THE LEGAL EFFICACY REGARDING WITH THE BORROWERS SAFEGUARD UNDER THE SARFAESI ACT, 2002

AUTHOR- MANISH KUMAR E* & N. AMUTHALAKSHMI**

* STUDENT AT SCHOOL OF LAW, VELS INSTITUTE OF SCIENCE, TECHNOLOGY AND ADVANCED STUDIES (VISTAS)

** ASSISTANT PROFESSOR AT SCHOOL OF LAW, VELS INSTITUTE OF SCIENCE, TECHNOLOGY AND ADVANCED STUDIES (VISTAS)

BEST CITATION – MANISH KUMAR E & N. AMUTHALAKSHMI, THE LEGAL EFFICACY REGARDING WITH THE BORROWERS SAFEGUARD UNDER THE SARFAESI ACT, 2002, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (6) OF 2026, PG. 902-911, APIS – 3920 – 0001 & ISSN – 2583-2344. DOI – https://doi.org/10.65393/IJLRV6I6494

Abstract

This dissertation examines the effectiveness of the SARFAESI Act 2002 in balancing two competing objectives: enabling swift recovery of non-performing assets (NPAs) by banks and ensuring fair treatment of borrowers. Enacted in response to rising NPAs, the Act introduced a major shift by allowing secured creditors to enforce security interests without prior judicial intervention, thereby improving recovery efficiency. However, this expansion of creditor power has raised concerns regarding procedural fairness and borrower rights. The constitutional validity of the Act was upheld in Mardia Chemicals Ltd v Union of India, subject to the condition that borrower safeguards operate as meaningful protections. This study evaluates whether such safeguards are effective in practice, focusing on key provisions such as Sections 13 and 17. Using a doctrinal and analytical approach supported by case law and institutional data, the research finds that although the Act provides formal protections, their practical effectiveness is limited by procedural gaps, delays, and the limited capacity of Debt Recovery Tribunals. It concludes that while the legislative objective is sound, targeted reforms are necessary to ensure a more balanced and equitable framework.

Keywords: SARFAESI, Borrowers Safeguards, Debt recovery Tribunals, Debt recovery Appellate Tribunals, Legal Efficacy, Historical Background, Secured Creditor, Enforcement of Security Interest, RBI, Bankruptcy, Insolvency, Property Enforcement, Demand Notice.