Secured creditors are not confined to a single recovery route. SARFAESI enforcement and proceedings under the Insolvency and Bankruptcy Code are both available in appropriate cases, and choosing correctly between them can significantly change how much, and how quickly, a lender recovers.
What SARFAESI Is Built For
SARFAESI works best where the lender's claim is secured against a specific, identifiable, realisable asset, and the goal is to enforce against that asset directly without disturbing the borrower's broader business or triggering a collective process involving other creditors.
What the IBC Is Built For
The IBC is designed for situations where the borrower entity itself is in broader financial distress, and a collective, time-bound resolution process, potentially restructuring or liquidating the entire enterprise, is more likely to maximise recovery than enforcement against one asset in isolation.
When the Underlying Business Still Has Value
Where the borrower's business, taken as a whole, has more value as a going concern than its individual assets do separately, initiating insolvency proceedings can produce a materially better outcome than piecemeal SARFAESI enforcement against particular security.
When Other Creditors Are Involved
If multiple creditors hold claims against the same borrower, the IBC's collective framework, and the moratorium it triggers, can be a more effective way to secure a proportionate, orderly recovery than each creditor pursuing separate enforcement action.
Making the Call
The decision depends on the borrower's overall financial position, not just the value of the specific security held. A recovery strategy that looks only at the secured asset, without assessing the wider picture, can leave real recovery value on the table.
Facing a recovery matter, or need panel counsel for one?
Speak directly with Advocate Hansal Shukla about your SARFAESI, DRT, or banking recovery matter.