Ananya Universal Bembey's Law Firm / B & B Advocates & Associates

02/02/2026

01/02/2026

10/11/2025

The SARFAESI Act, 2002, is not applicable in certain cases where the law explicitly excludes its scope. Key exemptions under Section 31 of the Act clarify where the provisions do not apply:The Act does not apply to liens on goods, money, or securities under contracts governed by laws like the Indian Contract Act or the Sale of Goods Act.It excludes pledges of movable properties as defined under Indian Contract Act.Security interests created on aircraft (under the Aircraft Act) or vessels (under the Merchant Shipping Act) are exempt.The rights of unpaid sellers under the Sale of Goods Act are also outside the SARFAESI ambit.Properties which cannot be attached or sold according to law are exempt (except properties specifically charged under the SARFAESI Act).Significantly, agricultural land is excluded from the Act’s purview if it is actually used for agricultural purposes at the time a security interest is created, and not merely because it is listed as such in revenue records. This exemption requires the borrower to prove the agricultural use of the land, failing which the property can be subject to SARFAESI enforcement.The Act is not applicable to loans where the amount due is less than 20% of the principal and interest, i.e., if more than 80% has been repaid.Additionally, Section 31A gives the Central Government power to exempt certain classes of banks or financial institutions from the Act’s provisions in the public interest.Thus, the SARFAESI Act applies only to specific secured assets and financial institutions, excluding certain types of securities, movable property pledges, aircraft, vessels, and properties like agricultural land when genuinely used for farming, highlighting its focused scope for recovery of secured debts without court intervention �����.

10/11/2025

The SARFAESI Act, 2002 (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act) is a significant Indian legislation enacted to empower banks and financial institutions to efficiently recover non-performing assets (NPAs) and enforce security interests without court intervention. The act streamlines the recovery process by enabling lenders to take possession of secured assets, manage or sell them, and recover dues directly from defaulting borrowers, thus reducing the burden on courts and supporting the financial stability of the banking sector.Key features of the SARFAESI Act include:It applies to all scheduled banks, cooperative banks, housing finance companies, and certain non-banking financial companies (NBFCs) meeting specific thresholds.Banks and financial institutions can enforce their security interests by seizing and auctioning residential or commercial properties pledged as collateral, without judicial approval.The act provides for securitisation and reconstruction of financial assets through special purpose vehicles such as Securitisation Companies and Reconstruction Companies.It mandates a central registry for recording securitisation transactions, ensuring transparency.Borrowers have rights under the act, including the ability to appeal to Debt Recovery Tribunals within specified time frames, with certain conditions.The act includes provisions for penalties and compliance to prevent obstruction and ensure adherence to the law.It has overriding effect over other laws concerning recovery, except cases under the Insolvency and Bankruptcy Code.The main objectives are to speed up the recovery of bad loans and enable financial institutions to auction secured assets efficiently if borrowers default, reducing the burden of NPAs on the banking system. The act has undergone amendments to include wider coverage and improve procedural efficacy.In summary, the SARFAESI Act, 2002 is a robust legal framework aimed at combating NPAs, facilitating swift recovery by banks and financial institutions through direct enforcement of security interests, securitisation, and asset reconstruction, thereby enhancing the health of the financial sector in India �����.