) 19th June 2025* – Rs. 95,00,000/- (v) 19th June 2025* – Rs. 1,50,00,000/- (vi) 19th June 2025* – Rs. 1,50,00,000/- (vii) 20th June 2025* – Rs. 1,86,00,250/- (viii) 20th June 2025* – Rs. 9,12,250/- 4(i) On 9th June 2025, an application was preferred by Vandana Chaudhari under Section 94 of the IBC before the NCLT, Mumbai (Personal Insolvency Application) and accordingly, an interim-moratorium under Section 96 of the IBC came into effect. *Note: The remainder of the six tranches of payment from sr. nos.
(iii) to (viii) in paragraph 4(h) above were made by the Petitioner and received by Respondent No.1/Bank after the imposition of the interim-moratorium on 9th June 2025. 4(j) On 20th June 2025, Respondent No. 1/Bank issued a sale certificate as per Appendix V read with Rule 9(6) of the SARFAESI Rules. 4(k) Being aggrieved by the above, the Borrowers filed an application under Section 17 of the SARFAESI Act before the DRT, Mumbai (Securitisation Application) impugning the sale process carried out by Respondent No. 1/Bank by contending that the same was contrary to the provisions of the IBC. 4(l) On 30th July 2025, the DRT passed an order disposing of the Securitisation Application by holding as follows: “Since there is moratorium and the matter is before Hon'ble NCLT, Mumbai, therefore, there is no need for any order to be passed by this forum. Accordingly, I.A. No.2267 of 2025 stands disposed of.” 4(m) Being aggrieved with the inaction on the part of Respondent NO. 1/Bank in handing over possession of the secured asset to the Petitioner despite the issuance of the sale certificate in its favour, the present Writ Petition has been filed. B ] S U B M I S S I O N S O F T H E P E T I T I O N E R
5. Mr. Hegde, learned Senior Advocate appearing on behalf of the Petitioner contends that the Borrowers have ceased to be the owners of the secured asset and it is the Petitioner who is now the owner of the secured asset. He argues that the Borrowers’ right, title and interest in the secured asset was extinguished on the day on which the auction notice was issued and at any rate, on the day on which the auction was held and confirmed in favour of the Petitioner. Therefore, he contends that the interim-moratorium which got triggered after the confirmation of the auction sale in favour of the Petitioner does not preclude Respondent No. 1/Bank from handing over possession of the secured asset to his client. He further asserts that having obtained the sale certificate from Respondent No. 1/Bank, the Petitioner has a vested right in the secured asset.
6. Mr. Hegde seeks to make out a distinction between a moratorium under Section 14 vis-à-vis an interim-moratorium under Section 96 of the IBC by contending that whilst any action under the SARFAESI Act would be covered under the former, it would stand excluded under the latter by relying on the specific inclusion in Section 14(1)(c) thereof. He further contends that whilst execution proceedings would be covered under Section 14 moratorium, the same would not be included in the Section 96 interim- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------moratorium. Accordingly, he urges this Court to harmoniously construe and interpret both provisions of the IBC.
7. Mr. Hegde places strenuous reliance on the decision of the Supreme Court in Celir LLP v. Bafna Motors (Mumbai) (P) Ltd.[1] to contend that after issuance of the sale notice dated 9th May 2025, under Rule 8(6) of the SARFAESI Rules, the Borrowers lost their right to redeem the mortgage under Section 13(8) of the SARFAESI Act (as amended on 1st September 2016). He submits that the Borrowers have also not challenged the auction sale conducted by Respondent No.1/Bank in favour of his client. He therefore contends that under the IBC, the Respondent No.2/RP cannot claim a better or a higher right on the secured asset, than that, available to the Borrower under the SARFAESI Act and once the Borrower lost the right to redeem the mortgage of the secured asset, the RP cannot claim any (such) rights in respect thereof. He then contends that since only one co-owner, viz. Ms. Vandana Choudhari had filed the Personal Insolvency Application and not her husband, Mr. Ravindra Choudhari, the RP cannot deal with his 50% undivided share in the secured asset.
