Provisions for registration by secured and other creditors under SARFAESI Act
December 26, 2019
The MoF has notified sections 17 to 19 of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, with effect from 24 January 2020. The aforesaid sections relate to the following amendments to the SARFAESI Act 2002 (the “Principal Act”) :
- In Section 23 of the Principal Act, pertaining to the filing of securitisation, reconstruction transactions and creation of security interest, the period of thirty days and the payment of additional fee for late filing has been deleted and further provided that the Central Government may by notification extend the registration of transaction relating to different types of security interest created on different kinds of property with Central Registry and may, by rules, prescribe forms for registration for different types of security interest under this Section and fee to be charged for such registration;
- A new Chapter IVA has been inserted (Sections 26B to 26E) in the Principal Act to provide for Registration by secured creditors and other creditors. Specifically :
Section 26B provides for extending the provision of Chapter IV (relating to registration of security with Central Registry) to all creditors, other than a secured creditor, for creation, modification or satisfaction of any security interest over any property of the borrower for the purpose of securing due repayment of any financial assistance granted by such creditor to the borrower.
A creditor, other than a secured creditor filing particulars of transactions of creation, modification or satisfaction of any security interest over properties created in its favour shall not be entitled to exercise any right of enforcement of securities under the Act.
Every authority or officer of the Central Government or any State Government or local authority, entrusted with the function of recovery of tax or other Government dues and for issuing any order for attachment of any property of any person liable to pay the tax or Government dues, will file with the Central Registry such attachment order with particulars of the assesse and details of tax or other government dues from such date as may be notified by the Central Government.
- Section 26C provides that registration of security interest will be effective from the date and time of registration of transactions or filing of attachment orders with Central Registry.
- Section 26D provides that secured creditor will be entitled to exercise right to enforce securities only if it is registered with Central Registry.
- Section 26E provides for the priority of debts due to secured creditors over all others debts, revenues, taxes, cesses and rates payable to central Government, State Government or any other local authority.
- Section 27 of the Principal Act has been amended to provide that the Penalties for default in filing or sending particulars of modification or intimation of satisfaction of security interest to Central Registry under sections 23, 24 and section 25, respectively, shall be deemed to be omitted from the coming into force of Chapter IV and amended section 23 (as above).
To refer to the gazette notification of section 17 to 19 of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, click here