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Issues: (i) Whether the borrowers' ownership rights in the secured asset stood extinguished on publication of the sale notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, after the 2016 amendment to Section 13(8) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (ii) Whether the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 prevented completion of the SARFAESI sale and delivery of possession to the successful auction purchaser.
Issue (i): Whether the borrowers' ownership rights in the secured asset stood extinguished on publication of the sale notice under Rule 8(6) of the Security Interest (Enforcement) Rules, 2002, after the 2016 amendment to Section 13(8) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;
Analysis: The amended Section 13(8) advances only the point of extinguishment of the borrower's equity of redemption to the date of publication of the sale notice. It does not, by itself, transfer ownership. In a statutory sale under Rules 8 and 9, transfer of title is completed only upon issuance of the sale certificate under Rule 9(6). The loss of redemption is only one facet of ownership and does not amount to complete divestment of title.
Conclusion: The borrowers did not lose ownership merely on publication of the sale notice; ownership would pass only on issuance of the sale certificate.
Issue (ii): Whether the interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 prevented completion of the SARFAESI sale and delivery of possession to the successful auction purchaser;
Analysis: The interim moratorium under Section 96 operates from the date of filing of the application and stays legal action or proceedings in respect of any debt. The sale under the SARFAESI framework was incomplete because a substantial part of the auction price was received after commencement of the interim moratorium, and the sale certificate could not validly be issued thereafter. Since completion of the sale was legally interdicted, the auction purchaser could not acquire title or claim possession.
Conclusion: The interim moratorium barred completion of the sale, and the auction purchaser was not entitled to possession.
Final Conclusion: The writ petition failed because the statutory sale had not been completed before the interim moratorium came into force, and the auction purchaser did not acquire ownership of the secured asset.
Ratio Decidendi: In a SARFAESI sale, title passes only on issuance of the sale certificate, and an interim moratorium under Section 96 of the Insolvency and Bankruptcy Code, 2016 prohibits completion of the sale if further payment or issuance of the certificate occurs after its commencement.
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