Introduction

The Indian banking sector has undergone significant regulatory transformation with the Reserve Bank of India’s landmark notification dated November 12, 2021, concerning Prudential Norms on Income Recognition, Asset Classification, and Provisioning pertaining to Advances [1]. This regulatory intervention represents a crucial milestone in harmonizing asset classification standards across all lending institutions in India. The circular, issued under the authority of the Banking Regulation Act, 1949, specifically Section 35A, which empowers the RBI to issue directions to banking companies, demonstrates the central bank’s commitment to maintaining financial stability and transparency within the banking ecosystem [2]. The significance of these revised NPA classification norms extends beyond mere regulatory compliance, as they fundamentally reshape how financial institutions approach risk assessment and asset management. The notification applies to all commercial banks, including small finance banks and regional rural banks, primary urban cooperative banks, state cooperative banks, district central cooperative banks, all-India financial institutions, and non-banking financial companies, including housing finance companies [1]. This universal applicability ensures a level playing field and eliminates regulatory arbitrage opportunities that previously existed between different categories of lending institutions.

Historical Context and Legal Framework

The Banking Regulation Act, 1949: Foundation of Banking Supervision

The Banking Regulation Act, 1949, originally enacted as the Banking Companies Act, 1949, serves as the primary legislative framework governing banking operations in India [2]. Section 35A of the Act specifically empowers the Reserve Bank of India to issue directions to banking companies in matters of policy involving public interest. This provision has been instrumental in enabling the RBI to issue various circulars and guidelines related to asset classification and provisioning norms.

The Act underwent significant amendments in 2020, bringing cooperative banks under the direct supervision of the RBI, thereby expanding the regulatory ambit and ensuring uniform application of prudential norms across all banking institutions [2]. The amendments also strengthened the RBI’s enforcement powers, including the ability to supersede boards of cooperative banks and initiate resolution processes when necessary.

Evolution of Asset Classification Norms

The concept of asset classification in Indian banking traces its origins to the recommendations of the Narasimham Committee in 1991, which advocated for the adoption of international best practices in banking supervision. The committee emphasized the need for transparent and uniform norms for identifying and providing for non-performing assets. Subsequently, the RBI introduced the first set of guidelines on income recognition, asset classification, and provisioning in 1992, which have been periodically refined to address emerging challenges in the banking sector.

The 2021 circular represents the latest iteration of these norms, incorporating lessons learned from the global financial crisis and the specific challenges faced by the Indian banking sector, including the need for early identification of stress and prompt corrective action.

Key Provisions of the November 2021 Circular

Specification of Due Dates and Repayment Schedules

The revised norms mandate that all loan agreements must explicitly specify the exact due dates for repayment, the frequency of repayments, and a clear breakup between principal and interest components [1]. This requirement addresses a significant gap in earlier practices where ambiguity in repayment schedules could lead to disputes and delayed recognition of asset deterioration.

The circular requires lending institutions to include examples of Special Mention Account (SMA) and Non-Performing Asset (NPA) classification dates within the loan agreement itself. This transparency measure ensures that borrowers are fully aware of the consequences of delayed payments and the timelines within which their accounts would be classified as stressed assets.

Financial institutions must now establish clear documentation standards that eliminate any ambiguity regarding payment obligations. The loan agreement must contain specific clauses detailing the exact methodology for calculating overdue amounts and the sequence of classification from standard assets to SMA categories and eventually to NPA status.

Enhanced SMA and NPA Classification Framework

The circular introduces significant modifications to the Special Mention Account classification system, designed to ensure continuity and consistency in asset classification across all lending institutions. Under the revised framework, borrower accounts are classified as SMA or NPA as part of the day-end process for the relevant date, eliminating the possibility of delayed recognition of asset deterioration [3].

The SMA classification serves as an early warning system, enabling banks to take timely corrective measures before accounts slip into the NPA category. The classification is based on the number of days past due (DPD), with SMA-0 representing accounts overdue for 1-30 days, SMA-1 for 31-60 days, and SMA-2 for 61-90 days. Once an account remains overdue for more than 90 days, it is classified as an NPA [3].

The revised norms emphasize the importance of automated systems in asset classification, reducing the scope for manual intervention and ensuring objective assessment based on predetermined criteria. This systematic approach minimizes the risk of regulatory forbearance and ensures that asset quality deterioration is promptly reflected in banks’ financial statements.

Days Past Due (DPD) Calculation Methodology

One of the most significant changes introduced by the circular relates to the methodology for calculating DPD. The revised norms require institutions to count DPD based on the oldest payment due date, ensuring that borrowers cannot manipulate their asset classification status by making partial payments against recent dues while leaving older obligations uncleared [4].

This modification addresses a loophole in the previous system where borrowers could potentially avoid NPA classification by strategically timing their payments. Under the new framework, the entire repayment history is considered, and the classification is based on the oldest unpaid obligation, regardless of subsequent payments made by the borrower.

The DPD calculation must be performed on a daily basis, with banks required to maintain detailed records of all payment obligations and their respective due dates. This granular approach ensures accurate asset classification and provides regulators with better visibility into the true extent of stress in the banking system.

Impact on Banking Operations and Risk Management

Operational Challenges and System Upgrades

The implementation of revised NPA classification norms has necessitated significant operational changes across lending institutions. Banks have been required to upgrade their core banking systems to accommodate the new DPD calculation methodology and ensure real-time asset classification. This technological transformation has involved substantial investments in system upgrades, staff training, and process reengineering.

Financial institutions have had to redesign their loan origination systems to ensure that all new loan agreements comply with the revised documentation requirements. This includes the development of standardized templates that clearly specify repayment schedules and classification criteria, as well as enhanced borrower communication protocols to ensure transparency in the lending relationship.

The circular has also prompted banks to strengthen their collections and recovery mechanisms, recognizing that early intervention is crucial for preventing asset quality deterioration. Many institutions have invested in advanced analytics and artificial intelligence tools to identify early warning signals and take proactive measures to address potential defaults.

Receipt and Collection of Payment Instruments

The revised norms have clarified the treatment of payment instruments in the context of NPA classification, specifying that the receipt and collection of payment instruments have a direct impact on asset classification [5]. This provision addresses situations where borrowers issue cheques or other payment instruments that subsequently get dishonored, ensuring that such instances are appropriately reflected in the asset classification process.

