Section 13(8) SARFAESI: The Borrower's Right of Redemption

Even after enforcement begins, the borrower has a way back: pay everything owed and get the asset released. That is the right of redemption under Section 13(8). But the window for exercising it has narrowed. Before 2016 it ran until the sale or transfer of the asset; the 2016 amendment moved the cut-off to the publication of the sale notice, and the Supreme Court confirmed the shift in Celir LLP v Bafna Motors. This note sets out the right, the 2016 change, and the Celir decision.

1. The Right to Redeem

Figure 1: Pay all the dues and release the asset

• The right. The borrower may redeem the secured asset by tendering all the dues, together with the costs and expenses of the enforcement, before the statutory cut-off.
• A full tender, not part. Redemption requires payment of the whole amount due, not a part payment or a promise to pay; a short tender does not redeem the asset.
• Who may redeem. The borrower, and others with an interest in the asset such as a guarantor whose property is charged, may exercise the right.
• The effect. On a valid tender before the cut-off the enforcement stops and the secured asset is released from the security, so the borrower recovers it.

2. The 2016 Shift

Figure 2: A wide window narrowed

• Before the 2016 amendment. Redemption was available until the date of sale or transfer of the secured asset, a wide window that let the borrower pay even at a late stage and stop the sale.
• After the 2016 amendment. Redemption is available only until the date of publication of the notice for public auction or sale, a narrow window that closes much earlier.
• The reason for the change. The amendment favours the certainty and finality of the auction, so a buyer is not left exposed to a late redemption after committing to the purchase.
• Read with the sale process. The cut-off now lines up with Rule 9's sale notice, so once the sale is advertised the borrower's redemption window has closed (Topic 25)

3. Celir LLP v Bafna Motors (2023)

Figure 3: Publication of the notice closes the door

• The question. Whether, under the amended s.13(8), the borrower could still redeem after the auction notice was published and the sale all but completed.
• The holding. The Supreme Court held the right of redemption extinguishes on the publication of the auction notice under the amended s.13(8), not at the later sale or transfer.
• Auction protected. A borrower cannot defeat a completed auction by a late tender, so the successful bidder's position is secured and the sale stands.
• The wider message. The decision underlines the shift in balance the 2016 amendment made, from the borrower's late redemption to the finality of the enforcement sale.

4. Frequently Asked Questions

What is the borrower's right of redemption under Section 13(8)?

Section 13(8) gives the borrower the right to redeem the secured asset by tendering all the dues owed to the secured creditor, together with the costs and expenses of the enforcement, before the statutory cut-off. The tender must be of the full amount; a part payment or a mere offer does not redeem the asset. Others with an interest in the property, such as a guarantor whose property is charged, may also exercise the right. On a valid and timely tender the enforcement stops and the asset is released from the security. The point until which the right may be exercised was narrowed by the 2016 amendment.

Until when can a borrower redeem the secured asset after the 2016 amendment?

After the 2016 amendment, the borrower may redeem only until the date of publication of the notice for public auction or sale of the secured asset. This is a significant narrowing of the earlier position, under which redemption was available until the actual sale or transfer. In Celir LLP v Bafna Motors (2023), the Supreme Court held that under the amended Section 13(8) the right of redemption extinguishes on publication of the auction notice, so a borrower cannot defeat a completed auction by tendering the dues afterwards. The change protects the certainty and finality of the auction and the position of the successful bidder.

5. Related Topics

• Topic 25: The Enforcement Rules 2002. The sale notice that now fixes the cut-off.
• Topic 28: Section 13(4) Measures. The enforcement redemption can halt.