Registration of Security Interests with the Central Registry

A central registry only works if transactions are actually filed and kept current. Sections 23 to 26 set out the duty to register a security interest, to record any modification, to report its satisfaction when the debt is paid, and the public's right to inspect the register. Registration turns a private charge into public notice, and it underpins the priority a secured creditor can claim. This note sets out what must be filed, how the record is kept current, and the right to inspect.

1. What Must Be Filed

Figure 1: Filing the particulars under Section 23

• What must be filed, s.23. The particulars of every transaction of securitisation, asset reconstruction and creation of security interest are filed with the Central Registry.
• The time to file. Filing was originally required within thirty days of the transaction; the 2016 amendment left the period to be prescribed by rules.
• Who files. The secured creditor, ARC or other person creating or holding the interest files the particulars in the prescribed form on payment of the fee.
• Beyond SARFAESI entities. Over time, registration with the Central Registry was extended to charges created by other creditors too, widening the record beyond banks and ARCs.

2. Keeping the Record Current

Figure 2: Modification and satisfaction

• Modification, s.24. Any modification of a registered security interest is also filed, so the register stays current with changes to the charge.
• Satisfaction, s.25. On the debt being repaid, the satisfaction of the security interest is reported to the registry, clearing the record of a discharged charge.
• Keeping the record true. Modification and satisfaction filings keep the Central Register an accurate picture of the live charges on an asset, which is the point of the registry.
• Default in filing. Failure to file, or to report satisfaction, attracts the penalties the Act provides, backing the duty to register with a sanction.

3. Inspection and Effect

Figure 3: From the right to inspect to priority

• Right to inspect, s.26. Any person may inspect the particulars in the Central Register on payment of the prescribed fee, so the record is genuinely public.
• Notice to the world. A registered interest operates as constructive notice, so a later buyer or lender takes subject to it and cannot claim ignorance.
• Then priority, Chapter IVA. Registration feeds the priority of registered secured creditors under s.26E, added in 2016, so registering is not merely a formality (Topics 49, 50)
• The incentive to register. Because priority and notice both flow from registration, a secured creditor has strong reason to file promptly and correctly.

4. Frequently Asked Questions

What must be registered with the Central Registry and within what time?

Under Section 23, the particulars of every transaction of securitisation, asset reconstruction and creation of security interest must be filed with the Central Registry. Filing was originally required within thirty days of the transaction, though the 2016 amendment left the period to be prescribed by rules. The secured creditor, asset reconstruction company or other person holding the interest files the particulars in the prescribed form on payment of the fee. Any modification of a registered security interest is filed under Section 24, and the satisfaction of the interest on repayment is reported under Section 25, so the Central Register remains an accurate record of the live charges on an asset. Over time, registration was extended to charges created by other creditors as well.

What is the effect of registering a security interest with CERSAI?

Registration makes the security interest a matter of public record. Under Section 26, any person may inspect the particulars in the Central Register on payment of the prescribed fee, so the registered interest operates as constructive notice to the world, and a later buyer or lender takes subject to it rather than being able to claim ignorance. Registration also founds priority: under Section 26E, introduced by the 2016 amendment, a secured creditor that has registered its security interest with the Central Registry gains priority over other claims. A secured creditor therefore has strong reason to register promptly, both to give notice and to secure its priority.

5. Related Topics

• Topic 41: The Central Registry (CERSAI). The registry transactions are filed with.
• Topic 49: Priority of Secured Creditors (Section 26E). The priority registration secures.