Section 31A SARFAESI Act - Power to Exempt Banks and Financial Institutions

Section 31A of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 authorises the Central Government, acting in the public interest, to exempt specified classes of banks or financial institutions from provisions of the Act, or to apply those provisions subject to specified exceptions, modifications and adaptations. It also provides for parliamentary scrutiny of proposed notifications.

Section 31A - Statutory provision

Legislative history: Section 31A was inserted by Act 1 of 2013, section 11 (effective 15 January 2013). Sub-section (2) was substituted by Act 44 of 2016, section 23 (effective 1 September 2016).

Meaning and scope of Section 31A

Central Government power in the public interest

Sub-section (1) confers a power to issue a notification for one or more classes of banks or financial institutions. The power must be exercised in the public interest. It is not a general exemption automatically available to every bank or to an individual borrower; its coverage depends on the wording of an applicable notification.

Complete exclusion or modified application

Under clause (a), a notification may specify provisions that do not apply to an identified class. Under clause (b), the Act may continue to apply with specified exceptions, modifications or adaptations. Accordingly, it is necessary to examine both the statutory provision and the precise terms, commencement and scope of any notification before concluding that a particular institution is exempt.

Parliamentary control over exemptions

Section 31A establishes safeguards for the notification-making power:

1. Draft laying: A proposed notification must be placed in draft before each House of Parliament while it is in session for a total of thirty days.
2. Disapproval or modification: If both Houses agree to disapprove the proposal, it must not be issued. If both Houses agree on modifications, it may be issued only in the agreed modified form.
3. Excluded periods: A period during which the relevant House is prorogued or adjourned for more than four consecutive days is not counted toward the thirty-day period.
4. Post-issue laying: Copies of an issued notification must be laid before each House as soon as may be.

How to check whether an exemption applies

1. Identify the legal category of the bank or financial institution concerned and the SARFAESI provisions relevant to the transaction.
2. Search the Gazette of India for notifications issued under Section 31A, including later amendments or withdrawals.
3. Check whether the notification applies to the relevant class, date, transaction and statutory provision, and whether conditions or modifications are specified.
4. Read the notification alongside the consolidated Act on India Code; avoid treating a draft notification as an operative exemption.

Difference between Sections 31 and 31A

Section 31 lists categories of security interests and other cases to which the Act does not apply by operation of the statute. Section 31A, in contrast, provides a notification-based power to exclude or modify provisions for classes of banks or financial institutions. The two sections should not be treated as interchangeable.

Official legal resources and related provisions

Consult India Code for the consolidated SARFAESI Act, e-Gazette for operative notifications and the Department of Financial Services for relevant official material. For other safeguards and consequences under the Act, see Section 32 (good-faith protection) and Sections 34 and 35 (jurisdiction and overriding effect).