SARFAESI Act: Supreme Court Flags Inconsistency Between Section 13(8) & Rules on Borrower’s Redemption Right, Urges Government to Amend

In the landmark judgment of M. Rajendran & Ors. v. M/s KPK Oils & Proteins India Pvt. Ltd. & Ors. decided by the Supreme Court of India (date: 22 September 2025) the Court confronted a long-standing interpretative deadlock relating to the interplay between the redemption right of a borrower under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 (the “Act”) specifically Section 13(8) and the procedural norms laid out under the Security Interest (Enforcement) Rules, 2002 (“the Rules”).

The Court made three key pronouncements:

• that under the 2016 amendment to Section 13(8) a borrower’s right of redemption is extinguished once a valid notice of public auction is published;
• that the Rules specifically Rules 8 and 9, continue to reflect provisions that allow redemption beyond the publication date, creating a “glaring anomaly”;
• and it urged the Ministry of Finance and the Law & Justice Ministry to amend the Rules so that they align with the Act and clear up the confusion.

Statutory Framework & Evolution of Borrower’s Redemption Right

Section 13(8) SARFAESI Act

• Prior to the 2016 amendment, Section 13(8) provided that where the dues of the secured creditor were tendered “at any time before the date fixed for sale or transfer”, then the secured asset would not be transferred.
• The 1 September 2016 Amendment changed the operative language: the borrower could tender the dues “at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale of the secured assets”.

Thus, post-amendment, the trigger point for extinguishing the redemption right was shifted from “date fixed for sale/transfer” to “date of publication of notice” of sale/transfer. That important change has generated interpretation issues, especially in the context of the Rules.

Rules 8 & 9 – Security Interest (Enforcement) Rules, 2002

• Rule 8(6) requires the authorised officer to serve a notice to the borrower/guarantor at least 30 days before the sale of an immovable secured asset.
• Rule 9(1) mandates publication of the notice of sale in a newspaper not earlier than 30 days before the date of auction or tender.
• These procedural steps remain unchanged even after the amendment.
• The interpretative tension arises because: if the borrower’s redemption right ends at “publication of notice”, but the 30-day waiting period must still run until sale under Rule 9(1), does the borrower still have redemption during that 30-day interval after publication? This question has produced inconsistent jurisprudence. The Supreme Court addressed that tension in the Rajendran case.

Key Issues Addressed in the Rajendran Case

• Extent of redemption right: Whether after the 2016 amendment the borrower retains the right to redeem the secured asset after the medium of notice is published (i.e., if they redeem in the 30-day interval between publication and sale).
• Act vs Rules conflict: Whether the Act (Section 13(8)) and the Rules (Rules 8 and 9) are incompatible in their operation on redemption rights (the anomaly).
• Effect on sale certificate and auction purchaser’s rights: Once the notice of sale is published and the process moves further, whether an auction purchaser’s rights are vested and immune from subsequent borrower redemption claims.
• Retrospective application: Whether the 2016 amendment applies to loans/due‐dates prior to that date (if default occurred after that?)

Supreme Court’s Decision: What It Held

The Supreme Court in Rajendran (2025) ruled as follows:

• The borrower’s right of redemption under Section 13(8) stands extinguished once the secured creditor issues a valid notice of sale (publication) under Rule 9(1) (or equivalent depending on mode of transfer).
• It clarified that the “notice of sale” is a single composite notice (service + publication + affixation/uploading) under Rules 8(6), 8(7) and 9(1) not multiple distinct notices and that the countdown for redemption ends on the date of the latest of those acts (i.e., the effective publication).
• It found that the Rules continue to embed a 30-day wait between publication and sale, even though the Act says redemption ends on publication this is the anomaly: the Rules appear to afford redemption up to sale, the Act cuts it off at publication. The Court flagged this interpretive deadlock and urged legislative correction.
• The Court held that the 2016 amendment to Section 13(8) applies to cases where the default (NPA classification) occurred after the amendment even if the loan was taken earlier.
• It emphasised that once the sale certificate is issued in favour of the auction purchaser, their rights become vested and cannot be undone by subsequent borrower payments

Broader Legal & Commercial Implications

For Borrowers

• The decision places a premium on timing: borrowers must act before the publication of the notice. After that, redemption will likely be barred.
• They must monitor the sequence of service/publication/affixation and act quickly if they intend to repay and redeem.
• Redemption rights have thus become narrower post-2016 and now more aligned with creditor and auction purchaser interests.

For Secured Creditors / Banks / ARCs

• The judgment affirms that auction purchasers acquire secure, vested rights once sale process is properly followed which enhances certainty in debt recovery.
• The enforcement process must ensure the “notice of sale” is valid, composite, and well-documented (service, publication, affixation/uploading) so that the cut-off point is clear.
• The risk of litigation due to ambiguity is reduced, but the anomaly in the Rules still remains until addressed.

For Auction Purchasers / Investors in Distressed Assets

• Investors in security-enforcement auctions gain increased clarity: once the notice is published and process followed, their position is secured.
• The decision helps reduce uncertainty of post-sale redemption claims by borrowers and therefore increases confidence in distressed-asset acquisitions.

Rule-Making / Legislative Reform

• The Court has explicitly called on the government to amend the Rules so that they align with the Act. This means we may expect amendments to Rules 8 and 9 in due course to remove the inconsistency.
• Until such amendment, parties must rely on the Court’s interpretation that the date of “publication” triggers extinction of redemption rights, and treat the 30-day rule as a procedural minimum rather than an extension of redemption rights.

Litigation & Arbitration Strategy

• For courts, tribunals and DRTs/DRATs: this judgment provides a clear benchmark when hearing redemption/auction disputes under SARFAESI.
• Legal counsel for borrowers will need to scrutinise the exact publication date and proof thereof; for creditors/purchasers, documentation of notice and procedure becomes critical.

Practical Check-List: Compliance & Risk Mitigation

For secured creditors:

• Ensure service of notice to borrower/guarantor is properly recorded (Proof of service).
• Ensure composite notice publication (newspaper, affixation, uploading) is documented, with date of last publication recorded.
• Ensure the 30-day minimum (Rule 9(1)) is adhered to from the date of publication to sale.
• Maintain records of sale certificate issuance and transfer/registration formalities to vest purchaser rights.

For borrowers:

• Monitor NPA classification, notice service, publication.
• If intending redemption, act before the publication of notice; after that date your right is significantly curtailed.
• Preserve proof of payment of dues along with costs/charges before the cut-off.
• Legal challenge strategies should focus on validity of publication/notice rather than just arguing right of redemption per se.

For purchasers:

• Conduct due diligence on notice publication and sale certificate process before bidding.
• Ensure documentation of sale certificate and registration/possession to protect from subsequent claims.

Conclusion

The Rajendran judgment marks a significant turning point in the law of enforcement of security interest under the SARFAESI regime. By firmly holding that the redemption right under Section 13(8) of the Act is extinguished on publication of the sale notice, the Court aligns statutory text with commercial realities of banking and asset-recovery auctions. At the same time, the Court candidly acknowledges that the procedural Rules haven’t kept pace, and calls for legislative reform.

For practitioners, borrowers and investors alike, the message is clear: the moment of publication matters. Redemption rights are no longer open-ended up to sale or transfer they are time-bound. Banks and purchasers gain increased certainty; borrowers must act early and quickly.

With the Rules anomaly still unresolved, the Court has handed the baton to the legislature but until amendment happens, the contours laid down by this judgment will govern.