Under the new framework, banks cannot consider a payment as received merely upon receipt of a cheque or electronic payment instruction. The payment is deemed effective only upon actual realization, and any subsequent dishonor results in the restoration of the overdue status for asset classification purposes.

This provision has significant implications for cash flow management and liquidity planning, as banks can no longer rely on unrealized payments for asset classification purposes. It has also necessitated enhanced due diligence in accepting payment instruments and improved coordination between various departments within banking institutions.

Application to Non-Banking Financial Companies

Scope and Coverage

The November 2021 circular extends its applicability to all categories of Non-Banking Financial Companies (NBFCs), including Housing Finance Companies (HFCs) and systemically important NBFCs [1]. This expansion represents a significant shift from the previous regulatory approach, which often treated NBFCs differently from banks in terms of asset classification norms.

The inclusion of NBFCs under the uniform asset classification framework eliminates regulatory arbitrage opportunities and ensures that all lending institutions follow consistent standards for risk assessment and provisioning. This harmonization is particularly important given the growing role of NBFCs in India’s financial system and their increasing interconnectedness with banks and other financial institutions.

The circular recognizes the unique business models of different NBFC categories while maintaining the core principles of asset classification. For instance, housing finance companies, which typically have longer tenor loans, benefit from certain modifications in the application of norms while adhering to the fundamental principles of timely recognition of asset quality deterioration.

Enhanced Upgradation Criteria

The revised norms introduce stringent criteria for upgrading NPA accounts to the standard asset category, requiring borrowers to clear all arrears of both interest and principal before an account can be upgraded [6]. This represents a departure from the previous practice where accounts could be upgraded upon payment of interest dues alone, even if principal amounts remained outstanding.

The enhanced upgradation criteria aim to ensure that only accounts with genuine improvement in repayment capacity are upgraded to the standard category. This prevents the cosmetic improvement of asset quality ratios without addressing underlying credit concerns. The new norms require borrowers to demonstrate sustained repayment capacity over a specified period before upgradation can be considered.

NBFCs have had to redesign their collection strategies and borrower rehabilitation programs to align with these stringent upgradation requirements. This has led to more structured approach to asset reconstruction and recovery, with greater emphasis on understanding borrowers’ repayment capacity and implementing appropriate restructuring measures where necessary.

Treatment of Penal Interest and Other Charges

Clarification on Charge Components

The circular provides detailed clarification on the treatment of penal interest and other charges in the context of NPA classification [7]. This addresses a significant area of ambiguity in the previous framework, where institutions often had discretionary approaches to including or excluding various charge components in their overdue calculations.

Under the revised norms, all components of the outstanding amount, including penal interest, processing fees, and other charges, are considered for the purpose of asset classification. This ensures that the classification reflects the complete picture of borrower obligations and prevents institutions from manipulating asset quality through selective treatment of charge components.

The clarification also addresses the treatment of compounded interest and the methodology for calculating overdue amounts when multiple charge components are involved. This standardization ensures consistency across institutions and provides borrowers with clear visibility into their total obligations.

Impact on Asset Quality Assessment

The inclusion of penal interest and other charges in asset classification calculations has significant implications for banks’ asset quality metrics. Many institutions have witnessed an increase in their gross NPA ratios following the implementation of these norms, as previously excluded charge components are now considered for classification purposes [8].

This change provides stakeholders with a more accurate assessment of banks’ asset quality and helps identify institutions that may have been understating their stressed assets. The enhanced transparency in asset classification has improved market confidence and enabled better risk pricing by investors and depositors.

Banks have had to strengthen their systems for tracking and reporting various charge components, ensuring that all elements of borrower obligations are appropriately captured in their management information systems and regulatory reports.

Relationship with Indian Accounting Standards

Alignment with Ind AS Framework

The revised NPA classification norms have important implications for banks following Indian Accounting Standards (Ind AS), particularly in the context of expected credit loss calculations under Ind AS 109 [9]. The circular recognizes the relationship between regulatory NPA recognition and credit-impaired status under Ind AS, while maintaining the distinct purposes served by each framework.

Under Ind AS 109, financial institutions are required to recognize expected credit losses based on forward-looking information and probability-weighted scenarios. The regulatory NPA classification, while based on past due criteria, provides important input for the Ind AS impairment assessment process. The revised norms enhance the alignment between these two frameworks while preserving their distinct regulatory and accounting objectives.

Banks following Ind AS have had to develop sophisticated models that incorporate both regulatory requirements and accounting standards, ensuring compliance with both frameworks while avoiding double provisioning or inadequate coverage of credit losses.

Enhanced Financial Reporting

The implementation of revised NPA norms has resulted in improved quality and comparability of financial reporting across banking institutions. The standardization of asset classification criteria ensures that investors and other stakeholders can make meaningful comparisons between different institutions’ asset quality metrics.

The enhanced documentation requirements and systematic approach to asset classification have also improved the auditability of banks’ financial statements. External auditors now have access to more detailed and standardized information regarding asset classification decisions, enabling them to provide better assurance regarding the accuracy of reported asset quality metrics.

Consumer Protection and Awareness Initiatives

Educational Requirements

The circular emphasizes the critical importance of consumer education regarding the concepts of overdue amounts, SMA classification, NPA status, and upgradation criteria [1]. This focus on borrower awareness represents a significant shift toward proactive consumer protection, recognizing that informed borrowers are more likely to maintain healthy repayment behavior.

Financial institutions are required to develop comprehensive communication strategies that clearly explain the implications of delayed payments and the progression from standard assets to stressed asset categories. This includes the development of borrower education materials, regular communication regarding account status, and proactive alerts when accounts approach critical classification thresholds.

The emphasis on consumer education also extends to digital platforms and mobile banking applications, where borrowers can access real-time information regarding their account status and upcoming payment obligations. This technological integration ensures that borrowers have continuous visibility into their repayment obligations and can take timely action to prevent asset quality deterioration.

Responsible Lending Practices

The revised norms promote responsible lending practices by requiring institutions to ensure that borrowers fully understand their obligations before loan disbursement. This includes mandatory counseling sessions for certain categories of borrowers and enhanced due diligence requirements for loan approval processes.

Banks are encouraged to develop borrower assessment frameworks that consider not only current repayment capacity but also the borrower’s understanding of loan terms and conditions. This holistic approach to borrower evaluation helps prevent future delinquencies and contributes to overall financial system stability.

