SARFAESI Model Answers I: Enforcement and Validity

Three questions recur in judiciary mains on SARFAESI enforcement: the Section 13 procedure and its safeguards, the Mardia validity settlement, and the Magistrate's role under Section 14. For each, this note gives the question as usually set and an answer outline in the order an examiner expects, with the authority for every point.

Question 1: Enforcement under Section 13

Discuss the procedure for enforcement of a security interest under Section 13 of the SARFAESI Act. What safeguards are available to the borrower?

Open. SARFAESI allows a secured creditor to enforce without the intervention of a court, s.13(1), to cut recovery delay (Topic 22)
Conditions. A secured creditor, a security interest, an account classified NPA, and no s.31 exclusion (Topic 23)
Notice. s.13(2): 60 days with particulars of dues and assets; s.13(3A): objection considered and reasons given in 15 days (Topics 26, 27)
Measures. s.13(4): possession, takeover of management, a manager, notice to the borrower's debtors; possession and sale under Rules 8 and 9; Magistrate's aid under s.14 (Topics 28, 25, 29)
Safeguards and close. Hearing read in by Mardia; mandatory sale notice in Mathew Varghese; redemption until the sale notice, s.13(8); s.17 review; s.19 compensation; speed balanced by strict compliance under Article 300A (Topics 7, 52, 30, 35, 40)

Question 2: Constitutional Validity

SARFAESI survived constitutional challenge in Mardia Chemicals, but not unaltered. Discuss.

Open. The challenge: seizure of property without adjudication, under Articles 14, 19(1)(g) and 300A, and an illusory remedy (Topic 7)
What was upheld. The Act as a whole, as a valid response to the NPA crisis in the public interest; the classification of secured creditors (Topic 83)
What was altered. The 75% deposit in old s.17(2) struck down; a duty to consider objections and give reasons, enacted as s.13(3A) in 2004; the s.17 remedy made a real one (Topics 27, 65)
Close. Later approvals: Narayan Chandra Ghosh (2011), Keshavlal (2015), Pandurang (2020); validity rests on strict compliance with safeguards.

Question 3: The Magistrate under Section 14

Explain the role of the Chief Metropolitan Magistrate or District Magistrate under Section 14. What is the remedy against an order under it?

Points and authorities, Question 3

Figure 1: Points and authorities, Question 3

⚠ Exam trap

In Question 3, do not describe the Magistrate as deciding the dispute or hearing the borrower on the merits; the Magistrate checks the affidavit and assists in taking possession. The 30/60-day limit is directory, and the remedy against the order is an application under s.17 to the DRT, not a writ or criminal revision (Kanaiyalal Sachdev).

Frequently Asked Questions

How long should a SARFAESI long answer be?

Match the marks. For a ten to fifteen mark question, an introduction of two or three lines, four to six developed points each with a section or case, and a two-line conclusion is usually right. Keep the statutory figures exact and close on the balance between speedy recovery and the borrower's safeguards.