Sarfaesi act

Goapl Garg (Querist) 12 October 2025 This query is : Resolved
I have allowed mortgage over my Land in favour of Bank towards loan availed by a corporate entity.I am not stakeholder or a director in such corporate entity and it was a third party mortgage.The sanction letter specified that my personal liability shall remain restricted upto the value of my land mortgaged.€the account has been NPA and Bank has invocked Sarfaesi provisions against my land also. The bank has taken symbolic possession of the land. The bank has put my land on auction but did not receive any bid.The bank now contemplate a second auction. I have offered the bank the present valuation price and redeem my land and liability. The Bank does not agree. Can I redeem my land by tendering the reserve price when I receive sale notice prior to publication of sale notice ? The Bank however says that in such scenerio I will be required to pay the entire dues of the borrower as against the sanction letter stipulation of my liability being limited to value of my land. Request to clarify my position.

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This discussion clarifies the rights of a third-party mortgagor under the SARFAESI Act. Even if you've mortgaged your land for a corporate loan without being a stakeholder, your liability is limited to the mortgaged property's value. You can redeem your land by paying the outstanding dues any time before the sale is confirmed, as protected by law and case precedents.

T. Kalaiselvan, Advocate (Expert) 13 October 2025
A mortgagor who is not a borrower or guarantor is liable only to the extent of the property mortgaged, and his personal liability does not arise.”
“A person who mortgages property for another’s loan without being a borrower or guarantor has only limited liability, restricted to the mortgaged asset.”
Your right of redemption is protected under:
Section 60 of the Transfer of Property Act, 1882, and Rule 8(6) and Rule 9(1) of the Security Interest (Enforcement) Rules, 2002) under the SARFAESI Act.

You can redeem the mortgaged property any time before the sale is concluded (i.e., before the sale is actually confirmed in favour of a buyer).
Case law:
Mathew Varghese v. M. Amritha Kumar, (2014) 5 SCC 610 —
“The borrower or mortgagor retains the right to redeem the property till the sale is completed and title passes to the auction purchaser.”
Thus, even a third-party mortgagor like you can redeem by paying the amount due to the secured creditor before the sale is confirmed.

Dr. J C Vashista (Expert) 19 October 2025
Very well analysed, opined and advised learned expert Mr. T Kalaiselvan, I endorse and appreciate his acumen.
Your liability is limited to the property mortgaged since you are neither principal borrower nor guarantor.
Since you are neither a director nor stakeholder in the corporate entity (presumablly it is a company), how and why did you offer your property for creation of charge over it, although it is your personal matter?
After taking symbolic possession of the mortgaged property by the Bank, if you can redeem it, you may clear the dues of the account declared NPA and / or participate in auction of the property.

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