Sale incomplete without sale certificate u/s 13(8) SARFAESI, Rule 9(6); IBC Section 96 blocks ownership transfer

HC held that post-amendment to Section 13(8) SARFAESI, only the borrower's right of redemption is extinguished upon publication of the sale notice; ownership in the secured asset still passes only upon issuance of a sale certificate under Rule 9(6). Applying the IBC interim moratorium under Section 96, the secured creditor was legally barred from accepting balance sale consideration after commencement of the moratorium, with the result that no sale certificate could validly issue and the statutory sale never attained completion. The auction purchaser's vested right remained conditional and inchoate, as full payment was impermissible during moratorium. Consequently, the Petitioner acquired no ownership rights or entitlement to possession. The writ petition was dismissed.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, after the 2016 amendment to Section 13(8) of the SARFAESI Act, a borrower's ownership rights in the secured asset stand extinguished upon publication of a sale notice under Rule 8(6) of the SARFAESI Rules.

1.2 When, in a statutory sale under the SARFAESI Act and Rules 8 and 9 of the SARFAESI Rules, does transfer of ownership in the secured asset stand completed.

1.3 What is the effect of an interim-moratorium under Section 96 of the IBC on: (a) continuation of SARFAESI proceedings; (b) acceptance of balance auction consideration; and (c) issuance of a sale certificate in favour of the auction purchaser.

1.4 Whether, in the facts, the statutory sale was completed and the auction purchaser acquired ownership/entitlement to possession of the secured asset notwithstanding the interim-moratorium under Section 96 of the IBC.

1.5 Whether the decisions in Indian Overseas Bank v. RCM Infrastructure Ltd. and Celir LLP v. Bafna Motors (Mumbai) (P) Ltd. alter or control the above conclusions regarding completion of sale and the effect of moratorium.

1.6 Whether the auction purchaser is entitled in these proceedings to refund of the amounts deposited with the secured creditor.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Effect of amended Section 13(8) SARFAESI Act on ownership rights upon publication of sale notice

Legal framework

2.1 The Court considered Section 13(8) of the SARFAESI Act in its pre- and post-2016 amendment form, together with Sections 13(5-A), 13(6), 13(7) and the scheme of Rules 8 and 9 of the SARFAESI Rules. The Court also referred to the Transfer of Property Act, 1882 (Section 60, by comparison), and to Supreme Court decisions including Narayan Deorao Javle, Paramjeet Singh Patheja, Hindon Forge and Celir LLP.

Interpretation and reasoning

2.2 The Court held that the 2016 amendment to Section 13(8) advances the point of extinguishment of the borrower's right of redemption from "any time before the date fixed for sale or transfer" to "any time before the date of publication of notice for public auction ..." but does not, by its text or scheme, provide that the borrower's entire ownership in the secured asset is extinguished on publication of the sale notice.

2.3 The Court reasoned that the "equity of redemption" is only one facet of "ownership", which is a broader "bundle of rights" (including enjoyment, destruction, alteration, redemption). Relying on Narayan Deorao Javle, the Court held that loss of redemption is subsidiary to and does not itself terminate ownership.

2.4 The Court found support in the structure of the SARFAESI Act and Rules:

(a) Section 13(5-A) allows the secured creditor to bid at a subsequent sale if the earlier sale fails for want of a higher bid than reserve price, indicating that after publication of a sale notice and loss of redemption, the borrower is still treated as owner until an effective transfer occurs.

(b) Section 13(6), using the expression "as if the transfer had been made by the owner", creates a limited legal fiction and does not convert the secured creditor into owner; this was reinforced by Paramjeet Singh Patheja and Hindon Forge.

(c) Section 13(7), which mandates payment of surplus sale proceeds to the borrower, presupposes continued ownership in the borrower until the actual transfer.

(d) Second proviso to Rule 9(2), requiring borrower's consent for sale below reserve price, is premised on the borrower retaining ownership post-publication of the sale notice.

2.5 The Court distinguished the extinguishment of the borrower's right of redemption as considered in Celir LLP (which concerned whether redemption can be exercised post public auction notice) from complete divestment of ownership, holding that Celir LLP does not state that ownership shifts on publication of the sale notice.

Conclusions

2.6 The amendment to Section 13(8) of the SARFAESI Act only advances the time of extinguishment of the borrower's right of redemption to the date of publication of the sale notice; it does not extinguish the borrower's entire ownership rights in the secured asset at that stage.

2.7 Loss of the right of redemption is not equivalent to loss of ownership. Ownership continues with the borrower until transfer is completed in accordance with the statutory scheme (i.e., upon issuance of a sale certificate after full payment).

