“Sold” Is Not Enough: Bombay High Court Clarifies Interplay Between SARFAESI Sale And Section 96 Interim Moratorium

The Hon’ble Bombay High Court (Bombay HC), in its judgment dated December 10, 2025, addressed a critical question regarding the overlap between the SARFAESI Act, 2002 and the Personal Insolvency provisions under the IBC. The Court determined whether a successful auction purchaser is entitled to a secured asset if the borrower initiates personal insolvency proceedings—triggering an interim moratorium—after the auction but before the issuance of the sale certificate.

The Respondent Bank conducted an auction of a secured asset on May 30, 2025, wherein the Petitioner was declared the successful bidder and paid 25% of the bid amount. However, on June 9, 2025, one of the co-borrowers filed a Personal Insolvency Application under Section 94 of the IBC, triggering the interim moratorium under Section 96. Despite this, the Petitioner paid the balance amount between June 18 and June 20, 2025, and the Bank issued a Sale Certificate on June 20, 2025. The Petitioner sought a direction from the Court to hand over possession of the asset, arguing that the borrower’s rights were extinguished prior to the moratorium.

The Petitioner, relying on the Supreme Court’s ruling in Celir LLP v. Bafna Motors, argued that upon the publication of the auction notice (May 9, 2025), the borrower’s right of redemption under Section 13(8) of the SARFAESI Act was extinguished. Consequently, they contended that the borrower had no ownership rights left when the interim moratorium kicked in on June 9, 2025.

Dismissing the Writ Petition, the Hon’ble High Court laid down the following principles:

1. Ownership Transfers Only via Sale Certificate: The Court held that in a statutory sale under SARFAESI Rules 8 and 9, the transfer of ownership is complete only when the successful purchaser makes the entire payment and the authorized officer issues the Sale Certificate. Relying on the Supreme Court’s decision in Indian Overseas Bank v. RCM Infrastructure Ltd., the Court reiterated that the sale is incomplete if the balance payment is made after the imposition of a moratorium.

2. Extinguishing Redemption is Not Extinguishing Ownership: The Court distinguished the Celir LLP judgment, clarifying that while the 2016 amendment to Section 13(8) extinguishes the right of redemption upon publication of the sale notice, it does not strip the borrower of ownership. The “equity of redemption” is merely one facet of the bundle of rights constituting ownership. Thus, losing the right to redeem does not ipso facto result in the loss of title to the property.

3. Impact of Section 96 Interim Moratorium: The Court observed that the interim moratorium under Section 96 of the IBC is wider than the moratorium under Section 14, as it applies to “all debts”,. Once triggered on June 9, 2025, it operated as a deemed stay on all legal actions pending in respect of any debt. Consequently, the Bank was statutorily barred from accepting the balance payment or issuing the Sale Certificate on June 20, 2025.

4. No Vested Right Without Full Payment: The Court noted that while a confirmed auction invests a “vested right” in the purchaser to obtain a certificate, this right is conditional upon making full payment. Since the moratorium prevented the legal acceptance of such payment, the sale could not be completed, and the Petitioner did not become the owner.

This judgment serves as a crucial reminder to auction purchasers and secured creditors regarding the strict timelines of the IBC. It establishes that even if an auction is successfully concluded, the transaction remains vulnerable to insolvency filings until the final Sale Certificate is issued. The ruling underscores that “sold” at the fall of the hammer does not mean “transfer complete” until the statutory documentation is executed prior to the insolvency commencement date.