The right of redemption under SARFAESI Act extinguishes upon auction notice publication; confirmed auction sales cannot be challenged without substantial procedural errors.

Headnote:(A) SARFAESI Act, 2002 - Section 13(8) - Right of redemption - The court held that the right of the borrower to redeem the secured asset extinguishes upon the publication of the auction notice, and the High Court erred in allowing redemption post-notice. The sale certificate issued to the auction purchaser is confirmed, and the borrower must cancel the release deed and return possession. (Paras 30, 221)

(B) Contempt of Court - Definition - The court emphasized that wilful disobedience to court orders constitutes contempt, and parties must comply with judicial decisions to uphold the rule of law. (Paras 182, 198)

Judgement Key Points

The confirmation of sale under SARFAESI signifies the finality of the auction, transferring full ownership rights to the purchaser (!) . Once a sale is confirmed, it is considered absolute, and no further deed or transfer from the court is required (!) . The sale, upon confirmation, cannot typically be challenged unless there are serious procedural irregularities, fraud, or collusion that affect its validity (!) (!) . The sale certificate issued after confirmation serves as conclusive proof of transfer and is binding (!) (!) . The process aims to provide finality, and the sale is generally immune from challenge once confirmed, provided statutory procedures are meticulously followed (!) (!) .

JUDGMENT

J.B. PARDIWALA, J.:

For the convenience of exposition, this judgment is divided into the following parts: -

INDEX A. FACTUAL MATRIX ................................................................................ 3

i. Facts leading upto the Decision of this Court in Civil Appeal Nos. 5542- 5543 of 2023............................................................................................. 3

ii. Developments during the pendency of Civil Appeal Nos. 5542-5543 of 2023. ....................................................................................................... 10

iii. Subsequent Developments and the Acts alleged to be in contempt thereof. .................................................................................................. 13

B. SUBMISSIONS OF THE PARTIES ...................................................... 20

i. Submissions of the Successful Auction Purchaser / the petitioner..... 20

ii. Submissions of the Borrower / the respondent no. 1........................... 28

iii. Submissions of the Subsequent Transferee / respondent nos. 2 & 4. . 38

iv. Submissions of the Bank / the respondent no. 3. ................................. 45

C. ISSUES FOR DETERMINATION ......................................................... 49

D. ANALYSIS ............................................................................................... 50

i. Concept of Abuse of Process of Court and Collateral challenge to judgments that have attained finality.................................................. 50

a. The Decision of this Court in Celir LLP v. Bafna Motors & Ors. (2023 INSC 838)and the Scope of challenge before it................................................................... 77

b. The ‘Henderson’ Principle as a corollary of Constructive Res - Judicata............. 83

ii. Applicability of Lis Pendens in the absence of any registration as required under the State Amendment to Section 52 of the TPA...... 104

iii. Whether any contempt is said to have been committed by the respondents herein?............................................................................ 121

iv. Circumstances when a sale of property by auction or other means under the SARFAESI Act may be set-aside after its confirmation.. 138

E. FINAL ORDER ..................................................................................... 146

1. Since the issues raised in both the captioned petitions are same and the parties are also the same, they were taken up for hearing analogously and are being disposed of by this common judgment and order.

2. The present petitions have been filed under Section 2(B) of the Contempt of Court Act, 1971 (for short, th e “ Act, 1971 ”) read with Article(s) 129 and142(2) of the Constitution respectively seeking to initiate contempt proceedings against the respondents / alleged contemnors for wilful disobedience of the final judgment and order dated 21.09.2023 passed by this Court in Civil Appeal Nos. 5542-5543 of 2023 respectively captioned as ‘ Celir LLP v. Bafna Motors (Mumbai) ’.

3. For the sake of convenience, we clarify that the petitioner herein is the successful auction purchaser, the respondent no. 1, Mr. Sumati Prasad Bafna is the original borrower (hereinafter referred to as the ‘ Original Borrower ’), the respondent no. 4 ‘Greenscape IT Park LLP’ and its director, Mr. Jayesh A. Vavia i.e., the respondent no. 2 herein are the subsequent transferee / third- party purch aser (hereinafter referred to as the ‘ Subsequent Transferee ’) and the respondent no. 3, ‘Union Bank of India’ is the secured creditor / bank (hereinafter referred to as the ‘ Bank ’).

A. FACTUAL MATRIX

i. Facts leading upto the Decision of this Court in Civil Appeal Nos. 5542- 5543 of 2023.

4. The Original Borrower herein had availed credit facility from the Bank. Accordingly, the Bank on 03.07.2017 sanctioned Lease Rental Discounting (for short, ‘the LRD’) credit facility to the tune of Rs. 100 crore in favour of the

Click Here to Read the rest of this document

2024 Supreme(Online)(SC) 12443

The right of redemption under SARFAESI Act extinguishes upon auction notice publication; confirmed auction sales cannot be challenged without substantial procedural errors.

Cases Referred (2)