Safiya Malik

The High Court of Jammu & Kashmir and Ladakh Division Bench of Justice Sindhu Sharma and Justice Shahzad Azeem dismissed a borrower’s challenge to a bank’s e-auction notice and sale intimation issued for a mortgaged residential property and permitted the bank to complete the auction process in favour of the successful purchasers. The Court held that once the auction notice was published, the borrower’s right to redeem the secured asset stood extinguished, and subsequent offers of payment did not prevent the bank from proceeding with the sale. Noting a growing tendency among defaulting borrowers to invoke multiple proceedings to delay recovery of public money, the Bench observed that a “multiplicity of frivolous proceedings” is pursued to stall enforcement and defeat the SARFAESI Act’s purpose.

The dispute arose from recovery proceedings initiated by a nationalised bank against a borrower after default in repayment of credit facilities. The borrower had availed a cash credit limit and a housing loan by mortgaging a residential property. Upon failure to repay the dues, the loan account was classified as a non-performing asset, following which statutory notices under the SARFAESI Act were issued.

Also Read: In Murder Cases, Sessions Courts Lack Power To Impose Life Imprisonment Without Remission: Supreme Court

Subsequently, the bank approved a one-time settlement proposal, subject to payment within a stipulated period. The borrower failed to comply with the terms of settlement. Thereafter, the bank proceeded with enforcement measures, culminating in issuance of an e-auction sale notice and a sale intimation letter declaring successful bidders.

The borrower challenged the e-auction proceedings, contending that earlier statutory notices lost significance after approval of the settlement proposal and that amounts paid ought to have been adjusted. Parallelly, the successful bidders sought directions for completion of the auction process and delivery of possession. The matters were heard together, as the outcome of the borrower’s challenge governed the rights of the auction purchasers. The dispute centred on whether the borrower retained any right to redeem the secured asset after publication of the auction notice.

On the admitted factual position, the Bench recorded: “Insofar as the availing of housing loan to the tune of Rs. 10 lacs and CCL to the tune of Rs. 75 lacs by the petitioner is concerned, same is not in dispute. This is also admitted fact that loan account of the petitioner was classified as NPA and thereafter, action under Section 13 (2) and 13 (4), of the SARFAESI Act was taken as the petitioner failed to repay the loan amount.”

On the One Time Settlement, it stated: “The petitioner has specifically admitted in the petition that for some reasons, he could not make the payment of the loan amount as per the terms and conditions of the OTS, meaning thereby, once the petitioner has flouted the terms and conditions of OTS Scheme, in that event, he cannot be allowed to raise the plea that the bank for all the time to come, is duty bound to accept the amount even beyond the stipulated period of OTS.”

It further recorded: “It is also not in dispute that the petitioner has challenged the action of the bank taken in terms of Section 13 (4) of the SARFAESI Act by way of WP(C) No. 421/2022, but same was dismissed, therefore, the petitioner now, cannot again question the action of the bank initiated in terms of Section 13 (2) and 13(4) of the SARFAESI Act.”

On the basis for the e-auction notice, the judgment stated: “Admittedly, the petitioner did not repay the loan amount in terms of notices issued by the bank and also in pursuance of One Time Settlement Scheme within the stipulated period, therefore, the bank has rightly proceeded in terms of Section 13 (8) of the SARFAESI Act, whereby, e-auction sale notice dated 30.07.2024 came to be issued… till the issuance of e-auction notice dated 30.07.2024, admittedly, the petitioner failed to tender the secured creditor the outstanding loan amount.”

Framing the central issue, the Bench stated: “Confronted with the above factual narration, only point for consideration that arises is as to whether after publication of auction notice by the respondent-Bank strictly as per Rule 8 (6) of Security Interest (Enforcement) Rules, 2002 [Rules of 2002), the petitioner’s right to redeem the secured assets survives.”

Citing the Supreme Court decision in M. Rajendran v. M/s KPK Oils and Proteins India Pvt. Ltd. (2025 SCC OnLine SC 2036), it recorded: “To put it simply, as per sub-section (8) of Section 13 of the SARFAESI Act, a borrower can tender the amount of due to the secured creditor along with all costs, charges and expenses, at any time, before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty, as the case may be.” It further recorded: “Where the borrower tenders such dues after the publication of the notice stipulated in Section 13(8), the secured creditor is not bound to accept it and can continue to proceed with the transfer of the secured asset, by way of lease, assignment or sale.”

On applying that position, the Court stated: “The SARFAESI Act is a special legislation enacted with the avowed object of providing a speedy and expeditious remedy to banks and financial institutions for recovery of public money in respect of non-performing assets without the intervention of civil Courts.” It then recorded: “Coming back to the case on hand, the e-auction sale notice came to be published on 30.07.2024… once auction notice is published, right of redemption of the petitioner has extinguished on 30.07.2024 and any amount even if deposited, is immaterial. …respondents No. 4 & 5 were not only declared as successful bidders but said to have deposited the consideration amount as per the terms of auction notice with the respondent-Bank.”

On repeated litigation, the Bench recorded: “…the petitioner appears to have hit every door across all the rungs up to the High Court repeatedly to obstruct the bank from taking action to realize the outstanding loan amount which necessarily paid by the bank out of the public corpus, therefore, it is high time to put the litigation to quietus.” It also recorded: “It is highly disturbing that a small but recalcitrant class of borrowers… resort to a multiplicity of frivolous proceedings… with the sole objective of stalling enforcement measures, thereby defeating the very purpose for which the SARFAESI Act was enacted. Such conduct has been repeatedly condemned by the Courts and terms the same as an abuse of process, warranting note of caution to such habitual litigants.”

Finally, the Court stated: “We are of the considered opinion that right of the petitioner to redeem the secured assets stand extinguished with the publication and culmination of auction process…” and recorded: “…the respondent-Bank is at liberty to complete the process of e-auction and to proceed in terms of sale intimation letter dated 28.08.2024.”

Also Read: Ancillary Tasks Can Be Delegated, Core Decision Must Remain With Court-Mandated Committee: J&K And Ladakh High Court

The Court recorded that “WP(C) No. 839/2025 titled M/s Krishna Traders Vs. Punjab National Bank and ors. [is] found to be bereft of merit, accordingly, same is dismissed along with connected CM(s).”

“in view of the observations and finding returned in WP(C) No. 839/2025, the respondent-Bank is at liberty to complete the process of e-auction and to proceed in terms of sale intimation letter dated 28.08.2024.”

The Court disposed of WP(C) No. 2342/2024 in the above terms

Advocates Representing the Parties

For the Petitioners: Ms. Mandeep Reen, Advocate; Mr. P. N. Raina, Senior Advocate with Mr. Sudesh Sharma, Advocate

For the Respondents: Mr. Parveen Kapahi, Advocate

Case Title: Vikas Bharti & Anr. v. Punjab National Bank & Ors. / M/s Krishna Traders v. Punjab National Bank & Ors.
Case Numbers: WP(C) No. 2342/2024 c/w WP(C) No. 839/2025
Bench: Justice Sindhu Sharma, Justice Shahzad Azeem