RIGHT OF REDEMPTION OF PROPERTY AND SARFAESI Act

 

RIGHT OF REDEMPTION OF PROPERTY AND SARFAESI Act

The SARFAESI Act specifically provided for the right of redemption. Section 13 of the SARFAESI Act speaks about enforcement of the security interest without intervention of the court. 

 

Section 13 and the Rules underlying the Act provided for a mechanism as to the enforcement, which is set forth by a Demand notice at the first instance and on failure to comply with the possession of the property is taken.  Such exercise is done by virtue of section 13 (2) and 13 (4). While further action for sale is provided, under section 13 (8) the Act provides for a right of redemption, more in the nature of a restrictive clause. 

 

The said section originally provided for right of redemption to extinguish on the property being sold in the auction in exercise of power under section 13 (4). Section 13 (8) as it stood originally is as follows:

“It the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further steps shall be taken by him for transfer or sale of the secured asset”

 

The Hon’ble Supreme Court considered the impact of this section with that of section 60 of the TP Act in the following judgements:

 

1.    Mathew Varghese Vs M Amritha Kumar (2104) 5 SCC 610

2.    Dwarika Prasad Vs State of Uttar Pradesh and Ors AIR 2018 SC 1286 = (2018) 5 SCC 491

3.    Shakeena and Ors Vs Bank of India and Ors (2019) 11 SCALE 59

 

The said sub-section 8 of section 13 was amended by Act 44 of 2016 and came into effect on 01.09.2016, whereby the said sub-section 8 of section 13 now provides for right of redemption in the following words:

“Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public…..”

 

Effectively the right of redemption provided under section 60 of the TP Act till the transfer as per the judgement of the Hon’ble Supreme Court is now restricted till the date of publication of notice for sale.