Upgrad LLM

mof govt. order for bankers_cersai

adviser

Ministry of Finance, Government of India (GoI) has issued an Order dated December 21, 2011, wherein it has been directed that all the secured creditors / lending institutions should file with the Central Registry, before 31st March 2012, particulars of transaction of security interest over property created before 31st March 2011 and still subsisting. Consequently, the mortgage created in favour of secured creditors / lending institutions and the particulars thereof in respect of cases sanctioned prior to March 31, 2011 and which are live as on date are requiresd to be entered in the portal directly.  The GoI has further indicated that in the said order that no fee will be charged for registration of subsisting transactions, if filed before March 31, 2012. 

 
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Advocate

Can some body suggest in cases of assets secured after 31-3-2011 and not yet registered with the Central Registry, so as to invoke SARFAESI Act provisions, in case of default?

 
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Invoking of the provisions under SARFAESI Act is different from the registration under CERSAI. CERSAI registration is intended to maintain a data base of the mortgage charges created over properties so that  a prospective mortgagee can search whether the property offered as security is already charged to other bankers. Further, registration or non registration of the mortgage particulars does not have a positive or negative effect on the charge over the same.

  

 
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Advocate

Registration of security interest in Central Registry, is only required under SARFAESI Act. Consider the Security Interest is not registered with Central Registry; still the mortgage of immovable property can be enforced, but only through Court/DRT, not under SARFAESI. In other words, there is no requirement of registering in central registry, under any other Act; but only under proceedings under SARFAESI Act.  Since the Act provisions are not fully clarified and settled, each banker or any body can interpret the provisions according to his whims and fancies and are proceeding accordingly.

 
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I have not come across any rule /provision stating that a secured creditor can proceed against the defaulter under the provisions of the SARFAESI Act, only if the EM Charge is registered with the CERSAI. If any such rule / recent amendment is there in any of the provisions, kindly let us know since it will be a fresh & hot news for all the banks. Registration under CERSAI and recovery under the SARFAESI Act are different, even though both are governed under the SARFAESI Act.   

 

 
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Advocate

As per Sec.39 of SARFAESI Act, provisions with respect to registration of security interest {Sec.20(2,3,4), 21 to 27} shall apply, only after Central Registry is established. Please read Sec. 39.

 Now, with effect from 01-04-2011, Central Registry is established and separate Rules also came into effect.  Hence, according to me, for proceeding under SARFAESI Act, subsequent to 01-04-2011, registration in Central Registry is a must.  Otherwise all the provisions under the above sections are useless, on non-registration.

 
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Sir, as I told you earlier, SARFAESI Act deals with mainly two parts Viz; 1) Enforcement of security interest and 2) Establishment of Central Registry. The provisions whatever referred by you is relating to establishment of Central Registry and its working procedure, which will come into effect after establishment of the Central Registry (which is clear as per S.39). There is no clear cut provision as on date stating that enforcement of security interest can only be done if the asset is registered with Central Registry. As doubted by you, there may be a chance that the Government may introduce such a provision stating that enforcement under the act is applicable only if the same is registered with registry, for which no rule is made as on date. If such a rule is introduced, it will certainly raise hue and cry from the secured creditors.        

 
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Advocate

As I had explained earlier, Registration of security interest in Central Registry has no relevance except under SARFAESI Act, ie., for proceeding under SARFAESI Act.  Filing of suit in Court or DRT, does not require registration of security interest in Central Registry, if the property is mortgaged or hypothecated. No dispute in it. If you want to proceed under SARFAESI, register the security interest in Central Registry.  If you don't want to proceed under SARFAESI Act, registration in Central Registry would be a waste.

 
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