Bombay High Court Bars SARFAESI Sale After Interim Moratorium Under IBC

ENA Sectors 2025-12-15 10:47:36 Mumbai, Dec 15 (KNN) The Bombay High Court has ruled that a secured creditor cannot continue with a SARFAESI sale once an interim moratorium under the Insolvency and Bankruptcy Code (IBC) comes into effect. SARFAESI sale barred after interim moratorium In a December 10 order, a Division Bench of Justices R.I. Chagla and Farhan P. Dubash held that once an interim moratorium under Section 96 of the IBC begins, all debt-related proceedings must stop. The Court said the secured creditor could not continue SARFAESI action or accept payments after the moratorium took effect. Background: Auction of borrowers flat The case arose from a writ petition by Arrow Business Development Consultants, the highest bidder in a Union Bank e-auction on May 30, 2025, for a mortgaged flat. Arrow paid the installments by June 2025 and received a sale certificate on June 20. Meanwhile, borrower Vandana filed a personal insolvency application on June 9, triggering an interim moratorium that halted all debt-related proceedings. Banks stand: Sale completed after notice publication Union Bank and the bidder argued that the borrowers ownership rights had ended with the May 9 sale notice under the amended Section 13(8) of SARFAESI, and once the right of redemption lapsed, the Bank was entitled to complete the sale and accept the remaining installments. Courts view: Ownership transfers only upon sale certificate The High Court rejected these arguments, holding that the 2016 amendment limits the right of redemption but does not extinguish ownership. Ownership transfers only when a sale certificate is issued, which under SARFAESI requires full payment. Since full payment wasnt made before the moratorium began, the sale could not legally proceed. Supreme Court precedent applied Relying on RCM Infrastructure (2022), the Court said a SARFAESI sale isnt complete without full payment before the moratorium. Since most installments and the sale certificate came after the moratorium, Union Bank could not complete the sale. The petition was dismissed, and the Court did not order a refund of the deposit, leaving that to separate proceedings. (KNN Bureau) 44415 https://knnindia.co.in/news/newsdetails/sectors/bombay-high-court-bars-sarfaesi-sale-after-interim-moratorium-under-ibc 2025-12-15 10:47:36 knnindia.co.in Bombay High Court Bars SARFAESI Sale After Interim Moratorium Under IBC