SARFAESI Sale Fails Without Sale Certificate Issued Before Moratorium: Bombay HC

In a significant ruling that clarifies the complex interface between the SARFAESI Act and the Insolvency and Bankruptcy Code, the Bombay High Court has held that a SARFAESI sale does not attain finality unless the sale certificate is issued before the commencement of an interim moratorium under Section 96 of the IBC, and that payments received after the moratorium cannot confer ownership upon the auction purchaser.

The judgment in Arrow Business Development Consultants Pvt Ltd v. Union Bank of India & Ors. was delivered on 10.12.2025 by a Division Bench of Justices R I Chagla and Farhan P Dubash.

The Bench held that transfer of ownership under SARFAESI takes effect only upon issuance of a sale certificate, and since the balance consideration in this case was accepted after the interim moratorium had commenced on 9.06.2025, the sale never stood completed and the auction purchaser did not acquire ownership rights.

The writ petition was filed by a successful auction purchaser seeking a direction to Union Bank of India to hand over physical possession of a flat in Nerul, Navi Mumbai, purchased for Rs 9.12 crore in a SARFAESI auction on 30.05.2025.

The bank had already issued a sale certificate on 20.06.2025. However, before the bank received the final tranches of payment, one of the co-owners of the flat filed a personal insolvency application before the NCLT under Section 94 of the IBC on 9.06.2025, which triggered an interim moratorium under Section 96.

This interim moratorium, the borrowers argued, barred the bank from accepting further payments or issuing the sale certificate.

The pivotal issue before the Court was whether, post the 2016 amendment to Section 13(8) of the SARFAESI Act, the borrower’s ownership rights stood extinguished upon publication of the auction notice, thereby rendering the interim moratorium ineffective as regards the secured asset.

The petitioner argued that once the sale notice under Rule 8(6) was issued and the auction was concluded, the borrowers ceased to be owners and therefore the moratorium could not affect the bank’s SARFAESI measures.

The bank supported this position and contended that the borrower had invoked the IBC only to frustrate recovery. The Resolution Professional, however, submitted that the moratorium automatically stayed all legal actions “in respect of any debt” and that the bank could neither accept further payments nor issue a sale certificate thereafter.

The Court had appointed Senior Advocate Naushad Engineer as Amicus Curiae, who took the Bench through the statutory scheme and precedents, emphasising that under the SARFAESI framework ownership passes only upon issuance of the sale certificate.

The Court undertook a detailed examination of SARFAESI Sections 13(1) to 13(8), Rules 8 and 9 of the SARFAESI Rules, and the consequences of amendments to Section 13(8).

The Bench concluded that the 2016 amendment only advanced the point at which the borrower loses the right of redemption, but did not modify the principle that ownership transfers only when the sale certificate is issued. It further held that loss of redemption is only one facet of ownership and does not extinguish ownership itself. Relying on the Top Court’s rulings in Indian Overseas Bank v RCM Infrastructure Ltd and Narayan Deorao Javle, the Court reiterated that a SARFAESI sale remains incomplete until full payment is received and a sale certificate is issued.

Therefore, if a moratorium intervenes before completion, the secured creditor is disabled from accepting further payments or issuing the certificate.

Applying these principles, the Court noted that although the auction was confirmed on 30.05.2025, six out of eight instalments of the purchase money were paid after 9.06.2025 when the interim moratorium took effect.

Therefore, the bank was legally barred from receiving them. Since the sale certificate was issued only on 20.06.2025, during the subsistence of the moratorium, the transfer of ownership could not be said to have taken place.

Consequently, the petitioner could not claim rights in the secured asset or seek possession. The Bench observed that the interim moratorium is wider in scope than the corporate moratorium under Section 14, as it applies to all debts of the guarantor and restrains continuation of legal action “in respect of any debt.”

On these findings, the writ petition was dismissed.

The Court also declined to entertain the purchaser’s alternative request for a refund of the amounts deposited, noting that no such relief was sought in the pleadings and that the parties would have to pursue appropriate proceedings for that purpose.

The judgment provides clarity on a recurring conflict between SARFAESI recovery measures and IBC moratorium protections, affirming that statutory sales under SARFAESI cannot bypass the IBC framework where insolvency proceedings are validly triggered.

Case Title: Arrow Business Development Consultants Pvt Ltd v Union Bank of India & Ors

Bench: Justices R I Chagla and Farhan P Dubash

Date of Judgment: 10.12.2025