Fresh 30-Day Notice Under Rule 8(6) SARFAESI Rules Mandatory For Subsequent Auctions, Borrower's Redemption Right Sacrosanct: DRAT Kolkata - 2025-08-19

Fresh 30-Day Notice Mandatory for Subsequent Auctions Under SARFAESI Act, DRAT Kolkata Upholds Borrower's 'Sacrosanct' Right of Redemption

Kolkata, July 18, 2025 – The Debts Recovery Appellate Tribunal (DRAT) at Kolkata has delivered a significant ruling reinforcing borrowers' rights, holding that a secured creditor must issue a fresh 30-day notice under Rule 8(6) of the SARFAESI Rules even for a subsequent auction sale, after an initial attempt fails. The bench, presided over by Chairperson Hon’ble Mr. Justice Anil Kumar Srivastava, dismissed an appeal filed by Canara Bank, thereby upholding the Debts Recovery Tribunal's (DRT) decision to quash an e-auction sale due to procedural violations.

The judgment emphasizes that the borrower's right of redemption is a "sacrosanct right" that cannot be bypassed, even when subsequent auction proceedings are initiated.

Case Background: A Flawed Auction Process

The case originated from a Securitisation Application filed by M/s Sree Vijayasri Lakshmi Traders (the borrower) before the DRT Visakhapatnam. The borrower challenged an e-auction sale notice dated December 13, 2018, which led to the sale of their secured property on January 29, 2019, for ₹1.33 Crores.

The timeline of events was critical: -

An initial e-auction scheduled for December 12, 2018, failed due to a lack of bidders. -

The bank issued a fresh e-auction notice the very next day, on December 13, 2018, for a sale to be held on January 29, 2019. -

Crucially, the bank did not serve a new 30-day notice to the borrower as mandated under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, before this subsequent auction.

The DRT found this omission to be a fatal procedural flaw and set aside the sale. Canara Bank appealed this decision to the DRAT.

Arguments of the Parties

Canara Bank (Appellant) argued that a fresh 30-day notice under Rule 8(6) was not required for a subsequent auction. They contended that the earlier notice served for the first (failed) auction was sufficient, and for the second attempt, they only needed to comply with the reduced 15-day notice period mentioned in the proviso to Rule 9(1).

The Borrower (Respondent) maintained that the procedural requirements are mandatory. The failure to issue a clear 30-day notice before the subsequent sale deprived them of their statutory right to redeem the mortgaged property.

Tribunal's Analysis: Protecting the Borrower's Right of Redemption

The DRAT engaged in a detailed analysis of the SARFAESI Act and its Rules, particularly the interplay between the borrower’s right of redemption under Section 13(8) and the notice requirements under Rules 8(6) and 9(1).

The Tribunal acknowledged the Supreme Court's stance in CELIR LLP vs. Bafna Motors (2024) , which stressed the need to protect the sanctity of public auctions. However, it clarified that this sanctity is contingent upon the auction being conducted in strict compliance with the law.

The judgment highlighted that the 2016 amendment to Section 13(8) of the SARFAESI Act drastically curtailed the borrower's right of redemption, extinguishing it upon the publication of the auction notice. The Tribunal reasoned that this very curtailment makes the preceding 30-day notice under Rule 8(6) even more critical.

Quoting the Supreme Court's decision in Mathew Varghese , the DRAT reiterated the core purpose of this notice:

"...the paramount objective is to provide sufficient time and opportunity to the borrower to take all efforts to safeguard his right of ownership either by tendering the dues to the creditor before the date and time of the sale or transfer..."

The Tribunal clarified the distinct functions of Rule 8(6) and Rule 9(1): -

Rule 8(6): Mandates a 30-day personal notice to the borrower, providing a window to exercise their right of redemption. -

Rule 9(1) Proviso: Allows for a shorter 15-day public notice for a subsequent sale attempt after a failure.

The DRAT concluded that the proviso to Rule 9(1) only shortens the public auction notice period; it does not override or eliminate the separate and mandatory 30-day notice required under Rule 8(6).

In a pivotal passage, the Tribunal held:

"Law nowhere curtails the right to redemption available to the Borrower under Section 13(8) of the Act in case of a subsequent sale. Accordingly, I am of the considered view that even in case of subsequent sale, Authorised Officer is required to issue 30 days notice under Rule 8(6) and thereafter 15 days notice under Proviso attached to Rule 9(1)."

The Final Verdict and its Implications

Finding no infirmity in the DRT's order, the DRAT dismissed Canara Bank's appeal. The Tribunal directed the bank to refund the entire auction amount of ₹1.33 Crores to the auction purchaser, along with 9% annual interest from the date of deposit.

The auction purchaser, who had taken possession of the property, was directed to hand it back to the secured creditor upon receiving the refund.

This judgment serves as a strong reminder to financial institutions that procedural safeguards under the SARFAESI Act are not mere formalities. A failure to provide the mandatory 30-day notice, even for a follow-up auction, will render the sale invalid, underscoring the judiciary's commitment to protecting the borrower's fundamental rights against arbitrary action.