Insolvency and Bankruptcy Code (IBC), 2016 (commonly called the Insolvency Act) vs. SARFAESI Act, 2002 are two key Indian laws for debt recovery and insolvency resolution, but they serve different purposes and operate differently.

Key Differences

When to Use Which?

• Use SARFAESI when:
  • You are a secured creditor with clear collateral.
  • The case is straightforward and you want quick recovery without involving other creditors.
  • Asset value is sufficient to cover the debt.
• Use IBC when:
  • The debtor has multiple creditors (secured + unsecured).
  • The business has revival potential.
  • You want a collective resolution and higher overall recovery.
  • There is a need to protect the company as a going concern.

Important Interaction Between the Two

• Once IBC proceedings start and moratorium is imposed, SARFAESI actions are stayed (IBC overrides SARFAESI due to Section 238 – non-obstante clause).
• SARFAESI can be used before IBC admission.
• Secured creditors under IBC can choose to stay outside the process and realise security separately, but with conditions.

Which is Better?

• SARFAESI → Faster for secured asset recovery.
• IBC → More effective for holistic debt resolution, higher long-term recovery, and protecting the economy by trying to save viable businesses.

Quick Overview