8. Without prejudice to the aforesaid submissions, he points out that even if the proceedings under the IBC were to take its course, the RP would ultimately sell the secured asset and the sale proceeds would be distributed amongst all the (secured and/or
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------unsecured) creditors. Hence, in the present case, since the sale has already taken place, the same should not be set aside and if this Court were not to accept his arguments, the sale proceeds deposited by his client with Respondent No.1/Bank could be directed to be handed over and used by the RP for this purpose. Lastly, (and again, without prejudice to his earlier submissions) Mr. Hegde submits that if this Court were not inclined to grant the reliefs sought in the present Writ Petition, then the monies deposited by the Petitioner with Respondent No.1/Bank should be refunded to his clients, with interest. C ] S U B M I S S I O N S O F R E S P O N D E N T N O. 1 / B A N K
9. Ms. Mable Soans, learned Counsel appearing on behalf of Respondent NO. 1/Bank supports the submissions made by Mr. Hegde in support of the reliefs sought in the present Writ Petition. She contends that the steps taken by her client under the SARFAESI Act are required to be protected and enforced by this Court. She states that the Bank is a secured creditor and is entitled to enforce its security to realise the outstanding amounts due and payable by the Borrowers, who she asserts, are not entitled to the benefit of the interim-moratorium under the IBC. She is at pains to point out the timing of the Personal Insolvency Application filed by (one of) the Borrowers and she submits that this was dishonestly done only to frustrate the claims of the Respondent No.1/Bank and upon realisation of the fact that possession of the secured asset was about to be taken by the Bank and handed over to the successful auction purchaser. She --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------therefore submits that this Court ought not to permit such injustice to be done to the Bank, especially when there is public money at stake. D ] S U B M I S S I O N S O F R E S P O N D E N T N O. 2
10. Mr. Shrirang Katneshwarkar, learned Counsel appears on behalf of Respondent No.2 viz. Resolution Professional (RP) representing Vandana Choudhari and submits that the interim-moratorium has admittedly come into effect on 9th June 2025 on the filing of the Personal Insolvency Application. He relies on Section 96 of the IBC and submits that w.e.f. that date, as contemplated therein, any pending legal action or proceeding in respect of any debt shall be deemed to have been stayed; and the creditors are not permitted to even initiate any legal action or proceedings in respect of any debt. He therefore contends that Respondent No.1/Bank could neither have accepted any payment towards the balance auction bid/amount from the Petitioner nor issued the sale certificate on 20th June 2025 after full payment was received by them. In any event, he states that Respondent No. 1/Bank is prevented from adopting any measures/proceedings to take forcible possession of the secured asset from his client and thereafter, hand over possession to the Petitioner and therefore, the DRT has correctly passed the order dated 30th July 2025.
11. He also invites the attention of this Court to a letter dated 4th June 2025 addressed by Respondent No. 1/Bank wherein, it has been categorically recorded that --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------during the meeting held between the parties on 19th May 2025, the Borrowers were informed that for withdrawing the e-Auction of the secured asset, they needed to deposit a sum of Rs. 15,00,00,000/- being its fair market value, for release of security. He relies on paragraph 5.28 of the Securitization Application No. 363 of 2025[2] filed by the Borrowers in which a reference to this assertion has been made by his client and relying thereupon, he submits that ex-facie, it is evident that the secured asset has been sold to the Petitioner at a gross undervaluation of Rs. 9,12,25,000/- by Respondent No.1/Bank in the auction held on 30th May 2025. He submits that besides this ground, several other grounds have also been taken in the said Securitization Application filed in the DRT-III, Mumbai for challenging the actions of Respondent No. 1/Bank under the SARFAESI Act including interalia the auction and sale of the secured asset in favour of the Petitioner, which is still pending adjudication. He therefore submits that no reliefs ought to be granted in the present Writ Petition. E ] S U B M I S S I O N S O F R E S P O N D E N T N O. 3
12. Mr. Gajendra Rajput appears on behalf of Respondent No.3 viz. Ravindra Chaudhari and reiterates the submissions made by the RP and opposes the reliefs sought in the present Writ Petition. Exhibit B to the present Writ Petition at page 36 F ] S U B M I S S I O N S O F T H E A M I C U S C U R I A E
13. We have also heard Mr. Naushad Engineer, learned Senior Advocate (Amicus Curiae). He has meticulously taken us through the events that have transpired between the parties leading to the passing of the order dated 30th July 2025 by the DRT. He has aptly summarised the issue as thus – If the Borrowers have lost their ownership rights in the secured asset upon issuance of the sale notice dated 9th May 2025, under Rule 8(6) of the SARFAESI Rules, the interim-moratorium which followed on 9th June 2025 on the filing of the Personal Insolvency Application would be inconsequential insofar as the secured asset is concerned. However, in the event that this Court determines and holds that the mere issuance of the said sale notice does not extinguish the ownership right of the Borrowers in the secured asset, the interim-moratorium would preclude Respondent No.1/Bank from taking any steps in furtherance of enforcement of its security interest under the SARFAESI Act in respect of the secured asset, including interalia, accepting payment of the balance auction bid/amount and the issuance of the sale certificate in favour of the Petitioner. In these premises, the Petitioner would not be entitled to any orders from this Court directing Respondent No. 1/Bank to take physical possession of the secured asset from the Borrowers and/or hand over the same to them.