Issue 2: When is transfer of ownership complete under SARFAESI - effect of Rules 8 and 9 and Indian Overseas Bank

Legal framework

2.8 The Court analysed Sections 13(1)-(4), 13(8) of the SARFAESI Act and Rules 8 and 9 of the SARFAESI Rules, particularly Rule 8(6) (sale notice) and Rule 9(1), 9(3), 9(4), 9(6) (deposit of price and sale certificate). The Court relied heavily on the Supreme Court's decision in Indian Overseas Bank v. RCM Infrastructure Ltd., and also referred to Shakeena and S. Karthik.

Interpretation and reasoning

2.9 The Court reiterated, following Indian Overseas Bank, that a sale under SARFAESI is a "statutory sale" governed strictly by Rules 8 and 9. Under this scheme, the sale is complete only when:

(a) the auction purchaser makes the entire payment of the sale price within the period prescribed/extended under Rule 9(4); and

(b) the authorised officer issues a sale certificate in the form prescribed in Appendix V in terms of Rule 9(6).

2.10 The Court emphasised that mere confirmation of sale or part-payment does not complete the sale; the Supreme Court in Indian Overseas Bank specifically rejected the contention that sale is complete on part payment or on confirmation of sale when the balance is received after moratorium.

2.11 Applying this to the post-2016 Section 13(8) regime, the Court held that the amendment did not alter this basic statutory requirement. The point of completion of transfer remains tied to issuance of the sale certificate after full payment, not to publication of sale notice, confirmation of sale, or extinguishment of redemption.

Conclusions

2.12 In a statutory sale under the SARFAESI Act and the SARFAESI Rules, transfer of ownership in the secured asset occurs only upon:

(i) payment of the entire sale consideration by the successful auction purchaser; and

(ii) issuance of a sale certificate under Rule 9(6).

2.13 Neither publication of the sale notice, nor extinguishment of the borrower's right of redemption, nor confirmation of sale by the secured creditor, by themselves effect transfer of ownership.

Issue 3: Effect of interim-moratorium under Section 96 IBC on SARFAESI proceedings and completion of sale

Legal framework

3.1 The Court examined Section 96 of the IBC (interim-moratorium on filing of an application under Sections 94 or 95) and contrasted it with Section 14 (moratorium in CIRP). The Court relied on the Supreme Court's exposition in Dilip B. Jiwrajka v. Union of India and on the Delhi High Court's reasoning in Sanjay Dhingra v. IDBI Bank Ltd., in conjunction with Indian Overseas Bank.

Interpretation and reasoning

3.2 Relying on Dilip B. Jiwrajka, the Court held that an interim-moratorium under Section 96:

(a) commences automatically on the date of filing of an application under Section 94 or Section 95 and continues till admission or rejection of the application under Section 100;

(b) operates "in respect of any debt" - i.e., it is debt-centric rather than debtor-centric, unlike Section 14, which is directed at proceedings "against the corporate debtor";

(c) has the consequence that any pending legal action or proceeding in respect of any debt is deemed stayed, and no fresh legal action or proceeding in respect of any debt may be initiated by creditors or the debtor.

3.3 The Court endorsed the Delhi High Court's reading in Sanjay Dhingra that the phrase "in relation to all the debts" in Section 96(1) covers all debts of the individual, including debts secured by mortgage and subject to SARFAESI proceedings. Hence, on commencement of the interim-moratorium, proceedings under SARFAESI in respect of such debt must be treated as stayed, and the secured creditor cannot continue enforcement, including accepting balance consideration.

3.4 Applying the ratio of Indian Overseas Bank and Sanjay Dhingra, the Court held that once the interim-moratorium came into effect on 9 June 2025, the secured creditor was legally barred from accepting the remaining tranches of the auction consideration and from taking further steps in the sale process (including issuance of the sale certificate) in respect of the same debt.

3.5 The Court clarified that, because the sale under SARFAESI is incomplete without full payment and sale certificate, any embargo (such as an interim-moratorium) that prevents acceptance of the balance payment necessarily prevents completion of the sale and transfer of ownership to the auction purchaser.

Conclusions

3.6 The interim-moratorium under Section 96 of the IBC is wider in scope than the moratorium under Section 14, and it restrains continuation or initiation of proceedings "in respect of any debt", including SARFAESI enforcement of a secured asset for that debt.

3.7 After the interim-moratorium comes into force, a secured creditor cannot lawfully accept balance auction consideration or proceed to issue a sale certificate under the SARFAESI framework in respect of that debt.

Issue 4: Whether the statutory sale in the present case was completed and whether the auction purchaser acquired ownership/possession rights

Interpretation and reasoning

4.1 The key undisputed factual sequence considered by the Court was:

(a) Sale notice under Rule 8(6) was issued on 9 May 2025.

