New Delhi (ABC Live): The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) allows banks to recover loans quickly without long court proceedings. In 2016, the government changed Section 13(8), which governs a borrower’s right to redeem property before sale.

Recently, the Supreme Court, in M. Rajendran v. KPK Oils and Proteins Pvt. Ltd. (2025 INSC 1137), considered a crucial issue:
➡️ Does the 2016 change also affect loans approved before 2016?
In other words, can borrowers who took earlier loans still redeem their property before sale?

The Court’s decision answers how far the 2016 amendment extends and how it impacts both banks and borrowers. Therefore, this case carries significant weight for India’s financial sector.

Principles on Retrospective Application of the 2016 SARFAESI Amendment

1. Presumption of Prospectivity

Laws that change substantive rights usually apply prospectively unless Parliament clearly says otherwise.
In Govind Das v. ITO (1976 1 SCC 906), the Court held that a provision affecting substantive rights cannot operate retrospectively unless it explicitly states so.

2. Substantive vs. Procedural Law

• Substantive law creates, alters, or removes vested rights → applies prospectively.

• Procedural law regulates how rights are enforced → may apply retrospectively, but only if fairness is preserved.

3. Fairness and Property Protection

In Mardia Chemicals Ltd. v. Union of India (2004 4 SCC 311), the Court upheld SARFAESI but emphasized that economic recovery measures must respect Article 300A (the constitutional right to property).
Thus, a retrospective curtailment of redemption rights would be both unfair and unconstitutional.

Case Law Evolution on Redemption Rights

Supreme Court’s Clarification in Rajendran (2025)

The 2016 Amendment significantly curtailed the borrower’s redemption rights. Because these changes are substantive, they cannot apply retrospectively unless Parliament expressly says so.

The Court clarified a dual regime:

• Pre-2016 loans: Borrowers can redeem up to the actual sale or transfer (the Mathew Varghese principle continues).

• Post-2016 loans: Redemption ends once the auction notice is published (Bafna Motors governs).

For auction purchasers, if a pre-2016 sale is undone, they must receive a refund plus 9% interest — ensuring fairness and protecting reliance interests.

Practical Implications

Borrowers

• Pre-2016: Broad redemption rights remain.

• Post-2016: Stricter cut-off at auction notice.

Banks

• Gain enforcement certainty for post-2016 loans.

• Must still navigate transitional disputes in older loans.

Auction Purchasers

• Financially protected through refund + interest.

• Should check whether the loan originated before 2016 before bidding.

Conclusion

The Supreme Court in Rajendran (2025) reaffirmed a vital rule — substantive legal changes cannot operate retrospectively without clear legislative intent.

Thus:

• Pre-2016 borrowers keep their right to redeem until the actual sale.

• Post-2016 borrowers are bound by stricter auction-notice rules.

• Auction buyers remain protected through compensation.

⚖️ Core Principle: The 2016 SARFAESI Amendment cannot apply retrospectively. Borrowers’ vested redemption rights stay intact unless Parliament explicitly provides otherwise.

Read Judgment