Section 31 SARFAESI Act: Provisions of this Act not to apply in certain cases

Section 31 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002: Provisions of this Act not to apply

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

The provisions of this Act shall not apply to—

(a) a lien on any goods, money or security given by or under the Indian Contract Act (9 of 1872) or the Sale of Goods Act, 1930 (3 of 1930) or any other law for the time being in force;

(b) a pledge of movables within the meaning of section 172 of the Indian Contract Act (9 of 1872);

(c) creation of any security in any aircraft as defined in clause (1) of section 2 of the Aircraft Act, 1934 (22 of 1934);

(d) creation of security interest in any vessel as defined in clause (55) of section 3 of the Merchant Shipping Act, 1958 (44 of 1958);

(e) any conditional sale, hire-purchase or lease or any other contract in which no security interest has been created;

(f) any rights of unpaid seller under section 47 of the Sale of Goods Act, 1930 (3 of 1930);

(g) any properties not liable to attachment (excluding the properties specifically charged with the debt recoverable under this Act) or sale under the first proviso to sub-section (1) of section 60 of the Code of Civil Procedure (5 of 1908);

(h) any security interest for securing repayment of any financial asset not exceeding one lakh rupees;

(i) any security interest created in agricultural land;

(j) any case in which the amount due is less than twenty per cent of the principal amount and interest thereon.

Legal Commentary & Landmark Judgments: Section 31

Section 31 of the SARFAESI Act, 2002 creates statutory exemptions where the provisions of the Act do not apply, specifically shielding agricultural land, security interests under one lakh rupees, and transactions where eighty percent of the debt has been discharged.

Statutory Shield for Agricultural Land: Under Section 31(i), expressly excludes agricultural land from the enforcement powers of secured creditors under Section 13.
Pecuniary and Small Debt Thresholds: Exempts security interests created in any property securing debt under one lakh rupees, and cases where the remaining unpaid amount is less than twenty percent of principal and interest.
Statutory Exclusion of Liens and Pledges: Preserves common law and statutory liens on goods and pledges of movables under the Indian Contract Act, excluding them from SARFAESI proceedings.

Key Landmark Precedents:

ITC Ltd. v. Blue Coast Hotels Ltd. (2018) 15 SCC 99: Supreme Court held that whether land is agricultural under Section 31(i) depends on its actual use on the date of mortgage and not mere revenue classification.
K. Sreedhar v. Rauthu Murthy 2023 SCC OnLine SC 13: Supreme Court reiterated that to claim exemption under Section 31(i), the borrower must establish through tangible evidence that the land was actively under agricultural cultivation.
Ram Kishun v. State of U.P. (2012) 11 SCC 511: Supreme Court emphasized that statutory exemptions protecting agricultural lands against coercive recovery safeguard farmers' constitutional right to livelihood.

Courtroom Practice & Strategic Litigation Guidance:

When challenging a Section 13(4) possession notice before the DRT under Section 17, produce current Khasra-Girdawari crop inspection records demonstrating active agricultural cultivation; proving agricultural status invalidates SARFAESI possession under Section 31(i).

Section 31: Provisions of this Act not to apply in certain cases

Section 31 of Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002: Provisions of this Act not to apply

Legal Commentary & Landmark Judgments: Section 31