INTRODUCTION
In India, before the formation of Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), information on the encumbrance on a property was known only to the borrower and the lender due to fragmented registration system. As a result, people could obtain multiple loans on the same property. Some people used to take one loan from one bank, which would hold the deed papers. Then they used to take several more loans from other banks using attested copies of the deed, by claiming that they had lost the originals. Some people also used to obtain loans using entirely fake title deeds or by using colour photocopies of the original title deed. Properties with unpaid loans were also being sold without informing the buyers of the existing liability on the property.
The decision to form central registry of equitable mortgages was revealed in the 2011 budget speech by then Finance Minister Pranab Mukherjee. It was formed under the Chapter IV Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
WHAT IS CERSAI
Central Registry of Securitisation Asset Reconstruction and Security Interest of India also known as CERSAI is a central online security interest registry of India. It was primarily created to check frauds in lending against equitable mortgages, in which people would take multiple loans on the same asset from different banks.
CERSAI has been established as a company under section 8 of the Companies Act, 2013 by the Government of India.
CERSAI was formed to identify and check fraudulent activity in lending transactions against equitable mortgages. In other words, the CRESAI was established to discourage and prevent the practice of taking out various loans from several banks using the same asset or property.
Major shareholders of the CERSAI are the Central Government of India, National Housing Bank and public sector banks, out of which the central government incidentally holds a 51% share in the company.
REGISTRATION
- The Registration with CERSAI can be initiated on the official website of CERSAI.
- The person seeking for registration will be required to fill out the registration form electronically available under the ‘Entity Registration’ option on the CERSAI website.
- The user must possess a Digital Signature Certificate (DSC) to gain access to the CERSAI portal and to fill out the relevant details.
- Once all the information required for the registration has been filled in, the same is required to be printed and signed by the authorised signatory.
- These printed forms, along with the all relevant documents as mentioned in the forms are to be sent to the official address of CERSAI.
ACCESSIBILITY
- Any bank, financial institution or an individual can access the registration platform of CERSAI for a certain fee. By registering themselves with CERSAI, the lenders can pull up the information on an asset or property to validate that whether any previous security interest has been created by a different lender ((banks, financial institutions etc.) in the past. Usually, this is done before the sanction of a loan to a borrower
- This is exceptionally beneficial for the genuine buyers of the property, as CERSAI permits them to pull up all the relevant information from the registry to check whether the property in which they are interested in free of any liability that may have been created by another lender.
MAIN OBJECTIVES OF CERSAI
- To crack down on such fraudulent and dubious activities, Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) was established with the prime objective of maintaining a centralised registry of equitable mortgages.
- It allows financial institutions and banks to register any transactions in respect of asset securitisation as well as reconstruction.
- The scope of CERSAI was further extended in the year 2012; it was extended to include the registration of any security interests that were created via the assignment of factoring or accounts receivables.
- In recent times, the scope of CERSAI was further enlarged to include registration of any security interests that are created on assets not considered to be a tangible asset and to all types of mortgages prevalent in India.
RIGHT TO ENFORCEMENT OF SECURITIES AND PRIORITY TO SECURED CREDITORS
- No secured creditors shall be entitled to exercise the rights of enforcement of securities unless the security interest created in its favour by the borrower has been registered with Central Registry.
- Notwithstanding anything contained in any other law for the time being in force, No secured creditor shall be entitled to exercise the rights of enforcement of securities unless the security interest created in its favour by the borrower has been registered with the Central Registry.
PENALTIES
- Notwithstanding anything contained in any other law for the time being in force, No secured creditor shall be entitled to exercise the rights of enforcement of securities unless the security interest created in its favour by the borrower has been registered with the Central Registry. Every secured creditors and asset reconstruction companies are required to fill the particulars of every transaction of securitisation or asset reconstruction or security interest created, failing which are liable for the penalties.
- Every secured creditors and asset reconstruction companies are required to send the details of any modification of security interest already registered to the Central Registrar, failing which are liable for the penalties.
SALIENT FEATURES OF AMENDMENT IN THE SARFAESI ACT, 2002 WHICH IS IN FORCE W.E.F. 24TH OF JANUARY, 2020 ARE AS FOLLOWS:
- Creditors other than Secured Creditors (as defined under section 2(1)zd of SARFAESI Act), in whose favour security interest is created have to file the same with CERSAI.
- Filing of security interest with CERSAI shall be deemed to constitute a Public notice from the date & time of filing with CERSAI.
- Attachment orders issued by Revenue Authorities for recovery of Govt. dues are required to be filed with CERSAI.
- Attachment orders issued in favour of any person, by Courts/Tribunals are required to be filed with CERSAI.
- Secured Creditors [as defined under section 2(1)(zd)] shall be entitled to enforce securities under SARFAESI Act only if the security interest is filed with CERSAI.
- Filing of Security interest or attachment orders with CERSAI shall have priority over any subsequent security interest created upon such property.
- After registration of security interest with CERSAI by secured creditors, their dues will be paid in priority over Govt. dues.
- Penalty provisions for default in filing, modifying and satisfaction of security interest (section 27) is no longer applicable.
- 30-day time period for filing the transactions of creation/ modification of security interest with CERSAI (section 23) is no longer applicable.
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