A SARFAESI Auction That Closed Before the Moratorium: What Haldiram Incorporation Actually Decided

A bank enforces its security under the SARFAESI Act, sells the mortgaged property at auction, and issues a sale certificate. Days later, the borrower is admitted into insolvency and an IBC moratorium is declared. Does the property belong to the auction purchaser, or does it fall back into the estate to be dealt with under the Insolvency and Bankruptcy Code, 2016 (“IBC”)? The Supreme Court addressed that sequence in Haldiram Incorporation Pvt. Ltd. v. Amrit Hatcheries Pvt. Ltd. & Ors., Civil Appeal No. 1733 of 2022, by an order dated 6 December 2023 of a Bench of Aniruddha Bose and Vikram Nath, JJ. The order is useful, but its scope is narrower than it is sometimes taken to be, and that is worth setting out precisely.

The Two Statutory Schemes

Under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”), a secured creditor may, after a notice under Section 13(2) and the expiry of sixty days, take measures under Section 13(4), including taking possession of and selling the secured asset through a SARFAESI auction sale. The mechanics of the sale are set out in the Security Interest (Enforcement) Rules, 2002: Rule 9 governs the deposit of the purchase price and the issue of the sale certificate, which is to be handed over to the purchaser under Rule 9(6) read with Appendix V.

Under the IBC, Section 14(1)(c) prohibits any action to foreclose, recover or enforce any security interest created by the corporate debtor once the IBC moratorium commences. Section 36 defines the liquidation estate; assets owned by third parties in the possession of the corporate debtor are excluded.

The Facts

The sale certificate for two blocks of land in Howrah district, West Bengal, was issued on 19 August 2019 under the SARFAESI Act. The purchaser’s case was that payment was completed on 16 August 2019. On 20 August 2019, on an operational creditor’s petition under Section 9, the National Company Law Tribunal admitted the corporate debtor and declared an IBC moratorium.

An erstwhile director resisted the sale. By order dated 25 February 2020, the Tribunal held the issue of the sale certificate and the handing over of the property illegal, held that the properties continued to be assets of the corporate debtor, and directed the liquidator to take possession. The bank’s appeal was dismissed by the NCLAT on 14 February 2022 by a 2:1 majority, a technical member dissenting.

What the Supreme Court Held — and on What Basis

At the hearing, counsel for the erstwhile director, the liquidator and the bank all conceded the legitimacy of the auction sale and agreed that it stood concluded before the declaration of the moratorium. The Court recorded that this “changed position left the appeal without any effective contest”.

On that footing, and relying on Esjaypee Impex Pvt. Ltd. v. Assistant General Manager and Authorised Officer, Canara Bank, (2021) 11 SCC 537 — where it was held that the mandate of Section 17(2)(xii) read with Section 89(4) of the Registration Act, 1908 required the authorised officer only to hand over the duly validated sale certificate to the auction purchaser, with a copy forwarded to the registering authority — the Court found no reason why the sale certificate should be held illegal, and no case of any defect in forwarding it. It allowed the appeal so far as the two properties were concerned, holding that they “cannot be treated to be liquidation assets of the Corporate Debtor for the purpose of further steps to be taken in the liquidation proceeding”.

Two qualifications follow from the order itself. First, the conclusion rests on a conceded factual position that the sale was complete before the moratorium; it is not a considered adjudication of a contested question. Second, in the connected appeal, Civil Appeal No. 2682 of 2022, the Court framed the broader question — whether, on issue of a public auction notice under the SARFAESI Act, the subject immovable asset vests in the lender bank — recorded that it involved the interpretation of both statutes, impleaded the Union of India through the Ministry of Corporate Affairs, and directed that the sale proceeds be kept in an interest-bearing account. Readers should verify the current status of that appeal before relying on any settled answer to that wider question.

When Is a SARFAESI Sale Complete Before the IBC Moratorium?

This is where the contest usually lies, and the leading authority is Indian Overseas Bank v. RCM Infrastructure Ltd. (Supreme Court, 18 May 2022). There, part of the sale consideration was paid after the CIRP had commenced. The Court held that under the 2002 Rules the sale is completed only on payment of the entire amount and confirmation, that the bank could not have continued proceedings under the SARFAESI Act once the CIRP was initiated and the moratorium ordered, and that Section 238 gives the Code overriding effect. The central issue is whether the SARFAESI auction was completed before the IBC moratorium commenced.