Regulatory Enforcement and Compliance

Supervisory Framework

The RBI has strengthened its supervisory framework to ensure effective implementation of the revised NPA classification norms. This includes enhanced on-site examinations, off-site monitoring systems, and regular reporting requirements that enable supervisors to track compliance across different categories of lending institutions.

The central bank has developed risk-based supervision methodologies that focus resources on institutions with higher compliance risks or asset quality concerns. This targeted approach ensures efficient utilization of supervisory resources while maintaining adequate oversight of the entire banking system.

Regulatory reporting formats have been modified to capture detailed information regarding asset classification transitions, enabling supervisors to identify trends and patterns that may indicate systemic issues or individual institutional concerns.

Penalties and Corrective Actions

The Banking Regulation Act, 1949, provides the RBI with comprehensive powers to enforce compliance with prudential norms, including the ability to impose monetary penalties, restrict business activities, or initiate resolution processes for non-compliant institutions [2]. The enhanced NPA classification norms are supported by this robust enforcement framework, ensuring that institutions have appropriate incentives to comply with regulatory requirements.

The RBI has established a structured approach to regulatory enforcement that includes escalating interventions based on the severity and persistence of non-compliance. This graduated response framework enables institutions to address compliance gaps while providing clear consequences for continued violations.

Future Implications and Industry Outlook

Technology Integration and Automation

The implementation of revised NPA classification norms has accelerated the adoption of advanced technologies in the banking sector. Institutions are increasingly investing in artificial intelligence, machine learning, and robotic process automation to ensure accurate and timely asset classification while minimizing operational costs.

These technological investments are expected to yield long-term benefits in terms of improved risk management, enhanced customer service, and reduced regulatory compliance costs. The automation of asset classification processes also reduces the scope for human error and subjective judgment, contributing to more reliable and consistent outcomes.

Financial technology companies are developing specialized solutions to help banks and NBFCs comply with the revised norms while optimizing their operational efficiency. This ecosystem development is expected to further improve the overall quality of asset classification and risk management across the industry.

Impact on Credit Markets and Financial Stability

The enhanced transparency and consistency in asset classification are expected to improve the overall functioning of India’s credit markets. Better asset quality disclosure enables more accurate pricing of credit risk and helps channel funds toward institutions with stronger asset quality metrics.

The revised norms contribute to financial stability by ensuring that stress in the banking system is identified and addressed promptly. The early warning system provided by the enhanced SMA classification framework enables regulators and market participants to take preventive measures before problems escalate to system-wide concerns.

Conclusion

The Reserve Bank of India’s revised NPA classification norms represent a landmark development in India’s banking regulatory framework, establishing uniform standards that promote transparency, consistency, and financial stability. These norms address longstanding gaps in asset classification practices while providing a robust foundation for risk management across all categories of lending institutions.

The implementation of these norms has required significant operational changes and investments from financial institutions, but the long-term benefits in terms of improved asset quality disclosure, enhanced risk management, and greater financial system stability justify these costs. The emphasis on consumer education and responsible lending practices demonstrates the RBI’s commitment to building a sustainable and inclusive financial system.

As the banking sector continues to evolve in response to technological advances and changing customer expectations, the revised NPA classification norms provide a stable regulatory foundation that supports innovation while maintaining prudential safeguards. The success of these reforms will ultimately depend on effective implementation by financial institutions and continued vigilance by regulators to ensure that the intended objectives of transparency and financial stability are achieved.

The enhanced framework positions India’s banking sector to better withstand future economic challenges while maintaining the confidence of depositors, investors, and other stakeholders. The alignment of regulatory requirements with international best practices also supports India’s integration with global financial markets and enhances the credibility of its banking system on the international stage.

References

[1] Reserve Bank of India. (2021). Prudential norms on Income Recognition, Asset Classification and Provisioning pertaining to Advances. RBI/2021-2022/125. Available at: https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12194&Mode=0 

[2] Government of India. (1949). The Banking Regulation Act, 1949. Available at: https://www.indiacode.nic.in/handle/123456789/1885 

[3] HDB Financial Services. (2024). NPA Classification Norms. Available at: https://www.hdbfs.com/customer-services/npa-classification-norms 

[4] Vinod Kothari Consultants. (2021). NPA classification norms significantly tightened. Available at: https://vinodkothari.com/2021/11/npa-classification-norms-2/ 

[5] Sundaram Finance. (2022). RBI Guidelines on Prudential Norms. Available at: https://www.sundaramfinance.in/guidelines 

[6] Business Standard. (2022). New prudential norms: NBFCs get some leeway on bad loans classification. Available at: https://www.business-standard.com/article/economy-policy/new-prudential-norms-nbfcs-get-some-leeway-on-bad-loans-classification-122021501451_1.html 

[7] Reserve Bank of India. (2023). Master Circular on Prudential Norms. RBI/2023-24/06. Available at: https://rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=12472 

[8] Live Law. (2022). NPA, Wilful Defaulter, Income Recognition, Asset Classification. Available at: https://www.livelaw.in/law-firms/law-firm-articles-/npa-wilful-defaulter-income-recognition-asset-classification-rbi-state-bank-of-india-205999 

[9] Law Bhoomi. (2025). Banking Regulation Act, 1949: An Overview. Available at: https://lawbhoomi.com/banking-regulation-act-1949/

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The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) stands as a landmark legislation in India’s banking and financial sector, fundamentally transforming the landscape of debt recovery and asset reconstruction. Enacted to address the mounting crisis of non-performing assets (NPAs) in the banking sector, this Act empowers banks and financial institutions to recover dues without the intervention of courts or tribunals, thereby expediting the recovery process and strengthening the financial stability of lending institutions.

The legislative intent behind the SARFAESI Act was crystallized following extensive deliberations by various committees that recognized the urgent need for a comprehensive framework to tackle the alarming levels of NPAs plaguing India’s financial ecosystem. The Act represents a paradigm shift from the traditional court-centric recovery mechanisms to a more efficient, time-bound procedure that balances the interests of secured creditors while providing adequate safeguards to borrowers.

Legal Foundation and Statutory Framework

Constitutional Validity and Judicial Scrutiny

The constitutional validity of the SARFAESI Act 2002 was comprehensively examined by the Supreme Court of India in the landmark judgment of Mardia Chemicals Ltd. v. Union of India [1]. In this pivotal case, the Supreme Court upheld the constitutional validity of the Act while acknowledging certain harsh provisions that could potentially affect borrowers’ rights. The Court emphasized that the Act was enacted for the speedier recovery of dues declared as non-performing assets, better availability of capital, liquidity enhancement, and overall economic growth of the country.