14. To assist the Court, the learned Amicus has taken us through the scheme of the IBC and in particular the provisions relating to a moratorium/interim-moratorium under Sections 14 and 96 respectively, of the IBC. Relying on the decision of the Supreme Court in Dilip B. Jiwrajka v. Union of India[3], he submits that the interimmoratorium under Section 96 is much wider than that under Section 14 inasmuch as, the former is in respect of a ‘debt’ as opposed to the (corporate)‘debtor’ who is sought to be insulated from the institution or continuation of legal actions or proceedings in respect of the debt.
15. The learned Amicus has also taken us through the relevant provisions of the SARFAESI Act, both ‘Pre’ and ‘Post’ the 2016 Amendment to Section 13(8) thereof and also to the relevant SARFAESI Rules. He relies on the judgment of the Supreme Court in Indian Overseas Bank v. RCM Infrastructure Ltd.4, and clarifies that ownership of immovable property stands transferred only upon the issuance of the sale certificate and the 2016 Amendment to Section 13(8) of the SARFAESI Act does not alter this position since the equity of redemption is only a facet of rights that constitutes ownership. In support, he invites our attention to the decision of the Supreme Court in Narayan Deorao Javle v. Krishna[5]. He submits that the SARFAESI Act and SARFAESI Rules also reveal
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------that the mere loss of redemption does not ipso facto result in loss of ownership and to that effect, relies on the judgments of the Supreme Court in Paramjeet Singh Patheja v. ICDS Ltd.[6] and Hindon Forge (P) Ltd. v. State of U.P.7.
16. The learned Amicus concludes that if the sale certificate is not issued prior to the interim-moratorium coming into effect, the auction purchaser cannot be said to be the owner of the secured asset and he relies on the decision of the Supreme Court in Indian Overseas Bank v. RCM Infrastructure Ltd.[8] and that of the Delhi High Court in Sanjay Dhingra v. IDBI Bank Ltd.[9] to corroborate his said conclusion. G ] A N A LY S I S O F S A R FA E S I A C T & S A R FA E S I R U L E S
17. We have heard all the parties and with their able assistance, perused the record. In order to properly appreciate and then adjudicate the issues that are subject matter of the present Writ Petition, it would be beneficial to consider the relevant provisions of the SARFAESI Act and the SARFAESI Rules and the statutory framework provided for enforcement of security interest thereunder which is summarised below:
2024 SCC OnLine Del 4521 17.[1] Under Section 13(1), a secured creditor is entitled to enforce its security interest sans any intervention of a court / tribunal, in accordance with the provisions of the SARFAESI Act; 17.[2] Under Section 13(2), upon a Borrower defaulting in its repayment obligations and its account being declared as non-performing asset (NPA), a secured creditor issues a notice of demand calling upon the Borrower to discharge its liabilities within a period of 60 days; 17.[3] Under Section 13(3-A), a secured creditor is mandatorily required to consider any representation or objection raised by a Borrower. In the event such representation or objection is not acceptable to the secured creditor, then the secured creditor is required to communicate its reasons for non-acceptance to the Borrower; 17.[4] Under Section 13(4) in the event a Borrower fails to discharge its liabilities within the period specified in Section 13(2), then a secured creditor could interalia take possession of the secured asset and/or take over management of the business of the Borrower; 17.[5] Under Section 13(8), where the dues payable to the secured creditor are tendered by a Borrower before the date of publication of notice for sale, either by way of public auction, inviting quotations, tender or private treaty, then the secured asset cannot be transferred by the secured creditor. This Section was amended in 2016. For the sake of ready reference, the unamended as also the amended provisions of Section 13(8) are set out below:
┌─────────────────────────────────────┬──────────────────────────────────────────┐ │ Pre-2016 Amendment │ Post-2016 Amendment │ ├─────────────────────────────────────┼──────────────────────────────────────────┤ │ “13(8) - If the dues of the │ “13(8) - Where the amount of dues of │ │ secured creditor together with all │ the secured creditor together with all │ │ costs, charges and expenses │ costs, charges and expenses incurred by │ │ incurred by him are tendered to the │ him is tendered to the secured creditor │ │ secured creditor at any time before │ at any time before the date of │ │ the date fixed for sale or │ publication of notice for public auction │ │ transfer, the secured asset shall │ or inviting quotations or tender from │ │ not be sold or transferred by the │ public or private treaty for transfer by │ │ secured creditor, and no further │ way of lease, assignment or sale of the │ │ step shall be taken by him for │ secured assets — (i) the secured │ │ transfer or sale of that secured │ assets shall not be transferred by way │ │ asset.” │ of lease assignment or sale by the │ │ │ secured creditor; and (ii) in case, any │ │ Page 17 of 39 │ step has been taken by the secured │ │ -------------------------------------------------------------------------------------------------------------------------------------------------------------------- │ creditor for transfer by way │ │ Order dated 10th December 2025 │ │ │ Arrow Business Development │ ------------- │ │ Consultants Vs. Union Bank of India │ │ │ & Ors. WP/11132/2025 of sa te un fu │ lease or assignment or le of the assets │ │ by tr as se 17.6 Under Rule 8(1), a │ before ndering of such amount der this │ │ secured creditor can take actual or │ sub-section, no rther step shall be │ │ symbolic possession of the secured │ taken such secured creditor for ansfer │ │ asset by delivering a possession │ by way of lease or signment or sale of │ │ notice as per Appendix IV, and by │ such cured assets.” │ │ affixing a copy of the same at a │ │ │ conspicuous place on the secured │ ----------- │ │ asset. The possession notice is │ │ │ also required to be published in │ ----------- │ │ two newspapers, with one being in │ │ │ the vernacular language, having │ CURED ASSET – WHEN │ │ sufficient circulation in the │ │ │ locality of the secured asset; 17.7 │ │ │ Under Rule 8(3), in the event │ │ │ actual possession of the secured │ │ │ asset is taken by a secured │ │ │ creditor, then the secured creditor │ │ │ is required to take as much care of │ │ │ the property as an owner of │ │ │ ordinary prudence would; Page 18 of │ │ │ 39 │ │ │ ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- │ │ │ Order dated 10th December 2025 │ │ │ Arrow Business Development │ │ │ Consultants Vs. Union Bank of India │ │ │ & Ors. WP/11132/2025 17.8 Under │ │ │ Rule 8(5), prior to effecting sale │ │ │ of the secured asset, a secured │ │ │ creditor is required to obtain │ │ │ valuation of the secured asset from │ │ │ an approved valuer; 17.9 Under Rule │ │ │ 8(6), the authorised officer of a │ │ │ secured creditor is required to │ │ │ serve a notice of 30 days for sale │ │ │ of the secured asset upon the │ │ │ Borrower; 17.10 Under Rule 9(1), no │ │ │ sale of the secured asset can take │ │ │ place before the expiry of 30 days │ │ │ from the date on which the public │ │ │ notice of sale is published. The │ │ │ proviso to Rule 9(1) states that if │ │ │ the sale of the secured asset fails │ │ │ and is required to be conducted │ │ │ again, then a secured creditor is │ │ │ once again required to publish a │ │ │ notice of sale