SARFAESI Miscellaneous Provisions: Sections 31A to 42

The closing part of SARFAESI is easy to skip and often examined in short notes and objective questions. Most of Chapter VI has its own note in this series; this note maps the whole chapter and then covers the provisions not treated elsewhere: the power to exempt, liability of companies, rules, the Central Registry trigger, removal of difficulties, and the repeal of the Ordinance.

1. Chapter VI at a Glance

Sections 31 to 42

Figure 1: Sections 31 to 42

2. The Provisions Explained

Power to exempt, s.31A. Inserted by the amendment in force from 15 January 2013: the Centre may, in the public interest, direct that any provision shall not apply, or apply with modifications, to a class of banks or financial institutions; the draft notification is laid before both Houses for 30 days (Topic 65)
Offences by companies, s.33. Every person in charge of the company's business is deemed guilty, unless the offence was without knowledge or due diligence was exercised; directors and officers whose consent, connivance or neglect is shown are also liable (Topic 45)
Rules, s.38. The Centre makes rules by notification; they are laid before Parliament for 30 days, which may modify or annul them. The Security Interest (Enforcement) Rules 2002 are made under it (Topic 25)
Central Registry, s.39. ss.20(2) to (4) and 21 to 27 apply only after the Central Registry is set up under s.20(1), which is why registration began with CERSAI in 2011 (Topic 41)
Removal of difficulties, s.40. An order not inconsistent with the Act may remove a difficulty, but no order after two years from commencement; each order is laid before Parliament.
Amendments and repeal, ss.41 and 42. s.41 amends other enactments through the Schedule; s.42 repeals the Second Ordinance of 2002, saving action taken under it (Topic 2)

Three powers of the Central Government

Figure 2: Three powers of the Central Government

⚠ Exam trap

Do not confuse s.31 with s.31A: s.31 lists transactions to which the Act never applies, while s.31A is a power to exempt a class of lenders by notification, added only from 2013. Remember that s.40 is time-bound to two years from commencement, while s.38 is a continuing power, and that s.39 explains why the registration provisions waited for CERSAI.

3. Frequently Asked Questions

What is the power to exempt under Section 31A of SARFAESI?

Section 31A, inserted with effect from 15 January 2013, allows the Central Government, in the public interest, to direct by notification that any provision of the Act shall not apply, or shall apply with specified exceptions or modifications, to a class or classes of banks or financial institutions. The draft notification must be laid before both Houses of Parliament for thirty days, and may be issued only if neither House disapproves.

When do the Central Registry provisions of SARFAESI apply?

Under Section 39, sub-sections (2) to (4) of Section 20 and Sections 21 to 27, which deal with the Central Registry, registration and penalties for default, apply only after the Central Registry is set up under Section 20(1). The Registry, CERSAI, was established in 2011, and the registration duties operate from then.

4. Related Topics

Topic 6: SARFAESI as Special Law. Sections 35 and 37.
Topic 93: J&K Provisions, Validation and Caveat. The other special and transitional sections.