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M.R. Vasumathi v. The Authorized Officer & Ors.

Civil Appeal · 2026 INSC 633Decided 9 Jun 2026
C.A. No.-001606-001606 - 2026
Justice Dipankar Datta · Justice Augustine George Masih

Background

A borrower had taken a loan from Indian Bank in 1984, secured by a guarantee and mortgage from one G. Ramanujam. After the borrower defaulted and Ramanujam later died, the bank (as secured creditor) pursued the guarantor's heirs (including the appellant, his daughter) and eventually auctioned the mortgaged property in 2010 under the SARFAESI Act, with a third party emerging as the successful bidder. The heirs challenged the notice and the auction before the Debts Recovery Tribunal and later the Madras High Court, arguing the bank had not followed the statutory procedure for the sale, but lost at every stage before reaching the Supreme Court.

Decision Breakdown

The Supreme Court found that the bank had committed a material irregularity by not adhering to the mandatory timelines prescribed under the SARFAESI Rules, and held that a sale confirmed despite such non-compliance cannot be shielded from judicial scrutiny merely because it was already completed. It also held that the heirs' repeated applications before the DRT seeking to redeem the mortgage were sufficient evidence of their intent to redeem, even without an explicit formal statement to that effect. The Court set aside the High Court, DRAT and DRT orders and quashed the auction sale, but balanced the equities: the auction purchaser was ordered refunded his full deposited amount with 7% interest, and the appellant was given a one-time opportunity (exercising the Court's special Article 142 power) to redeem the mortgage by paying the outstanding dues of Rs.95,42,372.52 plus 5% interest within a time to be fixed by the bank, failing which the property could be re-auctioned after a fresh valuation.

Lesson Learnt

A bank or lender enforcing a mortgage through auction under the SARFAESI Act must strictly follow the statutory timelines and procedure; even a completed and confirmed auction sale can be undone by courts if that process was not properly followed, and heirs of a guarantor retain a genuine right to redeem the mortgaged property if they show real intent to do so.

Official source (sci.gov.in)View Judgment (PDF)

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