Page 34 - Banking Finance February 2021

ARTICLE

entirely fake title deeds or by using colour photocopies of Y Hypothecation of Plant and Machinery, Stocks, debt
the original title deed. Properties with unpaid loans were including book debt or receivables, whether existing or
also being sold without informing the buyers of the existing future.
liability on the property. Y Intangible assets such as, patent, know how, copyright,
trade mark, license, franchise or any other business or
The decision to form central registry of equitable mortgages
commercial right of similar nature.
was revealed in the 2011 budget speech by then Finance
Y Any under construction residential or commercial
Minister Shri Pranab Mukherjee. It was formed under the
building or a part thereof by an agreement or
Chapter IV 'Securitisation and Reconstruction of Financial
instrument other than by mortgage.
Assets and Enforcement of Security Interest' Act, 2002
(SARFAESI Act). CERSAI is a Government of India Company
licensed under section 8 of the companies Act 2013 with As per the notification issued by Ministry of Finance
Govt. of India having a shareholding of 51% by the Central (Department of Financial Services) on 03rd May 2019 about
integration of the VAHAN motor vehicles registry with
Government, select Public Sector Banks and National
Housing Bank also being shareholders of the company. CERSAI, registration of charges relating to motor vehicles is
to be made only on the VAHAN registry and not on the
The CERSAI registry platform can be accessed online by CERSAI. Any vehicle registered with the VAHAN registry shall
be deemed to be registered with the CERSAI for the
financial institutions and the general public for a fee.
However, the latter can only access information related to purposes of the SARFAESI Act, 2002.
equitable mortgages.
Government of India has notified certain amendment with
regard to Chapter - IV - A in the SARFAESI Act, 2002 with
This allows prospective lenders to check the registry to
ensure that the property against which they are extending regard to CERSAI vide Gazette no 4133 dated 26th
December, 2019 which is in force with effect from 24th
a loan to a borrower is not encumbered by a pre-existing
January, 2020. Below are the salient features of Chapter -
security interest created by another lender. Even if it is, with
details of the previous loan available to them, they can IV A.
examine if the value of the collateral is sufficient for them 1. Creditors other than Secured Creditors (as defined
to extend another loan, given the existing liability on the under section - 2(1)zd of SARFAESI Act), in whose favour
security interest is created have to file the same with
property. For the general public, especially for home buyers,
it enables them to check the registry's records to ensure that CERSAI.
any property they are planning to purchase is free of any 2. Filing of security interest with CERSAI shall be deemed
loan/security interest created by a lender. to constitute a Public notice from the date and time of
filing with CERSAI.
As we have discussed above CERSAI's initial mandate was 3. Attachment orders issued by Revenue Authorities for
to maintain a central registry of equitable mortgages only,
this mandate was extended in 2012 to start registration of
security interests created through assignment of accounts
receivables or factoring, through the passage of the
Factoring Act, 2012.

In January 2016, Government of India through Ministry of
Finance notified the amendments of CERSAI Rules, 2011 vide
gazette notification. The mandate was extended even
further to allow the CERSAI to start registering "Creation,
Modification or Satisfaction" of security interest in below
mentioned cases.
Y Immovable property by all types of mortgages including
mortgage by deposit of title deeds.

34 | 2021 | FEBRUARY | BANKING FINANCE