Published on: 31st July 2026
Authored by: Manojkumar Bansode
Government Law College, Mumbai
1. Case Details
Case Name: Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. & Others
Citation: 2023 INSC 838; Civil Appeal Nos. 5542 to 5543 of 2023[1]
Court: Supreme Court of India
Bench: Justice J.B. Pardiwala and Justice Manoj Misra
Date of Judgment: 21 September 2023
Area of Law: Banking Law, SARFAESI Act,[2] Mortgage Law, Property Law[3]
This case concerns the interpretation of a borrower’s right of redemption under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”), following the 2016 amendment to Section 13(8). The Supreme Court examined the legal effect of a public auction conducted under the Act, the rights of a successful auction purchaser, and the extent of judicial interference under Article 226 of the Constitution. The judgment has become a significant precedent in banking and property law by clarifying the balance between borrowers’ redemption rights and the commercial certainty of auction sales.
2. Background and Facts
In July 2017, Union Bank of India sanctioned a Lease Rental Discounting (LRD) credit facility of ₹100 crore to Bafna Motors (Mumbai) Pvt. Ltd., with one of its directors acting as the guarantor. A substantial portion of the sanctioned amount was utilised to refinance an existing loan, while the remaining amount was secured by creating a simple mortgage over an industrial property situated at Nerul, Navi Mumbai. However, the borrower subsequently defaulted in repaying the loan, following which the account was classified as a Non-Performing Asset (NPA). As a result, the Bank initiated recovery proceedings under the SARFAESI Act. By 30 April 2023, the outstanding dues had risen to approximately ₹123.83 crore.
To recover the outstanding amount, the Bank attempted to auction the secured property on eight occasions between April 2022 and June 2023, but each attempt failed to attract a successful bidder. During this period, the borrowers also challenged the recovery proceedings before the Debt Recovery Tribunal, Mumbai. Thereafter, the Bank issued a fresh auction notice and conducted a ninth auction on 27 June 2023. Celir LLP emerged as the highest bidder with an offer of ₹105.05 crore. The Bank accepted the bid, issued a sale confirmation letter, and directed the auction purchaser to deposit the balance sale consideration within the stipulated period.
Before the sale certificate could be issued, the borrowers approached the Bombay High Court seeking permission to redeem the mortgaged property by clearing the outstanding dues. The High Court permitted the borrowers to redeem the property despite the completion of the auction process. Aggrieved by this decision, Celir LLP challenged the High Court’s judgment before the Supreme Court, raising important questions regarding the borrower’s right of redemption, the finality of auctions conducted under the SARFAESI Act, and the legal rights of a successful auction purchaser.
3. Legal Issues Before the Court
The Supreme Court was called upon to determine several important questions concerning the interpretation of the SARFAESI Act and the rights of parties involved in the auction of secured assets. The principal issue was whether, after the 2016 amendment to Section 13(8) of the SARFAESI Act, a borrower retains the right to redeem the mortgaged property once the auction notice has been published. The Court also considered whether the confirmation of sale in favour of a successful auction purchaser creates an enforceable legal right that cannot subsequently be defeated by permitting redemption. Another significant issue was whether the Bombay High Court was justified in exercising its writ jurisdiction under Article 226 of the Constitution despite the borrowers having an effective statutory remedy under the SARFAESI Act. Finally, the Court examined the extent to which the sanctity of public auctions should be protected in order to preserve certainty, fairness, and public confidence in the recovery mechanism established under the Act.
4. Arguments of the Parties
Arguments of the Appellant (Celir LLP):
The appellant, Celir LLP, contended that the Bombay High Court had erred in permitting the borrowers to redeem the mortgaged property after the auction proceedings had attained finality. It was argued that the borrowers had already availed the statutory remedy before the Debt Recovery Tribunal and, therefore, the writ petition under Article 226 of the Constitution was not maintainable. The appellant further submitted that, following the 2016 amendment to Section 13(8) of the SARFAESI Act, the borrower’s right of redemption stood extinguished upon the publication of the auction notice. Since Celir LLP had emerged as the highest bidder, paid the entire sale consideration, and the Bank had confirmed the sale, it acquired a vested legal right over the secured asset. Consequently, the Bank could not subsequently consent to the borrowers’ request for redemption.
Arguments of the Respondents (Borrowers):
On the other hand, the borrowers argued that the equitable right of redemption continued until the issuance of the sale certificate. They contended that since the sale certificate had not yet been issued, they were legally entitled to discharge the outstanding dues and redeem the mortgaged property. It was also submitted that the Bank had accepted the repayment and issued a No Dues Certificate, thereby acknowledging full satisfaction of the debt. The borrowers maintained that the High Court had rightly exercised its extraordinary jurisdiction to protect their proprietary rights and prevent the irreversible loss of valuable property when the Bank’s financial interests had already been fully secured.
