Bank recovery under SARFAESI Act cannot be stayed for private sale of mortgaged property after default.

The petitioner, a borrower of a Cash Credit Account, received a demand notice dated 26.05.2025 under Section 13(2) of the SARFAESI Act, 2002, for an outstanding amount of Rs. 9,32,026.57

The petitioner requested a six-month extension to sell the mortgaged property privately in the open market to secure a higher price, alleging that the Bank’s valuation report dated 22.06.2025 undervalued the property at Rs. 1700 per sq. m. while the government circle rate had increased to Rs. 3900 per sq. m.

The Bank rejected the request, noting that SARFAESI proceedings were already underway and required full clearance of dues

By the time of the hearing, the Bank informed the court that the secured assets had already been auctioned

The petitioner sought a writ of certiorari to quash the auction purchase dated 25.03.2026

1. Whether the High Court, under Article 226, can interfere with a financial institution's commercial decision to proceed with a recovery auction despite the borrower’s proposal for a private sale

2. Whether the secured creditor is legally obligated to defer recovery actions under the SARFAESI Act upon the request of a defaulting borrower

Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), specifically Section 13(2) regarding demand notices for debt enforcement

Principles of judicial review under Article 226 of the Constitution of India, which restricts interference in commercial decisions of financial institutions unless there is a clear violation of statutory provisions or principles of natural justice

The court reasoned that the petitioner did not challenge any procedural or statutory illegality in the Bank’s measures, but merely sought more time for a private sale

It held that once SARFAESI proceedings are initiated, a secured creditor is under no legal obligation to defer recovery actions for a borrower who has already defaulted and failed to comply with statutory notices

The court emphasized that it cannot sit in appeal over the commercial decisions of banks taken in accordance with law

Regarding the petitioner's claim of undervaluation, the court noted that the auction had already been concluded, making it improper to "put the clock back" at this stage

It held that the Bank acted strictly within the provisions of the SARFAESI Act and that no grounds for judicial interference existed under Article 226. The prayer to quash the auction purchase was denied as the process was legally finalized