Blog

Why “Sale Confirmation” Is Not Ownership, and Why Possession Cannot Be Delivered If Moratorium Intervenes

Arrow Business Development Consultants Pvt. Ltd. v. Union Bank of India & Ors.
(Bombay High Court, Civil Appellate Jurisdiction, Writ Petition No. 11132 of 2025, decided on 10 December 2025)

By Advocate Nazim Khan
Banking, SARFAESI & Insolvency Practitioner

1. Why This Case Matters

SARFAESI auctions are intended to be swift recovery mechanisms for secured creditors. However, the Insolvency and Bankruptcy Code introduced a protective insolvency regime, particularly for individuals and personal guarantors, through provisions such as Section 96 (Interim Moratorium).

A recurring and commercially disruptive problem arises when SARFAESI timelines clash with insolvency filings:

• An auction is conducted under SARFAESI
• The highest bid is accepted and sale is confirmed
• Payments continue or sale certificate is issued
• Meanwhile, the borrower or co-owner triggers personal insolvency under IBC

The legal question is not academic. It directly affects:

• Title certainty in statutory auctions
• Possession delivery by banks
• Confidence of auction purchasers
• Recovery timelines of secured creditors

The Bombay High Court addressed a critical issue:

If an interim moratorium under Section 96 begins after auction confirmation but before the statutory sale is completed, can the bank still accept money, issue a sale certificate, and deliver possession?

2. Court and Case Identity

Court: High Court of Judicature at Bombay, Civil Appellate Jurisdiction
Case: Writ Petition No. 11132 of 2025
Neutral Citation: 2025:BHC-AS:54045-DB
Date Reserved: 24 November 2025
Date Pronounced: 10 December 2025
Coram: Justice R.I. Chagla and Justice Farhan P. Dubash

Parties:
Petitioner: Arrow Business Development Consultants Pvt. Ltd. (Auction Purchaser)
Respondent No. 1: Union Bank of India (Secured Creditor)
Respondent No. 2: Insolvency Professional
Respondent No. 3: Borrower

3. The Secured Asset

The dispute concerned a residential flat:

Flat No. 201, 2nd Floor, “El Castillo” Building
Plot No. 23/B & 23/C, Sector-6, Palm Beach Road
Nerul (West), Navi Mumbai – 400706

This detail was crucial because the relief sought was physical possession of the flat by the auction purchaser.

4. Facts and Procedural History

4.1 Loan and NPA

Union Bank extended financial facilities to the borrowers, who mortgaged the flat as security. Upon default, the account was classified as NPA on 16 April 2023.

4.2 SARFAESI Demand Notice

A demand notice under Section 13(2) SARFAESI was issued on 24 April 2023.

4.3 Auction and Sale Confirmation

Auction sale notice was issued on 9 May 2025. The auction was conducted on 30 May 2025, where the petitioner emerged as the highest bidder at Rs. 9,12,25,000.

4.4 Payment Tranches

The Court recorded the exact payment schedule:

• 30 May 2025 – Rs. 91,12,500
• 31 May 2025 – Rs. 1,37,00,000
• 18–20 June 2025 – Balance six tranches

Importantly, the balance payments were made and accepted after the interim moratorium had commenced.

4.5 Insolvency Trigger

On 9 June 2025, the borrower filed a personal insolvency application under Section 94 IBC, resulting in an automatic interim moratorium under Section 96.

4.6 Sale Certificate

The sale certificate was issued on 20 June 2025, during the moratorium period.

4.7 DRT Proceedings

Borrowers approached the DRT under Section 17 SARFAESI. The DRT noted the moratorium and refrained from granting substantive relief.

5. Timeline at a Glance

6. Legal Issue Framed

Whether, after the amendment to Section 13(8) SARFAESI, the borrower’s ownership stands extinguished merely upon issuance of the auction sale notice.

7. Findings of the Court

• Ownership under SARFAESI passes only upon issuance of a valid sale certificate
• Extinguishment of redemption is not equivalent to transfer of ownership
• Section 96 interim moratorium is wide and operates immediately upon filing
• Steps taken during moratorium cannot complete statutory sale

8. Why the Auction Purchaser Failed

The Court held that confirmation of sale is not completion of sale. Since substantial payments and the sale certificate were issued during the moratorium, ownership did not legally crystallise.

9. Practical Impact

For Banks

• Monitor insolvency filings even after auction confirmation
• Avoid accepting payments during moratorium

For Auction Purchasers

• Title is secure only after valid sale certificate
• Conduct insolvency diligence before post-auction payments

10. Conclusion

The judgment reaffirms that statutory ownership does not pass merely on confirmation of sale. If an interim moratorium intervenes before lawful completion, possession cannot be enforced.

Disclaimer: This article is for general legal awareness and does not constitute legal advice.

For SARFAESI, IBC, and Banking Recovery Queries:
Contact Advocate Nazim Khan