SARFAESI Auction Sales: Which Defects Void a Sale and Which Do Not
This article reviews the conditions under which an auction held under the SARFAESI Act, 2002 and the Security Interest (Enforcement) Rules, 2002 becomes final, and the defects that the Supreme Court has treated as serious enough to set it aside, using decisions from 2010 to 2026.
On 1 October 2026 the Supreme Court set aside an auction of a mortgaged resort at Ooty in Sterling Holiday Resorts Limited, holding that finality attaches to a lawful sale and cannot stand in for legality. Practitioners advising borrowers, banks and purchasers should read that decision with the earlier line of cases.
The statutory sequence
The steps below are the checkpoints against which any challenge is measured.
Section 13(2): notice to the borrower giving 60 days to discharge the dues.Section 13(4): the secured creditor may take possession of the secured asset.Rule 8: the property must be valued and a reserve price fixed before sale.Rule 8(6): not less than 30 clear days' notice of sale to the borrower stating date, place and reserve price, published in two newspapers, one of them in the local language.Rule 9: the highest bidder pays 25% of the price immediately and the balance within 15 days. The period may be extended by agreement but not beyond three months in all, and the sale certificate is issued only on full payment.Section 13(8), as amended in 2016: the borrower's right of redemption ends on publication of the auction notice. Before the amendment it continued until the sale was completed.