of not less than 15 │ │ │ days for any subsequent sale; 17.11 │ │ │ Under Rule 9(3), on the sale of a │ │ │ secured asset, the successful │ │ │ purchaser is required to deposit │ │ │ 25% off the sale price (inclusive │ │ │ of earnest money deposit) on the │ │ │ same day or no later than the next │ │ │ working day; Page 19 of 39 │ │ │ ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- │ │ │ Order dated 10th December 2025 │ │ │ Arrow Business Development │ │ │ Consultants Vs. Union Bank of India │ │ │ & Ors. WP/11132/2025 17.12 Under │ │ │ Rule 9(4), the balance sale price │ │ │ payable is required to be paid by │ │ │ the successful purchaser to the │ │ │ secured creditor, on or before 15 │ │ │ days of confirmation of sale, which │ │ │ period is extendable up to a │ │ │ maximum period of 3 months; 17.13 │ │ │ Under Rule 9(6), upon all payments │ │ │ being made by the successful │ │ │ purchaser, the secured creditor is │ │ │ required to issue a sale │ │ │ certificate in the form provided in │ │ │ Appendix V to the SARFAESI Rules in │ │ │ favour of such successful │ │ │ purchaser. H] TRANSFER OF OWNERSHIP │ │ │ OF SE │ │ └─────────────────────────────────────┴──────────────────────────────────────────┘
18. It is well settled that in case of a sale governed by Section 13(8) of the SARFAESI Act and Rules 8 and 9 of the SARFAESI Rules, the transfer of ownership of the secured asset is complete, only upon the issuance of the sale certificate and not at any time prior to that. This is reiterated by the Supreme Court in Indian Overseas Bank (supra) where the Court held as follows:
19. Upon careful consideration of the relevant provisions, we find that the 2016 Amendment to Section 13(8) of the SARFAESI does not alter this regime since a plain reading thereof would reveal that its effect is only to extinguish the right of redemption of the Borrower, upon the publication of the sale notice and not the entire ownership right of the Borrower in the secured asset. During the unamended Section 13(8) regime, the loss of the right of redemption was coterminous with the loss of ownership (this position was aligned with Section 60 of the Transfer of Property Act, 1882). However, post the amendment to Section 13(8), the extinguishment of the right of redemption has been --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------advanced to the stage when the secured creditor publishes the notice for sale. Therefore, the amendment has only altered the date on which the right of redemption is lost/extinguished and it does not alter the position that the sale is only completed upon issuance of sale certificate, in accordance with Rule 9(6) of the SARFAESI Rules.
20. Our said finding is fortified by the fact that the equity of redemption is only a facet or one of the bouquet of rights that constitute ownership, which position is also reiterated by the Supreme Court in Narayan Deorao Javle (supra) which holds that: “19. [T]he equity of redemption is a right which is subsidiary to the right of ownership. Such right is not over and above the right of ownership purchased by the plaintiff.” Ownership, on the other hand, is a bundle of rights such as, the right to exclusive enjoyment, destruction, alteration, redemption. In Black’s Law Dictionary, 12th Edition, ownership has been defined to mean “the bundle of rights allowing one to use, manage, and enjoy property, including the right to convey to others ownership implies the right to possess a thing, regardless of any actual or constructive control. Ownership rights are general, permanent, and heritable.” Therefore, on losing merely the right of redemption, a Borrower does not automatically lose ownership rights over the secured asset. The ownership right is ultimately lost only upon issuance of sale certificate in accordance with Rule 9(6) of the SARFAESI Rules.