5. Judgment and Ratio Decidendi
The Supreme Court allowed the appeals filed by Celir LLP and set aside the judgment of the Bombay High Court. The Court held that the High Court had erred in permitting the borrowers to redeem the mortgaged property after the auction process had substantially concluded. It observed that the borrowers had an effective statutory remedy under the SARFAESI Act and should not have invoked the extraordinary writ jurisdiction under Article 226 of the Constitution.
While interpreting the amended Section 13(8) of the SARFAESI Act, the Court clarified that the 2016 amendment significantly altered the law relating to the borrower’s right of redemption. Unlike the earlier position, established in cases such as Mathew Varghese v. M. Amritha Kumar & Others[6] and Mardia Chemicals Ltd. v. Union of India,[7] the amended provision requires the borrower to discharge the secured debt before the publication of the auction notice. Once the auction notice is published in accordance with the statutory requirements, the borrower’s right to redeem the secured asset stands extinguished. Consequently, any subsequent attempt to redeem the property after the completion of the auction process cannot defeat the rights of a successful auction purchaser. This stance aligns with recent judicial trends seen in decisions like Union Bank of India v. Rajat Infrastructure Pvt. Ltd. & Another[4] and Shakeena & Another v. Bank of India & Others.[5]
The Court further emphasised that public auctions conducted under the SARFAESI Act must attain finality to preserve transparency, certainty, and public confidence in the recovery mechanism. A successful auction purchaser who has complied with all statutory conditions acquires enforceable legal rights that deserve judicial protection. Permitting borrowers to redeem the property after the auction has concluded would undermine the credibility of the auction process and discourage genuine bidders from participating in future auctions.
The ratio decidendi of the case is that, following the 2016 amendment to Section 13(8) of the SARFAESI Act, the borrower’s statutory right of redemption ceases upon the publication of the auction notice, and courts should not ordinarily interfere with completed auction proceedings where statutory procedures have been duly followed. The judgment reinforces the principles of commercial certainty, finality of public auctions, and limited judicial intervention in SARFAESI proceedings.
6. Critical Analysis
The decision in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. & Others marks an important development in Indian banking and insolvency jurisprudence by reaffirming the principle of commercial certainty in the enforcement of security interests. The Supreme Court rightly recognised that allowing borrowers to redeem secured assets after the completion of a valid auction would undermine the credibility of the recovery mechanism established under the SARFAESI Act. The judgment strengthens the confidence of prospective bidders by assuring them that a successfully concluded auction will not be disturbed except in exceptional circumstances.
The Court’s interpretation of the amended Section 13(8) also reflects the legislative intent behind the 2016 amendment, which sought to expedite debt recovery proceedings and minimise unnecessary delays. By clarifying that the borrower’s right of redemption ceases upon the publication of the auction notice, the Court has removed the uncertainty that previously existed due to conflicting judicial interpretations. This provides greater predictability for secured creditors and financial institutions while ensuring the efficient recovery of public funds.
However, the judgment may also attract criticism from the perspective of borrower protection. The equitable right of redemption has traditionally been regarded as an important safeguard against the permanent loss of property. A strict interpretation of Section 13(8) may, in certain circumstances, operate harshly against borrowers who are willing and financially capable of repaying the outstanding dues shortly after the auction process has commenced. Consequently, while the judgment promotes commercial certainty, it simultaneously narrows the scope of equitable relief available to defaulting borrowers.
Overall, the decision successfully balances the competing interests of borrowers, secured creditors, and auction purchasers. It reinforces the integrity of statutory auction proceedings and provides much-needed clarity on the interpretation of the SARFAESI Act, making it a significant precedent in the field of banking and property law.
7. Conclusion
The Supreme Court’s decision in Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. & Others has significantly clarified the legal position governing the borrower’s right of redemption under the SARFAESI Act after the 2016 amendment to Section 13(8). By holding that the right of redemption stands extinguished upon the publication of the auction notice, the Court has reinforced the principles of commercial certainty, finality of public auctions, and judicial restraint in recovery proceedings. The judgment not only strengthens the confidence of secured creditors and auction purchasers but also provides much-needed clarity for the consistent application of the SARFAESI framework. Although the ruling narrows the equitable protection traditionally available to borrowers, it represents an important step towards ensuring an efficient, transparent, and predictable mechanism for the enforcement of security interests in India. Consequently, this decision will continue to serve as a leading precedent in banking, property, and secured transactions law.
References
[1] Celir LLP v. Bafna Motors (Mumbai) Pvt. Ltd. & Others, 2023 INSC 838; Civil Appeal Nos. 5542 to 5543 of 2023 (Supreme Court of India).
[2] The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.
[3] The Transfer of Property Act, 1882.
[4] Union Bank of India v. Rajat Infrastructure Pvt. Ltd. & Another, (2023) 5 SCC 540.
[5] Shakeena & Another v. Bank of India & Others, (2019) 8 SCC 650.
[6] Mathew Varghese v. M. Amritha Kumar & Others, (2014) 5 SCC 610.
[7] Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311.
