AMENDMENTS TO 3.

“securitisation” means acquisition of financial assets by

any asset reconstruction company from any originator,

SARFAESI ACT, 2002

whether by raising of funds by such asset reconstrution
company from qualified buyers by issue of security
receipts representing undivided interest in such
financial assets or otherwise - Sec. 2(1)(z)
Made on 26th December 2019 w.e.f. 24th January
2020 4. “asset reconstruction” means acquisition by
any asset reconstruction company of any right or
The enforcement of security Interest and interest of any bank or financial institution
Recovery of Debts Laws and Miscellaneous in any financial assistance for the purpose of
Provisions (Amendment) Act, 2016 came in force realisation of such financial assistance - Sec. 2(1)(b)
on 12th August 2016 for the purpose of making
5. “security interest” means right, title or interest of
amendments in Sarfaesi Act, 2002, however,
any kind, other than those specified in section 31, upon
different sections were notified on different dates.
property created in favour of any
secured creditor and includes :-
Following sections of the above Act were notified
by Ministry of Finance, Department of Financial (i) any mortgage, charge, hypothecation, assignment or
Services, vide Notification No SO. 4619 (E) any right, title or interest of any kind, on tangible asset,
dated 26th December 2019 and are effective from 24th retained by the
January 2020 secured creditor as an
owner of the prop-
• Section 17 is for amendment in section 23 of erty, given on hire
Sarfaesi Act, 2002 or financial lease
or conditional sale
or under any other
• Section 18 is for insertion of Chapter IVA to
contract which
Sarfaesi Act, 2002. Chapter IVA is about the
secures the obliga-
registration process, right of enforcement of tion to pay any un-
securities and priority of secured creditors paid portion of the
purchase price of the
• Section 19 is about omission of section 27 asset or an obligation
of Sarfaesi Act, 2002 regarding penalty for incurred or credit
non-filing etc u/s 23 after its notification provided to enable the CA Anil Goel
borrower to acquire Founder and Chairman
the tangible asset; or AAA Insolvency Professionals LLP
FILING OF TRANSACTIONS OF SECURITISATION,
(ii) such right, title or interest in any intangible
RECONSTRUCTION AND CREATION OF asset or assignment or licence of such intangible
SECURITY INTEREST -SEC 23(1) asset which secures the obligation to pay any
unpaid portion of the purchase price of the
1. The particulars of every following type of
intangible asset or the obligation in curred or any
transactions shall be filed with Central Registry of
credit provided to enable the borrower to acquire the
Securitisation and Asset Reconstruction and
intangible asset or licence of intangible asset -
Security Interest of India (CERSAI) w.e.f. 24th
Sec. 2(1)(zf)
January 2020 :-

a) Transactions of securitisation,
b) Transactions of asset reconstruction; or
c) Transactions of creation of security interest

2. All such transactions subsisting on or

before the establishment of CERSAI or after the
establishment of CERSAI must be registered up to
24 th January 2020
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 EFFECT OF THE REGISTRATION OF
TRANSACTIONS, ETC. – Sec 26C
1. The effect of such filing or registration by a
secured creditor or other creditor or
government authority or a person having an
attachment order would constitute a public notice.

2. Where a security interest or attachment

order is filed/ registered with CERSAI, then the
claim of such creditor shall have priority
over any subsequent security interest created
upon such property. Any sale or transfer or
CHAPTER IVA of SARFAESI ACT, 2002 – lease of that property would be subject to
Notified w.e.f. 24th January 2020 FILING OR the security interest registered or filed by the
REGISTRATION BY SECURED CREDITORS creditor with CERSAI
AND OTHER CREDITORS

The Central Government has notified the RIGHT OF ENFORCEMENT OF SECURITIES –

provisions of Chapter IVA of Sarfaesi Act, 2020 Sec 26D
w.e.f. 24th January 2020 consisting of sections 26B
1. From the date of appointment as notified i.e.
to 26E and the implication of such notification
24th January 2020, no secured creditor shall be
would be as under : -
entitled to exercise the rights of enforcement of
securities under Sarfaesi Act, 2002 unless the
1. The filing of transactions can be done now
security interest is registered with CERSAI.
by all creditors for the purpose of securing
due repayment of any financial assistance
granted by such creditor to the borrower. PRIORITY TO SECURED CREDITORS – Sec
This facility was earlier open only to banks, 26E
FIs, Specified NBFCs, ARCs, debenture
trustees or any other trustee holding 1. After the registration of security interest
securities on half of banks or FIs – Sec 26B with CERSAI, the debts of the secured creditor
i.e. banks, FIs, NBFCs, ARCs, etc. shall be paid
2. The filing of transactions would not extend in priority over all other debts and all revenue,
any right to the creditor for enforcement of taxes, cessess and other rates payable to Central
security interest under Sarfaesi Act, 2002 Government or State Government or Local
unless the creditor is a bank, FIs, Specified Authority.
NBFCs, ARCs, Debenture Trustee, etc as
per the definition of Secured creditor u/s 2. If IBC proceedings are pending in
2(1)(zd) respect of any secured assets, the priority of
the secured creditors would be as per IBC

3. Every authority or officer of Central

Government or State Government or Local
Authority, entrusted with the function of
recovery tax, revenue or government dues shall also
file the transaction of attachment of any property
with CERSAI to recover the tax or government dues.

4. If any person obtains orders for

attachment of property from any court or authority
against any of his claim, such person may
file particulars of such attachment orders
with CERSAI to fortify his claim on the property.
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CONCLUSION:

The notification dated 26th December 2019, effective from 24th January 2020 is very significant in terms of effect
of registration with CERSAI, rights of enforcement of security interest and priority to secured creditors against
government and tax dues.

This notification also provides a platform where the security interest can be registered by any creditor or
government authority who have any security interest or attachment order against any
credit given or against any tax dues. This will provide a public notice to all before any
subsequent charge is created on the property fraudulently by the borrower or the creditor.

The registration of security interest with CERSAI would also assure the payment to secured creditors and tax
dues or any other government dues would not have any priority over the dues of creditor who have registered
his security interest with CERSAI.

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