21. Our said finding is also buttressed by a careful analysis of the provisions of the SARFAESI Act and SARFAESI Rules which demonstrate that the loss of the right of redemption does not ipso facto result in loss of ownership. These include: 21.[1] Section 13(5-A) which stipulates that where a sale of the secured asset is postponed for want of a bid higher than the reserve price, it shall be lawful for the secured creditor to bid for such secured asset at any subsequent sale. Thus, the fact that a secured creditor is permitted to partake in a subsequent sale itself demonstrates that the Borrower has not lost ownership of the secured asset merely upon the publication of the sale notice (and the consequent extinguishment of the right of redemption); 21.[2] Section 13(6) which provides that any transfer of secured asset by the secured creditor shall vest in the transferee all rights in the secured asset so transferred as if the transfer had been made by the owner of such secured asset. This deeming fiction viz. according the status of an owner to a secured creditor by virtue of Section 13(6) shows that, the secured creditor is an owner albeit for the limited purpose of transfer as envisaged in Section 13(6). In Paramjeet Singh Patheja (supra) the Supreme Court held that: “28. [I]t is settled by decisions of this Court that the words ‘as if’ in fact show the distinction between --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------two things and such words are used for a limited purpose. They further show that a legal fiction must be limited to the purpose for which it was created”. Therefore, the use of the words “as if” indicates a deeming fiction and the transfer is not by the secured creditor as owner but as if it is the owner of the secured asset. 21.[3] In Hindon Forge (supra), the Supreme Court held that the secured creditor, after taking possession of the secured asset, does not become the owner of the secured asset. The Hon’ble Supreme Court held thus: “39. [S]ection 13(6) of the SARFAESI Act makes it clear that a different intention is so expressed by the Act, as any transfer of a secured asset after taking possession thereof, shall vest in the transferee all rights in the secured asset so transferred as if the transfer had been made by the owner of such secured asset. It is clear, therefore, that statutorily, under Section 13(6), though only the lesser right of taking possession, constructive or physical, has taken place, yet the secured creditor may, by lease, sale or assignment, vest in the lessee or purchaser all rights in the secured asset as if the transfer had been made by the original owner of such secured asset. This aspect of the matter does not appear to have been noticed in --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------the aforesaid judgment. The ultimate conclusion in the said judgment is, however, correct as a secured creditor remains a secured creditor even after possession is taken over as the fiction contained in Section 13(6) does not convert the secured creditor into the owner of the asset, but merely vests complete title in the transferee of the asset once transfer takes place in accordance with Rules 8 and 9 of the 2002 Rules.” (emphasis supplied) 21.[4] Section 13(7) which provides that when the secured creditor transfers the secured asset and the sale proceeds are more than the dues owed to it, the secured creditor is mandatorily required to handover the excess to the Borrower. The payment of the excess sale proceeds to the Borrower is because the Borrower is the owner of the secured asset. Had it been the case that the secured creditor was the owner of the secured asset post the publication of the notice under Section 13(8) of the SARFAESI Act, then there would have been no requirement for the secured creditor to handover the excess sale proceeds to the Borrower. 21.[5] Second proviso to Rule 9(2) provides that if the secured creditor fails to obtain a price higher than the reserve price, then in such a --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------scenario the secured creditor can effect the sale at such price by obtaining the consent of the Borrower. This is because, merely upon publication of the notice under Section 13(8) of the SARFAESI Act, the Borrower does not cease to be the owner of the secured asset.
22. Thus, as set out above, the position of law, even post the 2016 Amendment to Section 13(8) of the SARFAESI Act continues to be that the transfer of ownership in the secured asset takes effect only upon the issuance of sale certificate and not at any time, prior thereto. Moreover, as per the statutory framework of the SARFAESI Act, only if the terms of payment have been complied with, can the secured creditor proceed to issue a sale certificate in favour of the successful purchaser. Therefore, in the event of there being any legal embargo which prevents the secured creditor from accepting the payment from the successful purchaser, then, what follows is that, the sale certificate cannot be issued by the secured creditor. Consequently, the sale does not stand completed in favour of the successful purchaser. I ] D E C I S I O N I N I N D I A N O V E R S E A S B A N K ( S U P R A )
23. In this regard, the decision of the Supreme Court in Indian Overseas Bank (supra) is extremely instructive. In that case, the Apex Court was dealing with an issue concerning the interplay between the provisions of the SARFAESI Act and the IBC with --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------key facts that are near identical to the case at hand. For the sake of convenience and ready reference, they are set out below: 23(a) On 13th June 2016, the corporate debtor’s account was declared as NPA by the secured creditor. Thereafter, a demand notice under Section 13(2) of the SARFAESI Act came to be issued by the secured creditor, who then proceeded to take symbolic possession of the secured asset under Section 13(4) of the SARFAESI Act; 23(b) On 27th September 2018, the 1st E-Auction Sale Notice came to be issued by the secured creditor. Subsequently, on 22nd October 2018, an application under Section 10 of the IBC came to be filed by the corporate debtor for initiation of corporate insolvency resolution process. On 6th November 2018, the first E-Auction was conducted by secured creditor but no bids were received; 23(c) As a result, on 27th November 2018, a second E-Auction Sale Notice came to be issued by the secured creditor and on 12th December 2018, the second E-Auction came to be conducted by secured creditor when the successful purchasers offered Rs. 32.92 crores;