The Supreme Court’s validation in Mardia Chemicals established that while some provisions of the Act may have harsh effects on borrowers, they receive reasonable protection under the statutory framework. The Court particularly noted that the requirement of depositing seventy-five percent of the claim amount before filing an appeal under Section 17(2) was not unreasonable, given the expeditious nature of the recovery mechanism contemplated under the Act.

Scope and Applicability

The SARFAESI Act applies to all secured debts where the outstanding amount is rupees one lakh or above, and the borrower’s account has been classified as a non-performing asset by the secured creditor in accordance with the Reserve Bank of India guidelines [2]. The Act covers various forms of security interests including mortgages, hypothecation, pledges, and charges created over movable and immovable properties.

However, the Act contains specific exclusions under Section 31, which bars its application to certain categories of assets including agricultural land primarily used for agricultural purposes, and cases where the remaining debt is below twenty percent of the original principal amount and interest. These exclusions reflect the legislature’s intent to protect certain vulnerable sectors while ensuring effective debt recovery mechanisms.

Initiation of Proceedings Under SARFAESI Act

Classification as Non-Performing Asset

The foundation of any action under the SARFAESI Act 2002 rests upon the classification of the borrower’s account as a non-performing asset. This classification must be done in accordance with the prudential norms and guidelines issued by the Reserve Bank of India. The Supreme Court in Mardia Chemicals clarified that this classification is a prerequisite for invoking the provisions of the Act, ensuring that the extraordinary powers granted under the statute are exercised only in genuine cases of default [3].

The RBI guidelines mandate that an asset becomes non-performing when interest or principal remains overdue for a period exceeding ninety days. This classification triggers the bank’s right to initiate recovery proceedings under the SARFAESI Act, subject to compliance with the prescribed procedural requirements.

Demand Notice Under Section 13(2)

Section 13(2) of the SARFAESI Act 2002 provides the statutory mechanism for initiating recovery proceedings. This provision states: “Where any borrower, who is under a liability to a secured creditor under a security agreement, makes any default in repayment of secured debt or any instalment thereof, and his account in respect of such debt is classified by the secured creditor as non-performing asset, then, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice…” [4].

The demand notice serves as both a formal communication to the borrower regarding the outstanding dues and a statutory prerequisite for exercising the powers under Section 13(4). The Supreme Court in Transcore v. Union of India clarified that the demand notice is not merely a show cause notice but constitutes the initiation of action under the SARFAESI Act [5].

Essential Components of Demand Notice

The demand notice must contain comprehensive details including the quantum of outstanding debt, particulars of the security created, details of the borrower and guarantors, and a clear demand for repayment within the stipulated sixty-day period. The notice must also specify the consequences of non-compliance, particularly the bank’s entitlement to exercise powers under Section 13(4).

The calculation of the claim amount in the demand notice must include the balance outstanding in the bank’s books and any un-debited portion of interest that has accrued but not been reflected due to the NPA status of the account. The authorized officer need not approach any court or tribunal for determination of the quantum of the claim amount, as this power is vested directly under the statute.

Service of Demand Notice

Rule 3 of the Security Interest (Enforcement) Rules, 2002 prescribes the manner of service of demand notice. The service must be effected by delivering or transmitting the notice at the place where the borrower or his authorized agent actually and voluntarily resides or carries on business. The service can be made through registered post with acknowledgment due, speed post, courier, or any other means of transmission including fax or electronic mail [6].

Where the authorized officer has reason to believe that the borrower is avoiding service, or for any other reason service cannot be made through normal means, the proviso to Rule 3(1) provides for substituted service. In such cases, service shall be effected by affixing a copy of the demand notice on the outer door or conspicuous part of the house or building where the borrower ordinarily resides or works, and additionally by publishing the contents in two leading newspapers, one in vernacular language having sufficient circulation in the locality.

Representation and Objection Procedure

Section 13(3A) – Mandatory Consideration

The SARFAESI Act 2002 incorporates a vital safeguard through Section 13(3A), which was introduced by the 2004 amendment following the observations in Mardia Chemicals. This provision mandates that if the borrower makes any representation or raises objections regarding the demand notice, the secured creditor must consider such representation and communicate the decision with reasons within fifteen days of receipt.

The Supreme Court in ITC Limited v. Blue Coast Hotels Ltd. clarified that Section 13(3A) is not merely directory but mandatory in nature [7]. The Court emphasized that the intent of the legislature in enacting this provision was to remedy the lacuna in the law and ensure that debtors are given a fair opportunity to present their case before any coercive action is taken.

This procedural safeguard ensures that the borrower’s right to be heard is preserved while maintaining the expeditious nature of the recovery process. The secured creditor’s obligation to provide reasons for rejecting objections serves as a check against arbitrary exercise of powers and ensures transparency in the decision-making process.

Enforcement of Security Interest Under Section 13(4)

Powers of Secured Creditor

Upon expiry of the sixty-day period mentioned in the demand notice, and in the absence of satisfactory response from the borrower, Section 13(4) empowers the secured creditor to exercise any or all of the following rights:

1. Take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset
2. Take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset
3. Appoint any person to manage the secured assets whose possession has been taken over
4. Require any person who has acquired any of the secured assets from the borrower and from whom any money is due or may become due to the borrower, to pay the secured creditor so much of the money as is sufficient to pay the amount due to the secured creditor

Distinction Between Symbolic and Physical Possession

The Supreme Court in Transcore v. Union of India addressed the conceptual distinction between symbolic and physical possession, holding that the SARFAESI Act does not make any distinction between actual or symbolic possession of secured assets [8]. The Court observed that possession is a relative concept and not an absolute one, and the dichotomy between symbolic and physical possession does not find place in the Act.

This judicial interpretation has significant practical implications, as it validates the common banking practice of taking symbolic possession through notice and publication, without necessarily requiring physical occupation of the premises. The Court emphasized that the word “possession” in the context of the SARFAESI Act should be understood in its legal sense rather than its literal physical sense.