Read together, the two decisions describe a bright line rather than a balancing exercise:

The Position After 26 May 2026

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act 6 of 2026) sharpens several related rules relevant to SARFAESI auctions, secured assets and the IBC moratorium:

• Section 3(31), by a new Explanation, confines “security interest” to an interest created by an agreement or arrangement between two or more parties, excluding an interest arising merely by operation of law. This addresses the position taken in State Tax Officer v. Rainbow Papers Ltd., (2023) 9 SCC 545.
• Section 53(1)(b)(ii), by an Explanation, provides that a secured creditor relinquishing security worth less than its debt is secured only to the extent of the value of that security and unsecured for the balance; and Section 53(2) now carries illustrations confirming that inter-creditor priority agreements between secured creditors are respected while arrangements subordinating workmen are disregarded.
• Section 52(2) requires a secured creditor who intends to realise its security in liquidation to inform the liquidator within fourteen days of the liquidation commencement date, failing which the security is deemed relinquished; where several secured creditors hold security over the same asset, realisation requires the concurrence of creditors holding at least sixty-six per cent of the secured claims over it. These changes do not apply to liquidations initiated on or before the commencement date.
• Section 67B replaces the former criminal offence with a penalty of not less than ₹1 lakh and up to ₹2 crore for contravention of the moratorium.
• Section 28A permits a creditor that has taken possession of a guarantor’s asset by enforcing security to transfer it during the CIRP as part of the resolution, with the specified approvals.

Practical Points

• For an auction purchaser, the file should establish the date of full payment, the date of confirmation and the date the sale certificate was handed over. Those dates decide the outcome if the borrower is admitted into insolvency soon afterwards.
• A sale certificate is evidence of a completed sale; it does not by itself establish that the sale was completed before a particular date.
• For secured creditors, an enforcement process that is close to, but not past, completion is the exposed case. Section 14(1)(c) operates from the date of the moratorium, not from the date the creditor learns of it.
• For liquidators, a claim that pre-moratorium auction proceeds or properties form part of the estate should be tested against the completion analysis rather than asserted from the proximity of the dates.

Frequently Asked Questions

1. Does an IBC moratorium cancel a completed SARFAESI auction sale?
No. If the sale was fully completed before the moratorium commenced, the property does not ordinarily form part of the corporate debtor’s liquidation estate.

2. When is a SARFAESI sale considered complete?
The completion generally depends on payment of the full sale consideration and confirmation of the sale under the applicable SARFAESI Rules.

3. What happens if the SARFAESI sale was incomplete when the moratorium began?
Section 14(1)(c) of the IBC bars further enforcement of security during the moratorium, so the sale cannot ordinarily be completed thereafter.

4. What did the Supreme Court hold in Haldiram Incorporation?
The Court accepted that the auction sale had been concluded before the moratorium and held that the properties could not be treated as liquidation assets of the corporate debtor

Legal Information Disclaimer

This article provides general information about Indian law as it stood on 16 September 2026. It is not legal advice, and reading it does not create an advocate–client relationship. Statutes, rules and judicial interpretations change, and their application depends on the facts of each matter. Readers should consult the current official text of the laws and judgments cited and should not act on this information without advice specific to their circumstances. This article is published for legal awareness and education and is not intended to advertise or solicit professional work.

Sources / Authorities

1. Haldiram Incorporation Pvt. Ltd. v. Amrit Hatcheries Pvt. Ltd. & Ors., Civil Appeal No. 1733 of 2022, Supreme Court of India, order dated 6 December 2023 — Indian Kanoon
2. Indian Overseas Bank v. M/s RCM Infrastructure Ltd. & Anr., Supreme Court of India, 18 May 2022 — Indian Kanoon
3. Esjaypee Impex Pvt. Ltd. v. Assistant General Manager and Authorised Officer, Canara Bank, (2021) 11 SCC 537, Supreme Court of India
4. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 — Sections 13, 17; Security Interest (Enforcement) Rules, 2002 — Rule 9 and Appendix V
5. Insolvency and Bankruptcy Code, 2016 — Sections 3(31), 14, 28A, 36, 52, 53, 67B, 238 (as amended) — IBBI – Legal Framework
6. Insolvency and Bankruptcy Code (Amendment) Act, 2026 (No. 6 of 2026) — Gazette text (IBBI); Notification S.O. 2625(E) dated 22 May 2026 — IBBI
7. Registration Act, 1908 — Sections 17(2)(xii), 89(4); State Tax Officer v. Rainbow Papers Ltd., (2023) 9 SCC 545, Supreme Court of India

Authorized by  Prapti Bhatt