Supreme Court Flags Inconsistencies in SARFAESI Act Rules on Borrower Redemption Rights, Urges Government Amendment

The Supreme Court recently flagged critical inconsistencies between Section 13(8) of the SARFAESI Act, 2002, and Rule 9 of the Security Interest (Enforcement) Rules, 2002, relating to borrowers’ redemption rights. Section 13(8) permits borrowers to redeem mortgaged property until the transfer is completed, while Rule 9 restricts redemption rights until the publication of auction notice. This contradiction has created ambiguity for both lenders and borrowers. The Court observed that such inconsistency undermines legislative intent and creates scope for prolonged disputes in enforcement proceedings. Highlighting the principle that redemption rights should be interpreted liberally to protect borrowers’ equity, the Court urged the government to intervene with amendments that align statutory provisions and subordinate rules. It further noted that financial institutions require procedural certainty while borrowers deserve protection against premature foreclosure. Although the Court refrained from rewriting the law, it called upon Parliament to ensure legislative coherence. The ruling underscores judicial concern with balancing financial discipline against borrower protection in secured credit transactions.