Procedure for Taking Possession of Secured Assets

Movable Assets

The procedure for taking possession of movable secured assets is distinctly different from that applicable to immovable assets. Rule 4 of the Security Interest (Enforcement) Rules, 2002 mandates that taking symbolic possession of movable secured assets is not permissible in law. The authorized officer must take actual possession of movable assets in the presence of two witnesses and draw a panchanama as nearly as possible in accordance with Appendix-I of the Rules.

After taking possession, the authorized officer must record an inventory report as per Appendix-II and deliver it to the borrower or any person entitled to receive it on behalf of the borrower. The inventory report must mention the name of the person appointed by the authorized officer in whose custody the secured assets are preserved.

The authorized officer has a statutory duty to preserve movable secured assets with the care that an owner of ordinary prudence would take under similar circumstances. In case of factories or stores, the secured creditor must entrust the assets to an authorized person or approved repossessors. Additionally, the authorized officer must take insurance cover if necessary until the sale is completed.

Immovable Assets

For immovable secured assets, Rule 8 of the Security Interest (Enforcement) Rules, 2002 prescribes the procedure for taking possession. The authorized officer shall take possession by delivering a possession notice prepared as per Appendix-IV to the borrower and by affixing the possession notice on the outer door or conspicuous place of the property.

The possession notice must also be published, as soon as possible but not later than seven days from the date of taking possession, in two leading newspapers, one in vernacular language having sufficient circulation in the locality. This dual requirement of service and publication ensures adequate notice to all interested parties and the general public.

Plant and Machinery

The treatment of plant and machinery under the SARFAESI Act depends on their attachment to the earth. If plant and machinery are fastened to the earth with cement and concrete as on the date of taking possession, they should be treated as part of the immovable secured asset and must be mentioned specifically in the possession notice with a separate annexure providing brief description and particulars.

Conversely, if plant and machinery are detachable from earth as on the date of taking possession, the authorized officer must record an inventory report as per the procedure applicable to movable assets and deliver it to the borrower or authorized person.

Valuation and Sale Procedure

Approved Valuers

The SARFAESI Act 2002 mandates valuation of secured assets by approved valuers before effecting sale. Rule 2(d) of the Security Interest (Enforcement) Rules, 2002 defines “approved valuer” as a person registered as a valuer under Section 34AB of the Wealth Tax Act, 1957, or approved by the board of the company [9].

Section 34AB of the Wealth Tax Act provides for registration of valuers with specific qualifications for different classes of assets. For immovable property valuation, the valuer must be a graduate in civil engineering, architecture or town planning from a recognized university, or possess a post-graduate degree in valuation of real estate, along with requisite experience in the field.

Reserve Price Determination

The reserve price for sale of secured assets is typically determined as the valuation amount minus fifteen to twenty percent, as established in various judicial precedents including Swastic Agency v. State Bank of India. This margin accounts for market conditions and ensures reasonable recovery while preventing distress sale of assets.

The determination of reserve price requires careful consideration of various factors including market conditions, nature of the asset, urgency of recovery, and potential for appreciation or depreciation. The authorized officer, in consultation with the secured creditor, must fix the reserve price based on the valuation report obtained from approved valuers.

Sale Notice and Publication

Before effecting sale of immovable secured assets, Rule 8(6) mandates service of a thirty-day sale notice to the borrower. This notice must be served in the same manner as prescribed for demand notice and possession notice under Rule 3 of the Security Interest (Enforcement) Rules, 2002.

For public auction or tender process, the secured creditor must publish a public notice in two leading newspapers, one in vernacular language having sufficient circulation in the locality. The public notice must contain:

1. Description of the immovable property including details of known encumbrances
2. The secured debt for recovery of which the property is to be sold
3. Reserve price below which the property may not be sold
4. Time and place of public auction or completion deadline for other sale methods
5. Requirements for earnest money deposit
6. Any other material information for potential purchasers

Sale Confirmation and Payment

The sale must be confirmed in favor of the purchaser who offers the highest sale price, subject to confirmation by the secured creditor. No sale can be confirmed if the amount offered is less than the reserve price, unless the authorized officer obtains consent from both the borrower and secured creditor for sale below reserve price.

The successful bidder must deposit twenty-five percent of the bid amount immediately upon confirmation. The balance amount must be paid within fifteen days of confirmation of sale, or such extended period as may be agreed upon in writing between the parties, not exceeding ninety days in total.

Appeal Mechanism Under Section 17

Right to Appeal

Section 17 of the SARFAESI Act 2002 provides the statutory remedy for any person aggrieved by any measure taken under Section 13(4). The provision states that any person aggrieved by any of the measures referred to in Section 13(4) may make an application to the Debts Recovery Tribunal within forty-five days from the date on which the measure is taken.

The Supreme Court in Mardia Chemicals upheld the constitutional validity of the appeal mechanism while striking down the requirement of depositing seventy-five percent of the claim amount as a condition precedent for entertaining the appeal. However, subsequent amendments have modified this provision, and the current requirement mandates deposit of fifty percent of the debt due to the secured creditor as determined by the Debts Recovery Tribunal.

Jurisdiction and Powers of DRT

The Debts Recovery Tribunal has been vested with exclusive jurisdiction to entertain appeals under Section 17 of the SARFAESI Act. The Tribunal has the power to grant interim relief and issue appropriate directions to safeguard the interests of both secured creditors and borrowers.

The DRT must dispose of applications under Section 17 within four months from the date of application. This time-bound disposal requirement ensures that the expeditious recovery contemplated under the Act is not defeated by prolonged appellate proceedings.

Jurisdictional Bars and Civil Court Exclusion

Section 34 – Ouster of Civil Court Jurisdiction

Section 34 of the SARFAESI Act 2002 creates a comprehensive bar on the jurisdiction of civil courts in respect of any matter which the Debts Recovery Tribunal or Appellate Tribunal is empowered to determine. This provision states: “No civil court shall have jurisdiction to entertain any suit or proceeding in respect of any matter which a Debts Recovery Tribunal or the Appellate Tribunal is empowered by or under this Act to determine and no injunction shall be granted by any court or other authority in respect of any action taken or to be taken in pursuance of any power conferred by or under this Act.”

The Supreme Court in Mardia Chemicals acknowledged this jurisdictional bar while carving out a limited exception where the action of the secured creditor is alleged to be fraudulent or the claim is so absurd and untenable that it does not require any investigation [10].

