LEGAL LEARNING – SHRI GANPATI JURISTS
Legal Learning: Lease & Auction Under SARFAESI Act, 2002
Key Takeaways:
1. Fraudulent Lease After Demand Notice is Void:
Any lease agreement created after the issuance of a demand notice under Section 13(2) of the SARFAESI Act, 2002, without the secured creditor’s consent, is fraudulent and void under Section 13(13).
> A lessee cannot claim legal rights over the secured property if the lease was executed after security interest was enforced.
2. Public Auction Sale Not Invalid for Minor Technical Errors:
A sale notice missing minor details like street number is not invalid, as long as the property is otherwise sufficiently described.
> The focus is on substantial clarity, not formal perfection.
3. Rights of Auction Purchasers Are Protected:
Auction purchasers under the SARFAESI Act acquire valid title, rights, and interest in the property, and are entitled to peaceful possession.
> Tribunals can direct the bank to deliver possession to the successful bidder.
Relevant Sections:
Section 13(2) – Demand Notice
Section 13(13) – Prohibition on Transfer Post Notice
Section 17(1) – Challenge to Auction Sale
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