SARFAESI Auction Sale Is Invalid If Balance Sale Price Is Paid Beyond Rule 9 Timeline Without Written Extension: Supreme Court
Case Name: M. R. Vasumathi v. The Authorized Officer & Ors.
Citation: 2026 INSC 633
Date of Judgment/Order: 09 June 2026
Bench: Dipankar Datta, J. and Augustine George Masih, J.
Held: The Supreme Court held that compliance with Rule 9 of the Security Interest (Enforcement) Rules, 2002 is a statutory sine qua non for a valid SARFAESI auction sale. The Court held that the auction purchaser must deposit 25% of the sale price immediately and the balance 75% within the prescribed period, unless there is a written agreement extending time in accordance with Rule 9(4). In the absence of any written extension or legally sustainable waiver, delayed payment of the balance sale price is a material statutory irregularity going to the root of the auction process and renders the sale liable to be set aside.
Summary: The dispute arose from recovery proceedings initiated by Indian Bank against the secured asset mortgaged by late G. Ramanujam, who had stood as guarantor for a loan availed in 1984. After a preliminary decree was passed in 1997 and settlement efforts failed, the secured creditor issued a SARFAESI demand notice in 2009 and proceeded to auction the property on 11.03.2010. The auction purchaser deposited 25% of the bid amount around the date of sale, but the remaining 75% was paid only on 31.03.2010, beyond the 15-day period expiring on 26.03.2010. The DRT, DRAT and Madras High Court upheld the sale, relying broadly on the conduct of the legal heirs and the completed auction. Reversing those findings, the Supreme Court held that SARFAESI auction validity must be tested strictly against the statute and rules, not merely on equitable considerations or the borrower’s delay. The Court found no material showing that the auction purchaser sought extension before expiry of time or that any written agreement extending time existed between the concerned parties.
Decision: The Supreme Court partly allowed the appeal, set aside the judgments and orders of the High Court, DRAT and DRT, and quashed the auction sale of the secured asset. The auction purchaser was directed to receive refund of the entire amount deposited with interest at 7% per annum from the respective dates of deposit, to be paid by the secured creditor within six weeks. The appellant was granted a one-time opportunity under Article 142 to redeem the mortgage by paying ₹95,42,372.52 along with 5% interest per annum from the date of the Section 13(2) SARFAESI notice until payment. If the appellant fails to redeem within the stipulated time, the secured creditor may put the property to fresh auction after obtaining a fresh valuation report from a government-empanelled valuer, and the appellant would forfeit all rights to the secured asset. The issue of limitation was left open, parties were directed to bear their own costs, and all connected applications were disposed of.