Exception for Fraud Cases

The Bombay High Court in Regional Manager, Union Bank of India v. M/s Punya Coal Road Lines recently held that once a secured creditor issues demand notice under Section 13(2) of the SARFAESI Act, the civil court’s jurisdiction is barred, and any challenge to the notice comes under the domain of the Debts Recovery Tribunal, unless fraud is specifically pleaded and established [11].

This exception ensures that genuine cases involving fraudulent conduct by secured creditors are not left without remedy while maintaining the overall efficiency of the SARFAESI framework.

Rights of Borrowers and Safeguards

Right to Redeem Mortgage

Section 13(8) of the SARFAESI Act provides for the right of redemption, allowing borrowers to redeem their mortgaged property by paying the entire outstanding debt along with costs and expenses at any time before the actual sale. This provision states: “Where the amount of dues of the secured creditor together with all costs, charges and expenses incurred by him is tendered to the secured creditor at any time before the date of publication of notice for public auction or inviting quotations or tender from public or private treaty for transfer by way of lease, assignment or sale for realization of the secured assets, the secured assets shall be released forthwith.”

However, this right is subject to strict compliance with payment requirements and timing restrictions. The Supreme Court has consistently held that partial payments or promises of future payment do not constitute valid exercise of the redemption right.

Participation in Sale Process

The SARFAESI framework permits borrowers to participate as tenderers or bidders in the sale process of their own secured assets. This provision allows borrowers an opportunity to reacquire their property by participating in the competitive bidding process, subject to compliance with all sale conditions.

However, borrowers cannot participate as spectators or witnesses in the sale process, as this could potentially interfere with the transparent conduct of the sale proceedings.

Recent Developments and Amendments

2016 Amendment Act

The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2016 introduced significant changes to the SARFAESI framework. Key amendments include provisions enabling banks and Asset Reconstruction Companies to convert debt into equity, allowing banks to bid for their own properties in auctions, and introducing the concept of Swiss challenge method for sale of financial assets.

These amendments reflect the evolving nature of the financial sector and the need for more flexible recovery mechanisms to address contemporary challenges in debt resolution.

Regulatory Guidelines

The Reserve Bank of India has issued comprehensive guidelines for implementation of the SARFAESI Act, including master circulars on prudential norms for classification, valuation and operation of investments by banks, and specific instructions for conduct of e-auctions under the Act.

These guidelines ensure uniform implementation of the statutory provisions while addressing practical challenges faced by banks and financial institutions in the recovery process.

Conclusion

The SARFAESI Act, 2002 represents a significant milestone in India’s banking legislation, providing a robust framework for expeditious recovery of non-performing assets while incorporating adequate safeguards for borrower protection. The Act’s constitutional validity, as affirmed by the Supreme Court in Mardia Chemicals, establishes its legitimacy as a necessary tool for maintaining financial stability in the banking sector.

The comprehensive procedural framework under the Act, supported by detailed rules and extensive judicial interpretation, ensures that the extraordinary powers granted to secured creditors are exercised within defined legal parameters. The mandatory consideration of borrower representations under Section 13(3A), the right of appeal under Section 17, and the redemption provisions under Section 13(8) collectively provide a balanced approach to debt recovery.

However, the effective implementation of the SARFAESI Act requires strict adherence to procedural requirements, proper documentation, and compliance with regulatory guidelines. The Latin maxim “expressio unius est exclusio alterius” emphasized in the original checklist remains relevant – any deviation from prescribed procedures can render the entire action liable to be struck down by the Debts Recovery Tribunal.

As India’s financial sector continues to evolve, the SARFAESI Act remains a cornerstone of the debt recovery framework, requiring continuous refinement through judicial interpretation and legislative amendments to address emerging challenges in the dynamic financial landscape.

References

[1] Mardia Chemicals Ltd. v. Union of India, (2004) 4 SCC 311. Available at: https://indiankanoon.org/doc/1059476/ 

[2] SARFAESI Act, 2002, Section 2(1)(zg) and Section 13(2). Available at: https://www.indiacode.nic.in/handle/123456789/2006 

[3] SARFAESI Act Implementation Guidelines. Available at: https://taxguru.in/corporate-law/overview-sarfaesi-act-2002-note-process-enforcement-security-interest-section-13.html 

[4] Section 13(2) of SARFAESI Act, 2002. Available at: https://ibclaw.in/section-13-enforcement-of-security-interest/ 

[5] Transcore v. Union of India, (2008) 1 SCC 125. Available at: https://indiankanoon.org/doc/1511187/ 

[6] Security Interest (Enforcement) Rules, 2002, Rule 3. Available at: https://ibclaw.in/sarfaesi-the-security-interest-enforcement-rules-2002/ 

[7] ITC Limited v. Blue Coast Hotels Ltd., Supreme Court of India. Available at: https://indiacorplaw.in/2018/04/supreme-court-rules-mandatory-procedure-sarfaesi-act.html 

[8] Transcore v. Union of India – Symbolic vs Physical Possession. Available at: https://indiancaselaws.wordpress.com/2014/02/10/transcore-vs-union-of-india-uoi-and-anr/ 

[9] Wealth Tax Act, 1957, Section 34AB. Available at: https://www.casemine.com/search/in/VALUER%2BUNDER%2BSECTION%2B34AB 

[10] Constitutional Validity of SARFAESI Act. Available at: https://taxguru.in/finance/constitutional-validity-sarfaesi-act-2002-tested-mardia-chemicals-vs-uoi.html 

[11] Regional Manager, Union Bank of India v. M/s Punya Coal Road Lines, Bombay High Court. Available at: https://www.livelaw.in/high-court/bombay-high-court/bombay-high-court-section-132-sarfaesi-act-recovery-notice-civil-court-jurisdiction-barred-drt-231151 

[12] Security Interest (Enforcement) Rules, 2002 – Complete Text. Available at: https://indiankanoon.org/doc/198257891/ 

[13] SARFAESI Act Procedure for Sale of Assets. Available at: https://ibclaw.in/procedure-for-sale-of-immovable-assets-under-sarfaesi-act-2002/ 

[14] RBI Guidelines on SARFAESI Implementation. Available at: https://www.rbi.org.in/commonperson/english/scripts/FAQs.aspx?Id=3568 

[15] Exception to DRT Jurisdiction – Mardia Chemicals Analysis. Available at: https://www.livelaw.in/columns/securitization-and-reconstruction-of-financial-assets-and-enforcement-of-security-interest-act-2002-sarfaesi-act-drt-mardia-chemicals-194534 

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Introduction

The banking sector in India has undergone significant transformations over the decades, with one of the most critical aspects being the management and classification of Non-Performing Assets (NPAs). The definition of Non-Performing Assets has evolved through various legislative amendments and judicial interpretations, fundamentally altering the landscape of debt recovery and asset management in Indian financial institutions. This evolution represents not merely a technical adjustment but a paradigmatic shift in how financial institutions approach credit risk management and recovery mechanisms.

