Section 1 SARFAESI Act: Short Title, Extent, Commencement and Application

Section 1 is the Act's own address label: what it is called, where it runs, from when, and over what. The details matter more than they look, because the extent clause changed with the Jammu and Kashmir reorganisation, the commencement reaches back to the ordinance the Act replaced, and the application clause carries the crucial pointer to the Section 31 exclusions that keep agricultural land and small debts outside the whole scheme. This note covers Section 1 in full.

1. The Four Elements

Figure 1: Title, extent, commencement, application

• Short title. The Act is the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, universally cited by the acronym SARFAESI, the three functions, securitisation, reconstruction and enforcement, named in the title itself (Topic 1)
• Extent. The Act extends to the whole of India. As originally enacted it did not extend to the State of Jammu and Kashmir; with the reorganisation of 2019 that exclusion fell away and the Act now runs across the whole country, a point worth stating precisely in any extent question.
• Commencement. The Act came into force on 21 June 2002, the date on which the Securitisation Ordinance it replaced was promulgated, so its operation is carried back to the ordinance rather than beginning only when the Act received assent.
• Application. By s.1(4), nothing in the Act applies to the transactions and securities listed in s.31: the application clause is therefore read with s.31, which keeps agricultural land, pledges, small debts and other cases outside the Act's reach (Topic 5)

2. Reach in Practice

Figure 2: What Section 1 settles

• Over whom and what. The Act operates on secured creditors, banks, financial institutions, ARCs and notified NBFCs and housing finance companies, and their security interests in secured debts that have been classified as non-performing assets, the preconditions the enforcement chapter then builds on (Topics 1, 9)
• The territorial update. Candidates still often write that the Act does not extend to Jammu and Kashmir; since the 2019 reorganisation the correct position is that it extends to the whole of India, the former carve-out having gone.
• The commencement nuance. Dating commencement to the 21 June 2002 ordinance matters because enforcement actions and the Act's operation are measured from that date, not from a later assent.
• The boundary pointer. s.1(4) imports the whole s.31 exclusion list into the question of application, so an answer on the Act's reach is incomplete without the exclusions (Topic 5)

3. Frequently Asked Questions

What does Section 1 of the SARFAESI Act provide?

Section 1 gives the Act its short title, the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, extends it to the whole of India (the former exclusion of Jammu and Kashmir having fallen away with the 2019 reorganisation), fixes its commencement from 21 June 2002, the date of the Securitisation Ordinance it replaced, and provides in Section 1(4) that nothing in the Act applies to the transactions and securities listed in Section 31. It thus settles what the Act is called, where and from when it runs, and the pointer to what it excludes.

4. Related Topics

• Topic 5: Section 31 Exclusions. What the application clause leaves out.
• Topic 1: Introduction and Scheme. The Act Section 1 opens.