SARFAESI and the RDB Act: How the Two Recovery Laws Fit

India's bank recovery law rests on two statutes. The 1993 Act, now the Recovery of Debts and Bankruptcy Act, created the Debt Recovery Tribunals and a route to a decree and recovery certificate. SARFAESI, in 2002, added self-help enforcement of the security without a court. The two share tribunals and procedure, and a lender may use both together. This note compares the two routes and sets out the links between them.

1. Two Routes Compared

Figure 1: Decree and recovery, or self-help enforcement

• The RDB route. The lender files an original application before the DRT under s.19, obtains a decree and recovery certificate, and the Recovery Officer executes it by attachment and sale.
• The SARFAESI route. The secured creditor enforces the security itself, without a court, by the s.13(4) measures (Topic 22)
• Thresholds. The RDB Act applies to debts of Rs 20 lakh and above since a 2018 notification raised the limit from Rs 10 lakh; SARFAESI needs a secured debt of at least Rs 1 lakh and dues above the 20% floor (Topic 23)
• Secured and unsecured. The RDB route serves secured and unsecured debts alike; SARFAESI is confined to secured debts backed by a registered security interest.

2. The Links Between Them

Figure 2: Shared tribunals, parallel remedies

• Same tribunals. SARFAESI did not create new forums; its s.17 and s.18 remedies lie to the DRT and DRAT set up under the RDB Act (Topics 34, 37)
• Same procedure. Applications under s.17 are dealt with, as far as possible, under the RDB Act procedure and rules.
• Parallel remedies. A lender may pursue a DRT application and SARFAESI together, with no election and no need to withdraw (Transcore, Topic 51)
• Balance and priority. Any shortfall after a SARFAESI sale is recovered through the DRT under s.13(10), and s.31B of the RDB Act gives secured creditors priority matching s.26E (Topic 49)

3. The Courts Kept Out

• Both statutes oust the civil court. The RDB Act bars courts from matters within the DRT's jurisdiction, and s.34 SARFAESI bars suits and injunctions on matters the DRT can decide (Topic 73)
• Limits of the ouster. Questions the DRT cannot decide, such as title to the property, remain with the civil court (Prabha Jain, Topic 73)

4. Frequently Asked Questions

How does the RDB Act differ from the SARFAESI Act?

The Recovery of Debts and Bankruptcy Act 1993 provides an adjudicatory route: a bank files an original application before the Debt Recovery Tribunal under Section 19, obtains a decree and recovery certificate, and the Recovery Officer executes it by attachment and sale. It applies to secured and unsecured debts of Rs 20 lakh and above. The SARFAESI Act provides a self-help route: a secured creditor enforces its registered security interest itself, without a court, through the Section 13(4) measures, for secured debts of at least Rs 1 lakh.

Can a bank use the RDB Act and SARFAESI at the same time?

Yes. In Transcore v Union of India, the Supreme Court held that the two remedies are complementary, so a bank may invoke SARFAESI while its original application under the RDB Act is pending, without electing between them or withdrawing the application. The statutes are also linked structurally: SARFAESI's remedies under Sections 17 and 18 lie to the DRT and DRAT created by the RDB Act, any shortfall after a SARFAESI sale is recovered through the DRT under Section 13(10), and Section 31B of the RDB Act gives secured creditors priority matching Section 26E.

5. Related Topics

• Topic 51: Transcore v Union of India. Parallel use of the two laws.
• Topic 76: SARFAESI and the IBC. The third recovery and resolution regime.