SARFAESI Act, 2002: Securitisation, Security Interest Enforcement, DRT Appeals & ARC Regulation

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act No. 54 of 2002) provides the statutory framework for securitisation and reconstruction of financial assets, enforcement of security interests and the Central Registry of security interests in India.

Act54 of 2002
Enacted17 December 2002
Deemed in force21 June 2002
Current-law note: This page follows the present section structure shown on India Code, including Chapter IVA, Sections 26D and 26E, Sections 30A to 30D, and Section 28 as omitted. For a certified or authoritative text, rules, notifications and amendments, use the official resources provided in the right sidebar.

Long title: An Act to regulate securitisation and reconstruction of financial assets and enforcement of security interest and to provide for a Central database of security interests created on property rights, and for matters connected therewith or incidental thereto.

Purpose and operation of the SARFAESI Act

The Act enables eligible secured creditors to enforce security interests in accordance with the statutory procedure without first obtaining a decree from a civil court, subject to the safeguards, exclusions and remedies contained in the Act and the Security Interest (Enforcement) Rules, 2002. It also regulates asset reconstruction companies (ARCs) and provides for registration of security interests through the Central Registry framework.

Chapter III contains the principal enforcement provisions, including Section 13 on enforcement of security interest, Section 14 on assistance by the Chief Metropolitan Magistrate or District Magistrate, Section 17 on applications against measures taken to recover secured debts, and Section 18 on appeals to the Appellate Tribunal.

Chapter-wise section index

CHAPTER I - PRELIMINARY

Section 1 - Short title, extent and commencement

(1) This Act may be called the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002.

(2) It extends to the whole of India.

(3) It shall be deemed to have come into force on the 21st day of June, 2002.

The long title was substituted by Act 44 of 2016 with effect from 1 September 2016.

Section 2 - Definitions
CHAPTER II - REGULATION OF SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS OF BANKS AND FINANCIAL INSTITUTIONS
Section 3 - Registration of asset reconstruction companies Section 4 - Cancellation of certificate of registration Section 5 - Acquisition of rights or interest in financial assets Section 5A - Transfer of pending applications to any one of Debts Recovery Tribunals in certain cases Section 6 - Notice to obligor and discharge of obligation of such obligor Section 7 - Issue of security by raising of receipts or funds by asset reconstruction company Section 8 - Exemption from registration of security receipt Section 9 - Measures for assets reconstruction Section 10 - Other functions of asset reconstruction company Section 11 - Resolution of disputes Section 12 - Power of Reserve Bank to determine policy and issue directions Section 12A - Power of Reserve Bank to call for statements and information Section 12B - Power of Reserve Bank to carry out audit and inspection
CHAPTER III - ENFORCEMENT OF SECURITY INTEREST
Section 13 - Enforcement of security interest Section 14 - Chief Metropolitan Magistrate or District Magistrate to assist secured creditor in taking possession of secured asset Section 15 - Manner and effect of take over of management Section 16 - No compensation to directors for loss of office Section 17 - Application against measures to recover secured debts Section 17A - Making of application to Court of District Judge in certain cases Section 18 - Appeal to Appellate Tribunal Section 18A - Validation of fees levied Section 18B - Appeal to High Court in certain cases Section 18C - Right to lodge a caveat Section 19 - Right of borrower to receive compensation and costs in certain cases
CHAPTER IV - CENTRAL REGISTRY
Section 20 - Central Registry Section 20A - Integration of registration systems with Central Registry Sections 20B & 21 - Delegation of powers; Central Registrar Section 22 - Register of securitisation, reconstruction and security interest transactions Section 23 - Filing of transactions of securitisation, reconstruction and creation of security interest Section 24 - Modification of security interest registered under this Act Section 25 - Asset reconstruction company or secured creditors to report satisfaction of security interest Section 26 - Right to inspect particulars of securitisation, reconstruction and security interest transactions Section 26A - Rectification by Central Government in matters of registration, modification and satisfaction, etc.
CHAPTER IVA - REGISTRATION BY SECURED CREDITORS AND OTHER CREDITORS
Section 26B - Registration by secured creditors and other creditors Section 26C - Effect of the registration of transactions, etc. Sections 26D & 26E - Right of enforcement of securities; priority to secured creditors
CHAPTER V - OFFENCES AND PENALTIES
Section 27 - Penalties Section 28 - Omitted Sections 29 & 30 - Offences; cognizance of offence Section 30A - Power of adjudicating authority to impose penalty Sections 30B & 30C - Appeal against penalties; Appellate Authority Section 30D - Recovery of penalties
CHAPTER VI - MISCELLANEOUS
Section 31 - Provisions of this Act not to apply in certain cases Section 31A - Power to exempt a class or classes of banks or financial institutions Section 32 - Protection of action taken in good faith Section 33 - Offences by companies Sections 34 & 35 - Civil court not to have jurisdiction; Act to override other laws Sections 36 & 37 - Limitation; application of other laws not barred Section 38 - Power of Central Government to make rules Sections 39-42 - Central Registry-related application, removal of difficulties, amendments to enactments, repeal and saving

The Schedule

The Schedule referred to in Section 41 records amendments made by the Act to specified enactments. The historical schedule is retained below as part of the statutory material carried by the original page.

Year Act No. Short title Amendment
1956 1 The Companies Act, 1956 In section 4A, in sub-section (1), after clause (vi), insert: "(vii) the asset reconstruction company which has obtained a certificate of registration under sub-section (4) of section 3 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002."
1956 42 The Securities Contracts (Regulation) Act, 1956 In section 2, in clause (h), after sub-clause (ib), insert: "(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002."
1986 1 The Sick Industrial Companies (Special Provisions) Act, 1985 In section 15, in sub-section (1), after the proviso, insert the following:
"Provided further that no reference shall be made to the Board for Industrial and Financial Reconstruction after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where financial assets have been acquired by any asset reconstruction company under sub-section (1) of section 5 of that Act: Provided also that on or after the commencement of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, where a reference is pending before the Board for Industrial and Financial Reconstruction, such reference shall abate if the secured creditors, representing not less than three-fourth in value of the amount outstanding against financial assistance disbursed to the borrower of such secured creditors, have taken any measures to recover their secured debt under sub-section (4) of section 13 of that Act."

Terminology in the Schedule reflects statutory amendments, including substitution of "asset reconstruction company" by Act 44 of 2016. Some enactments mentioned in the historical Schedule have since been repealed or superseded; the Schedule is retained here as part of the Act's historical statutory text.

Related rules and regulatory framework

Enforcement action under the Act operates together with the Security Interest (Enforcement) Rules, 2002. Asset Reconstruction Companies are also subject to directions issued by the Reserve Bank of India under the powers conferred by the SARFAESI Act. The RBI's current consolidated framework is the Master Direction - Reserve Bank of India (Asset Reconstruction Companies) Directions, 2024.

Legal-use disclaimer: This page is an informational section index and overview. Statutory provisions, subordinate legislation and regulatory directions may be amended or notified from time to time. For litigation, enforcement, compliance or limitation calculations, verify the current official text and applicable notifications.