Bombay High Court Rules: SARFAESI Sale Not Complete Until Sale Certificate Amid IBC Moratorium

Case Overview

The Bombay High Court, in a significant ruling on the intersection of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) and the Insolvency and Bankruptcy Code, 2016 (IBC), dismissed a writ petition filed by Arrow Business Development Consultants Pvt. Ltd., the successful auction purchaser of a residential flat in Navi Mumbai. The case, Arrow Business Development Consultants Pvt. Ltd. v. Union Bank of India & Ors. (Writ Petition No. 11132 of 2025), was decided by a bench comprising Justices R.I. Chagla and Farhan P. Dubash on December 10, 2025.

The dispute centered on a residential flat owned by borrowers Vandana Chaudhari and Ravindra Chaudhari, mortgaged to Union Bank of India as security for a loan. After the account turned non-performing in April 2023, the bank initiated SARFAESI proceedings, culminating in an auction on May 30, 2025, where the petitioner emerged as the highest bidder for Rs. 9.12 crore. However, on June 9, 2025, Vandana Chaudhari filed a personal insolvency application under Section 94 of the IBC, triggering an interim moratorium under Section 96. The bank issued a sale certificate on June 20, 2025, after receiving full payment, prompting the petitioner's plea for physical possession.

The core legal question was whether the borrowers' ownership rights in the secured asset extinguished upon the auction notice under Rule 8(6) of the SARFAESI Rules, post the 2016 amendment to Section 13(8), or if the interim moratorium halted the process.

Key Arguments Presented

The petitioner, represented by Senior Advocate G.S. Hegde, argued that the borrowers lost ownership rights upon the issuance of the auction notice on May 9, 2025, or at latest upon auction confirmation on May 30, 2025. They contended that the interim moratorium under Section 96 IBC does not cover execution proceedings under SARFAESI, unlike the corporate moratorium under Section 14. Relying on Celir LLP v. Bafna Motors (Mumbai) (P) Ltd. (2024) 2 SCC 1, they asserted the right to redeem the mortgage was extinguished, vesting ownership in the purchaser upon full payment. They sought possession or, alternatively, refund of the bid amount.

Union Bank of India, through advocate Mable Soans, aligned with the petitioner, emphasizing its rights as a secured creditor and alleging the insolvency filing was a delaying tactic to frustrate SARFAESI enforcement, especially with public money at stake.

Respondent No. 2, the Resolution Professional (RP) Neha Punit Agarwal, represented by Shrirang Katneshwarkar, countered that the moratorium from June 9, 2025, stayed all debt-related proceedings, prohibiting the bank from accepting balance payments or issuing the sale certificate. They highlighted the auction's alleged undervaluation (Rs. 9.12 crore vs. a fair market value of Rs. 15 crore) and ongoing challenges under Section 17 SARFAESI before the Debt Recovery Tribunal (DRT).

Respondent No. 3, Ravindra Chaudhari, echoed the RP's submissions. Amicus Curiae Naushad Engineer, Senior Advocate, provided neutral analysis, arguing that ownership transfers only upon sale certificate issuance under Rule 9(6) SARFAESI Rules, unaffected by the 2016 amendment, which merely curtails redemption rights.

Legal Precedents and Principles Applied

The court extensively analyzed the SARFAESI framework, distinguishing pre- and post-2016 amendment scenarios under Section 13(8). It clarified that while the amendment extinguishes the borrower's redemption right upon sale notice publication—advancing it from the sale completion stage—it does not transfer ownership. Ownership, a "bundle of rights" including possession and enjoyment, vests only upon sale certificate issuance, as affirmed in Indian Overseas Bank v. RCM Infrastructure Ltd. (2022) 8 SCC 516.

In Indian Overseas Bank , the Supreme Court held that SARFAESI sales are statutory and complete only after full payment and certificate issuance under Rules 8 and 9. Here, since balance payments (six tranches) occurred post-moratorium, the sale was incomplete.

The court distinguished Celir LLP , noting it addressed redemption rights without IBC implications; the purchaser's "vested right" upon confirmation is conditional on full payment and absent legal embargoes like moratoriums.

Relying on Dilip B. Jiwrajka v. Union of India (2024) 5 SCC 435, the interim moratorium under Section 96 was deemed broader than Section 14, applying to all debts and staying proceedings "in respect of any debt." The Delhi High Court's Sanjay Dhingra v. IDBI Bank Ltd. (2024 SCC OnLine Del 4521) reinforced that SARFAESI actions halt post-moratorium commencement.

Additional precedents like Narayan Deorao Javle v. Krishna (2021) 17 SCC 626 clarified redemption as a subsidiary ownership facet, while Paramjeet Singh Patheja v. ICDS Ltd. (2006) 13 SCC 322 and Hindon Forge (P) Ltd. v. State of U.P. (2019) 2 SCC 198 underscored that possession does not equate to ownership.

Pivotal excerpt from the judgment: "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."

Court's Decision and Implications

The Bombay High Court dismissed the writ petition, holding:

• Ownership transfers solely upon sale certificate issuance; the amendment advances redemption loss but not ownership.
• The interim moratorium stayed proceedings, invalidating post-June 9, 2025, payments and the June 20 sale certificate.
• The petitioner holds no ownership rights, disentitling possession claims.

No costs were imposed, and refund pleas were left open for separate proceedings. The ruling safeguards insolvency processes, prioritizing moratoriums to prevent asset dissipation, impacting secured creditors by mandating completion of SARFAESI sales pre-insolvency filings. It underscores harmonious construction of SARFAESI and IBC, protecting borrower assets during personal insolvency while allowing challenges like undervaluation to proceed.

This decision, with Amicus Curiae's assistance, provides clarity for banks, purchasers, and insolvency professionals navigating overlapping regimes.