All NotesCorporate LawSARFAESI Act, 2002

SARFAESI Act, 2002

SARFAESI Leading Cases Digest II: Possession and Sale

Where Part I dealt with validity and forum, this part covers what happens on the ground: how possession is taken, what a valid sale requires, how tenants and lessees are protected, and how guarantors fare when insolvency intervenes. Twelve decisions, in date order, each reduced to its issue and holding, then grouped by question.

1. The Cases, 2013 to 2017

Possession, sale, lessees and NBFCs

Figure 1: Possession, sale, lessees and NBFCs

2. The Cases, 2018 to 2024

Redemption, guarantors, tenants and finality

Figure 2: Redemption, guarantors, tenants and finality

3. By Question

  • Possession. Either route, s.13(4) or s.14, is open, and s.17 lies whichever is used, Noble Kumar (Topic 53)
  • A valid sale. The 30-day individual notice is mandatory (Mathew Varghese); a private treaty needs agreed written terms (J. Rajiv Subramaniyan); a confirmed sale falls only for fraud, collusion or underpricing (Celir 2024) (Topics 52, 67, 82)
  • Redemption. Only full payment redeems (Blue Coast), and only until publication of the sale notice (Celir 2023) (Topics 55, 30)
  • Tenants and lessees. A valid prior lease must be considered (Harshad Govardhan); bona fide tenants are protected (Kalsaria), but only if the lease predates the mortgage and was validly made (Bajarang) (Topics 63, 54, 60)
  • Guarantors and NBFCs. The IBC moratorium does not shield a personal guarantor (Ramakrishnan), nor does a resolution plan discharge one (Lalit Kumar Jain); NBFCs may enforce older debts (M.D. Frozen Foods) (Topics 78, 59)

⚠ Exam trap

Keep the two Celir decisions apart: Celir v Bafna Motors (2023) ends the right of redemption on publication of the sale notice, while Celir v Sumati Prasad Bafna (2024) limits when a confirmed sale can be set aside. On tenants, cite Kalsaria for protection and Bajarang Agarwal for its limits, and remember that s.17(4A) now routes tenancy claims to the DRT.

4. Frequently Asked Questions

What did Mathew Varghese decide about SARFAESI sales?

In Mathew Varghese v M. Amritha Kumar (2014) the Supreme Court held that the thirty days' notice of sale to the borrower under the Enforcement Rules is mandatory and must be individually served, so that the borrower has a real chance to pay and redeem. A sale held without such notice is void. The Court also stressed that the secured asset must not be sold at an undervalue.

Does the IBC moratorium protect a guarantor from SARFAESI action?

No. In State Bank of India v V. Ramakrishnan (2018) the Supreme Court held that the moratorium under Section 14 of the Insolvency and Bankruptcy Code protects the corporate debtor's assets, not the property of a personal guarantor. In Lalit Kumar Jain v Union of India (2021) it added that approval of a resolution plan for the corporate debtor does not by itself discharge the personal guarantor's liability.

5. Related Topics

  • Topic 88: Leading Cases Digest I. Validity, forum and remedies.
  • Topic 90: Common Exam Traps. The errors these cases correct.