Introduction:

In the case of M/s Gogi Motor Store vs. Citizen’s Co-operative Bank & Anr., the High Court of Jammu & Kashmir and Ladakh delivered a significant judgment reaffirming the amended legal position under Section 13(8) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). The controversy arose when the petitioner, M/s Gogi Motor Store, challenged the Tender-cum-Auction Notice issued by Citizen’s Co-operative Bank for auctioning its mortgaged residential property. The petitioner had availed a Cash Credit Limit of ₹49 lakh by mortgaging the property in July 2019 but defaulted in repayment, eventually leading to the account being classified as a Non-Performing Asset by May 2023. The Bank followed the statutory process under Sections 13(2), 13(4), and 14, ultimately issuing multiple auction notices. While earlier attempts failed, the latest Tender-cum-Auction Notice dated 17 June 2025 led to a successful bid by a third party, Mayank Gupta, who deposited the entire bid amount. The petitioner approached the High Court nearly two months after publication of the auction notice, contending that it had substantially repaid the dues and that the Bank had verbally assured restructuring. The High Court, however, anchored its reasoning in the 2016 amendment to Section 13(8) and relied on recent Supreme Court authority to hold that the borrower’s right to redeem the secured asset ends the moment the auction notice is published, if dues are not paid before such publication, thereby dismissing the writ petition as meritless.

Arguments of the Petitioner:

The petitioner, M/s Gogi Motor Store, argued in a detailed manner that despite the SARFAESI proceedings initiated against it, the Bank had failed to adhere to the principle of fairness and had ignored the borrower’s substantial repayments. It asserted that the outstanding dues had considerably reduced to approximately ₹19.8 lakh due to multiple payments already made after the account turning irregular, and that the Bank had given verbal assurances of restructuring the loan account, creating a legitimate expectation that coercive proceedings would not be taken forward. The petitioner further alleged that the valuation of the mortgaged property — worth over ₹2 crore — had not been correctly assessed, leading to a gross undervaluation and rendering the auction process arbitrary and unjust. It contended that no proper or legally valid service of notices under the SARFAESI Act had been effected, depriving it of adequate opportunity to respond. The petitioner questioned the propriety of auctioning a valuable residential property for a comparatively insignificant outstanding amount, arguing that such a move would be disproportionate, unreasonable, and violative of constitutional guarantees under Article 14. Moreover, it was contended that the borrower’s right of redemption under Section 13(8) continued till the actual sale was concluded, and therefore any payment made—even after publication of auction notice—should compel the Bank to entertain redemption and halt the auction process. Lastly, the petitioner argued that the Bank had accepted partial payments during the process, which, according to the petitioner, amounted to waiver or dilution of SARFAESI proceedings, and that the writ jurisdiction of the High Court should be exercised to prevent the grave prejudice caused by the auction of a residential property for a small outstanding.

Arguments of the Bank and Respondents:

Citizen’s Co-operative Bank refuted every contention raised by the petitioner and asserted that the borrower had was deliberately attempting to derail legally compliant recovery proceedings after years of continuous default. The Bank produced a complete chronology of notices and steps taken under Sections 13(2), 13(4), and 14 of the SARFAESI Act, including the demand notice for ₹53,43,639/- issued on 20 July 2023, the symbolic and physical possession notices, and orders obtained from the District Magistrate for taking possession. The Bank contended that at every stage the petitioner remained non-responsive and wilfully negligent, ignoring all statutory communications. It was argued that acceptance of incidental deposits after initiation of SARFAESI proceedings did not in any manner nullify or suspend the recovery process, particularly because the borrower did not clear the entire overdue amount before publication of any auction notice. The Bank emphasized that Section 13(8), as amended by the 2016 amendment, extinguishes the borrower’s right of redemption once the auction notice is published, and that the borrower cannot insist on tendering dues after such publication. It highlighted that two auction notices dated 16 December 2024 and 3 April 2025 had already been issued but failed to attract bidders, and that a fresh Tender-cum-Auction Notice dated 17 June 2025 successfully resulted in the third respondent becoming the highest bidder and depositing the entire bid amount. The Bank contended that once a third-party interest has crystallised, courts cannot interfere merely to facilitate borrower delay tactics. It was also argued that the petitioner had suppressed material facts and approached the court after a delay of almost two months from the publication of the auction notice, demonstrating that the writ petition was filed solely to obstruct the final sale process. The Bank further stated that the valuation was conducted by an approved valuer and that the petitioner’s allegations of undervaluation were baseless and unsupported by any expert report. Asserting that the petitioner had no subsisting right of redemption once the auction notice was published, the Bank urged the court to dismiss the writ petition as meritless and malafide.

Court’s Judgment:

The High Court of Jammu & Kashmir and Ladakh, speaking through Justice Shahzad Azeem with concurrence from Justice Sindhu Sharma, undertook a comprehensive evaluation of the facts, statutory scheme, and recent judicial precedents, ultimately concluding that the petitioner had no right to challenge the auction proceedings after failing to exercise redemption before publication of the auction notice. The Court meticulously traced the timeline and observed that the petitioner repeatedly neglected statutory notices, failed to respond to demand notices, ignored possession intimations, and neither appeared before the Bank nor initiated any remedial measures within the statutory framework. Emphasizing the transformative effect of the 2016 amendment to Section 13(8), the Court referred extensively to the Supreme Court’s authoritative decision in M. Rajendran & Ors. v. KPK Oils and Proteins India Pvt. Ltd., 2025 SCC OnLine SC 2036, which unequivocally held that a borrower’s right to redeem the secured asset ends the moment the auction notice is published, and that any amount tendered thereafter is immaterial and does not obligate the secured creditor to accept it. The Court observed that earlier judicial interpretations—where redemption was allowed until the actual sale—no longer applied after the statutory amendment. The Court further held that the petitioner approached the court after nearly two months from publication of the auction notice, indicating clear delay and laches. It dismissed the argument of undervaluation, holding that bald allegations cannot discredit a certified valuer’s report. The bench reasoned that once a third-party bidder had deposited the entire amount, the auction process had achieved finality, and judicial interference would defeat both statutory intention and commercial certainty. Noting that the writ petition was an “abortive attempt just to delay the process,” the Court held that the petitioner’s right of redemption stood extinguished on 17 June 2025—the date of publication of the Auction Notice—and that the petition lacked merit. Consequently, the writ petition was dismissed and all interim orders vacated.