The journey of Non-Performing Assets definition reflects the broader challenges faced by the Indian banking system, particularly in the context of mounting bad debts and the need for efficient recovery mechanisms. From its initial conceptualization to the current framework, the definition has been shaped by economic necessities, regulatory requirements, and constitutional principles. Understanding this evolution is crucial for financial institutions, legal practitioners, and borrowers alike, as it directly impacts the rights and obligations of all stakeholders in the credit ecosystem.

Understanding Non-Performing Assets: Core Definition and Classification

The Reserve Bank of India (RBI) has established the fundamental framework for understanding NPAs through its prudential norms. According to RBI guidelines, an asset that ceases to generate income for the bank and states that an account that remains overdue/out of order for more than 90 days can be classified as NPA [1]. This definition forms the cornerstone of asset classification in Indian banking.

The classification system extends beyond the basic definition to create a hierarchy of asset quality. Banks are mandated to categorize NPAs into three distinct categories: Substandard Assets, Doubtful Assets, and Loss Assets. Substandard assets refer to those which have remained NPAs for a period of twelve months or less. These assets are characterized by well-defined credit weaknesses that jeopardize the liquidation of debt and represent a potential loss if deficiencies are not corrected.

Doubtful assets represent a more severe deterioration in asset quality. An asset transitions from the substandard category to doubtful status when it remains in the substandard category for a period exceeding twelve months. The distinguishing feature of doubtful assets is that collection or liquidation in full is questionable, and the possibility of loss is high, though the exact amount of loss cannot be determined.

Loss assets represent the most severe category of impaired assets. The RBI defines loss assets as those considered uncollectible and of such little value that their continuance as bankable assets is not warranted, although there may be some salvage or recovery value. These assets require immediate write-off from the books of the bank, though this does not absolve the borrower of their liability.

Historical Context and Legislative Background

The concept of NPAs and their systematic classification emerged from the need to align Indian banking practices with international standards and to address the growing problem of bad debts in the financial sector. The journey began with the introduction of prudential norms by the RBI in 1992, which established income recognition, asset classification, and provisioning standards for banks.

The inadequacy of existing debt recovery mechanisms became apparent during the 1990s, leading to the enactment of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDBFI Act). However, after a decade of operation, it became evident that the RDDBFI Act was insufficient to achieve the desired results of efficient debt recovery. The slow pace of recovery and mounting levels of non-performing assets necessitated a more robust legal framework.

This realization culminated in the enactment of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) [2]. The SARFAESI Act represented a paradigm shift by providing secured creditors with the right to enforce security interests without court intervention, following procedures prescribed under Section 13 of the Act. This legislative development marked a significant departure from the traditional judicial approach to debt recovery, empowering financial institutions with self-help remedies.

The SARFAESI Act and NPA Definition Framework

The SARFAESI Act initially adopted the RBI’s definition of Non-Performing Assets in its original form. Section 2(1)(o) of the SARFAESI Act, as originally enacted, defined “Non-Performing Asset” as an asset or account of a borrower classified by a bank or financial institution as substandard, doubtful, or loss assets, in accordance with directions or guidelines relating to asset classification issued by the Reserve Bank [3].

This original definition created uniformity in NPA classification across all financial institutions covered under the Act. It ensured that the well-established RBI norms, which had been refined over a decade of implementation, would serve as the benchmark for determining when SARFAESI proceedings could be initiated against a defaulting borrower.

The constitutional validity of the SARFAESI Act was challenged in Mardia Chemicals Ltd. & Others v. Union of India & Others, where the Supreme Court upheld the constitutional validity of the Act, except for sub-section (2) of Section 17 [4]. This judicial validation provided the necessary legal foundation for the Act’s implementation and established confidence in its mechanisms.

The 2004 Amendment: Expanding the Regulatory Framework

The landscape of NPA definition underwent significant transformation with the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004. This amendment fundamentally altered Section 2(1)(o) of the SARFAESI Act, introducing a more nuanced approach to NPA classification that recognized the diverse nature of financial institutions and their regulatory frameworks.

The amended definition created a bifurcated system. Under clause (a), for banks or financial institutions administered or regulated by any authority or body established, constituted, or appointed by law, NPA classification would be in accordance with directions or guidelines relating to asset classifications issued by such regulatory authority or body. Under clause (b), for all other cases, the classification would continue to follow directions or guidelines issued by the Reserve Bank of India [5].

This amendment recognized the reality that the Indian financial sector comprises institutions regulated by different authorities, each with potentially different approaches to asset classification. Non-banking financial companies, asset reconstruction companies, and other specialized financial institutions might operate under regulatory frameworks distinct from traditional banking norms, necessitating flexibility in NPA definition application.

Constitutional Challenges and Judicial Interpretation

The 2004 amendment triggered significant constitutional challenges across various High Courts, creating a complex legal landscape with conflicting judicial opinions. The Gujarat High Court, in a common judgment dated April 24, 2014, held that the amended Section 2(1)(o) of the SARFAESI Act was unconstitutional [6]. The court’s reasoning centered on the argument that the amendment created two distinct classes of borrowers, potentially violating the equality principle enshrined in Article 14 of the Constitution.

The Gujarat High Court’s analysis focused on the deviation from the original objectives of the SARFAESI Act. The court observed that while one class of borrowers would be governed by guidelines issued by the RBI, another class would be governed by guidelines issued by different regulatory authorities. This differentiation, in the court’s view, created an unreasonable classification that could not be justified under constitutional principles.

Conversely, the Madras High Court, in a common judgment dated May 18, 2014, rejected the constitutional challenge to the amended definition [7]. The Madras High Court’s approach emphasized the practical necessity of recognizing diverse regulatory frameworks within the financial sector. The court reasoned that the function of prescribing norms for asset classification was not an essential legislative function and that different regulatory approaches for different types of financial institutions were justified by their distinct operational characteristics.