(b) Auction was conducted and sale confirmed in favour of the petitioner on 30 May 2025.

(c) Two initial tranches of the sale price were paid before 9 June 2025.

(d) The personal insolvency application under Section 94 IBC was filed on 9 June 2025, triggering an interim-moratorium under Section 96 from that date.

(e) The remaining six tranches of the auction consideration and the sale certificate were post-dated after 9 June 2025.

4.2 Applying its earlier conclusions and Indian Overseas Bank, the Court held:

(a) Since the interim-moratorium under Section 96 took effect on 9 June 2025, all legal action "in respect of any debt" stood stayed from that date.

(b) Acceptance of the six post-moratorium tranches by the secured creditor and issuance of the sale certificate on 20 June 2025 were contrary to Section 96 and could not be treated as valid steps completing the sale.

(c) As a result, the statutory precondition for completion of a SARFAESI sale - full payment and valid issuance of a sale certificate before the moratorium - was not satisfied.

4.3 The Court rejected the contention that publication of the sale notice or confirmation of sale, combined with extinguishment of the borrower's right of redemption, by itself divested the borrower of ownership and insulated the sale from the subsequent interim-moratorium.

4.4 The Court also rejected the argument that the vested right recognised in Celir LLP displaces the ratio of Indian Overseas Bank in a case where an IBC moratorium has intervened before completion of sale. It held that:

(a) The "vested right" in Celir LLP is a right of the successful purchaser to obtain a sale certificate upon fulfilling conditions (including full payment), and primarily operates to prevent the creditor and borrower from undoing the sale inter se by a private arrangement after a valid statutory sale.

(b) Celir LLP did not involve any IBC proceedings or moratorium, and therefore did not dilute or overrule the principle in Indian Overseas Bank that a sale not completed before moratorium cannot be perfected thereafter by accepting balance payment or issuing a sale certificate.

Conclusions

4.5 Because the interim-moratorium under Section 96 IBC intervened before full payment and valid issuance of a sale certificate, the statutory sale under SARFAESI did not stand validly completed.

4.6 The auction purchaser did not acquire ownership in the secured asset and consequently had no right to seek possession of the property on the footing of completed transfer.

4.7 The auction purchaser, therefore, was not entitled to a writ directing delivery of physical possession of the secured asset.

Issue 5: Interplay and reconciliation of Indian Overseas Bank and Celir LLP

Interpretation and reasoning

5.1 The Court treated Indian Overseas Bank as laying down the governing principle where completion of a SARFAESI sale is examined in the context of an IBC moratorium: completion depends on issuance of the sale certificate upon full payment before moratorium.

5.2 Celir LLP was interpreted as addressing a different question - namely, the cut-off for the borrower's right of redemption under the amended Section 13(8) and the legal effect of confirmation of sale on the auction purchaser's vested right, in a context devoid of IBC implications.

5.3 The Court held that Celir LLP does not alter the statutory requirements for completion of sale under Rules 8 and 9 nor does it authorise completion of a sale by accepting balance payment after a moratorium has commenced. Celir LLP and Indian Overseas Bank operate in distinct factual and legal settings and can be harmoniously read.

Conclusions

5.4 Indian Overseas Bank continues to govern situations where SARFAESI sale steps overlap with IBC moratorium periods: a sale not completed prior to moratorium cannot be perfected thereafter.

5.5 Celir LLP does not detract from the requirement that transfer of ownership arises only upon issuance of a sale certificate after full payment and has no effect on the prohibitory regime imposed by Section 96 IBC.

Issue 6: Entitlement of the auction purchaser to refund of monies in these proceedings

Interpretation and reasoning

6.1 The Court noted the auction purchaser's alternative / without prejudice plea for refund of the auction consideration with interest if possession was not to be granted.

6.2 The Court observed that the writ petition, as framed, did not contain any specific prayer for refund or restitution of the sale consideration from the secured creditor.

6.3 In exercise of writ jurisdiction confined to the reliefs sought, the Court declined to adjudicate upon or grant any relief in relation to refund, holding that such claim lies outside the scope of the present petition.

Conclusions

6.4 No direction for refund of the auction consideration was issued in this writ petition due to absence of an appropriate prayer.

6.5 The issue of refund or other monetary relief in favour of the auction purchaser was expressly left open to be agitated in appropriate proceedings.

Overall Disposition

7.1 On the above findings-especially that (a) ownership did not pass to the auction purchaser; and (b) the interim-moratorium under Section 96 IBC barred further SARFAESI steps including acceptance of balance consideration and issuance of the sale certificate-the Court held that no mandamus for delivery of possession could be granted and dismissed the writ petition, without any order as to costs.

---