SARFAESI Act, 2002 | Section 38

Section 38 of the SARFAESI Act, 2002: Power of Central Government to Make Rules

Section 38 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 authorises the Central Government to frame rules to implement the Act. It identifies matters that may be regulated through subordinate legislation and requires parliamentary scrutiny of those rules.

Section 38(1): Authority to make rules

Under section 38(1), the Central Government may make rules for carrying out the provisions of the Act by notification in the Electronic Gazette, as defined in section 2(s) of the Information Technology Act, 2000. A rule is subordinate legislation that provides procedures and details within the authority conferred by the parent Act. Rules cannot override the Act itself.

Section 38(2): Matters for which rules may be made

Sub-section (2) lists specific matters without restricting the general power under sub-section (1). The clause-by-clause scope is as follows:

Clause (a): Other business or commercial rights of a similar nature within section 2(1)(t).
Clause (aa): Form and manner of applications under section 13(10).
Clause (b): Exercise of secured creditors' rights through officers under section 13(12).
Clause (ba): Fees for applications to the Debts Recovery Tribunal under section 17(1).
Clause (bb): Form of applications to the Appellate Tribunal under section 17(6).
Clause (bc): Fees for appeals under section 18(1).
Clause (bca): Integration of registration systems with the Central Registry under section 20A(1).
Clause (bcb): Conditions for delegation of powers to the Reserve Bank under section 20B.
Clause (c): Safeguards for records under section 22(2).
Clause (d): Filing particulars of securitisation transactions and fees under section 23.
Clause (da): Forms and fees for registering different security interests under section 23(3).
Clause (e): Fees for inspecting transaction particulars under sections 22 and 26(1).
Clause (f): Fees for inspecting the electronic Central Register under section 26(2).
Clause (fa): Form and manner for filing transactions under section 26B(2).
Clause (fb): Form, manner and date for filing attachment orders under section 26B(4).
Clause (fc): Form, manner and fees for filing particulars of attachment orders under section 26B(5).
Clause (g): Other matters required or permitted to be prescribed under the Act.

Section 38(3): Parliamentary control

Every rule must be placed before both Houses of Parliament for an aggregate period of 30 days, which may fall within one session or two or more successive sessions. Within the prescribed parliamentary period, both Houses may agree to modify or annul a rule. Such modification or annulment does not invalidate actions already lawfully taken under that rule.

How Section 38 operates in practice

Enforcement of security interests

The Security Interest (Enforcement) Rules, 2002 prescribe important procedural requirements for enforcement actions, including demand notices, possession and sale of secured assets. Section 13 of the Act governs enforcement of security interests, while sections 17 and 18 address tribunal remedies and appeals.

Central Registry and registration

The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Central Registry) Rules, 2011, as amended, govern aspects of registration and access to records maintained through the Central Registry. The Central Registry is the statutory system for recording specified securitisation, reconstruction and security-interest transactions.

Tribunal procedures and fees

Section 38 also enables rules concerning applications and appeals under sections 17 and 18. The applicable statutory provisions and procedural rules should be read together to identify the correct forum, form, fee and filing requirements.

Amendments relevant to Section 38

The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004 (Act 30 of 2004) introduced clauses (ba), (bb) and (bc), effective 11 November 2004. Act 44 of 2016 introduced clause (a), renumbered the former clause (a) as (aa), and inserted provisions concerning integrated registries, delegation and additional registration matters, effective 1 September 2016.

Important: Section 38 grants rule-making authority; it does not independently authorise a secured creditor to bypass statutory notice, limitation, tribunal review or other safeguards prescribed under the Act and applicable rules.

Official legislation and regulatory resources

India Code - Central Acts and statutory provisions (search for the SARFAESI Act, 2002).
e-Gazette of India - notifications and amendments.
Reserve Bank of India - regulatory directions and notifications.
CERSAI - Central Registry services.

Frequently asked questions

Who can make rules under section 38?

The Central Government, through the prescribed Gazette notification process.

Can rules under section 38 be changed?

Yes. Rules may be amended by valid delegated legislation and are subject to the parliamentary laying and modification mechanism in section 38(3).

Are the SARFAESI Rules separate from the Act?

Yes. The Act creates the statutory framework; rules provide implementing details and must remain consistent with the Act.