Supreme Court Resolution: Keshavlal Khemchand Judgment

The conflicting High Court decisions necessitated authoritative resolution by the Supreme Court. In Keshavlal Khemchand and Sons Pvt Ltd & Ors v. Union of India & Ors, the Supreme Court provided definitive clarity on the constitutional validity of the amended NPA definition [8]. This landmark judgment addressed fundamental questions about legislative delegation, constitutional equality, and the practical requirements of financial regulation.

The Supreme Court’s analysis began with recognizing the impracticality of creating a universal NPA definition applicable to all categories of financial institutions across all time periods. The court observed that defining NPA holistically for millions of loan transactions across various categories of loans and advances, extended by different types of creditors, would not only be impracticable but could potentially paralyze the entire banking system.

The court emphasized that Parliament’s approach of delegating guideline formulation to expert regulatory bodies was both practical and constitutionally sound. The Supreme Court held that the function of prescribing norms for classifying a borrower’s account as NPA is not an essential legislative function. According to the court, Parliament was merely stipulating that the expression “NPA” should be understood by all creditors in the same sense as understood by expert regulatory bodies such as the RBI or other specialized regulators.

Regarding the Article 14 challenge, the Supreme Court concluded that different standards for different classes of financial institutions did not constitute unreasonable classification. The court recognized that creditors do not form a uniform or homogeneous class, noting innumerable differences among creditors based on their legal structure, the nature of loans they advance, and the terms and conditions governing such advances.

Regulatory Framework and Implementation Mechanisms

The current regulatory framework for NPA classification operates through a multi-tiered system that recognizes the diverse nature of financial institutions while maintaining consistent standards within each regulatory domain. The Reserve Bank of India continues to serve as the primary regulator for banks and most non-banking financial companies, issuing detailed guidelines on income recognition, asset classification, and provisioning norms.

For institutions regulated by other bodies, such as housing finance companies under the National Housing Bank or asset reconstruction companies with specialized regulatory frameworks, the respective regulatory authorities provide guidelines aligned with their institutional characteristics and operational requirements. This approach ensures that NPA classification remains relevant to the specific nature of different financial institutions while maintaining overall systemic coherence.

The implementation of these norms requires banks and financial institutions to establish robust systems for monitoring account performance, identifying early warning signals, and ensuring timely classification of assets. The 90-day norm serves as a bright-line test, but institutions are expected to identify potential problems much earlier through their internal risk management systems.

Impact on Debt Recovery and Financial Stability

The evolution of The journey of Non-Performing Assets definition from its original conception to the current framework represents a sophisticated evolution in financial regulation that balances practical necessities with constitutional principles. The Supreme Court’s validation of the amended definition in the Keshavlal Khemchand case has provided legal certainty and established a framework that recognizes the diverse nature of financial institutions while maintaining essential protections for all stakeholders. definition has had profound implications for debt recovery mechanisms and overall financial stability. The SARFAESI Act’s provisions, combined with clear NPA classification norms, have empowered financial institutions to take swift action against defaulting borrowers without prolonged judicial proceedings. This has significantly reduced the time required for debt recovery and has improved the overall efficiency of the financial system.

The classification system also serves important prudential purposes by requiring banks to set aside provisions against potential losses based on the category of NPA. Substandard assets require minimum provision of 15%, doubtful assets require provisions ranging from 25% to 100% depending on the period of default, and loss assets require 100% provision. This ensures that banks maintain adequate buffers against potential losses and enhances the stability of the financial system.

Contemporary Challenges and Future Perspectives

The NPA framework continues to evolve in response to changing economic conditions and emerging challenges in the financial sector. The COVID-19 pandemic, for instance, necessitated temporary regulatory forbearance measures, highlighting the need for flexibility within the framework while maintaining its essential integrity.

Technological advances in lending, such as digital lending platforms and fintech innovations, are creating new categories of financial services that may require tailored approaches to asset classification. The regulatory framework must continue to evolve to address these developments while maintaining the core principles of prudential regulation and financial stability.

The resolution of stressed assets through mechanisms such as the Insolvency and Bankruptcy Code, 2016, has created additional complexity in the NPA landscape. The interplay between SARFAESI proceedings and insolvency processes requires careful coordination to ensure that creditor rights are protected while facilitating efficient resolution of distressed assets.

Conclusion

The journey of Non-Performing Assets definition from its original conception to the current framework represents a sophisticated evolution in financial regulation that balances practical necessities with constitutional principles. The Supreme Court’s validation of the amended definition in the Keshavlal Khemchand case has provided legal certainty and established a framework that recognizes the diverse nature of financial institutions while maintaining essential protections for all stakeholders.

This evolution demonstrates the dynamic nature of financial regulation and the need for continuous adaptation to changing economic and technological conditions. The current framework, while robust, must continue to evolve to address emerging challenges while maintaining its core objectives of financial stability and creditor protection. The success of this framework will ultimately be measured by its ability to facilitate efficient capital allocation while protecting the interests of depositors and maintaining systemic stability in the Indian financial sector.

References:

[1] SCC Times. (2024). “Upgradation of NPA Account – Whether Permissible After Issuance of Demand Notice under Section 13(2) of the Sarfaesi Act.” Available at: https://www.scconline.com/blog/post/2024/05/17/upgradation-of-npa-account-whether-permissible-after-issuance-of-demand-notice-under-section-132-of-the-sarfaesi-act/ 

[2] ClearTax. (2022). “SARFAESI ACT, 2002- Applicability, Objectives, Process, Documentation.” Available at: https://cleartax.in/s/sarfaesi-act-2002 

[3] Reserve Bank of India. “Non-performing Assets (NPA).” Available at: https://www.rbi.org.in/commonman/English/Scripts/Notification.aspx?Id=889 

[4] Mardia Chemicals Ltd. & Others v. Union of India & Others, 2004 4 SCC 311

[5] The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2004

[6] Gujarat High Court Common Judgment dated April 24, 2014 

[7] Madras High Court Common Judgment dated May 18, 2014 

[8] Keshavlal Khemchand and Sons Pvt Ltd & Ors v. Union of India & Ors, Supreme Court of India. Available at: https://indiankanoon.org/doc/189160531/ 

[9] Mondaq. (2015). “Constitutionality Of The Amended Definition Of NPA Upheld – Financial Services – India.” Available at: https://www.mondaq.com/india/financial-services/377044/constitutionality-of-the-amended-definition-of-npa-upheld 

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