Sections 26C and 26D SARFAESI: Effect of Registration

Registration would mean little without consequences, and the 2016 amendment supplied two powerful ones. Section 26C makes a registered security interest public notice from the date of filing. Section 26D goes further: a secured creditor cannot even use the Chapter III enforcement machinery unless its interest is registered. Together with the priority provision that follows, they make registration the hinge on which notice, enforcement and priority all turn. This note sets out both provisions and their combined force.

1. Effect of Registration, Section 26C

Figure 1: Registration as public notice from filing

• Effect of registration, s.26C. Once a security interest is registered with the Central Registry, it is deemed to be public notice from the date of filing of the particulars.
• Notice to the world. A later creditor or buyer is treated as having notice of the registered interest, so it cannot claim to have dealt in ignorance of the charge.
• Bearing on priority. Because registration gives notice from filing, it fixes who knew what and when, which in turn shapes the priority among competing claimants (Topic 49)
• From the date of filing. The notice runs from the date the particulars are filed, so prompt filing matters directly to the creditor's position against others.

2. Enforcement Only If Registered, Section 26D

Figure 2: No registration, no enforcement

• The rule, s.26D. Notwithstanding anything, no secured creditor may exercise the Chapter III rights of enforcement unless its security interest is registered with the Central Registry.
• A hard precondition. Registration is not optional: without it the creditor cannot use the s.13 machinery at all, whatever the contract or the security documents say (Topic 22)
• In force from 2020. This requirement was brought into force from January 2020, so an unregistered security interest cannot be enforced under the Act thereafter.
• The strongest incentive. Tying enforcement to registration gives secured creditors the sharpest reason to file their interests promptly and correctly.

3. The Combined Effect

Figure 3: Notice, enforcement and priority all hinge on registration

• Notice, s.26C. Registration is public notice from the date of filing, so no one dealing with the asset can plead ignorance of the charge.
• Enforcement, s.26D. There is no Chapter III enforcement at all unless the interest is registered, making registration a gate to the Act's central remedy.
• Priority, s.26E. A registered secured creditor gains priority over other debts and dues, the subject of the next provision (Topics 49, 50)
• One turning point. All three consequences, notice, enforcement and priority, turn on registration, so a secured creditor that fails to register loses far more than a formality.

4. Frequently Asked Questions

What is the effect of registration of a security interest under Section 26C?

Under Section 26C, once a security interest is registered with the Central Registry, it is deemed to be public notice from the date on which the particulars were filed. A later creditor, buyer or other person dealing with the asset is treated as having notice of the registered interest and cannot claim to have acted in ignorance of it. Because the notice runs from the date of filing, registration fixes who had notice and when, which bears directly on the priority among competing claimants. This makes prompt and accurate filing important to a secured creditor's position, since the date of filing can decide its standing against others.

Can a secured creditor enforce a security interest that is not registered?

No. Section 26D provides that, notwithstanding anything contained in any other law, no secured creditor shall be entitled to exercise the rights of enforcement of securities under Chapter III unless the security interest created in its favour has been registered with the Central Registry. Registration is therefore a hard precondition to enforcement: without it, the creditor cannot use the Section 13 machinery at all, whatever the loan or security documents provide. The requirement was brought into force from January 2020. Read with Section 26C on notice and Section 26E on priority, it means that notice, enforcement and priority all turn on registration, giving secured creditors a strong reason to register promptly.

5. Related Topics

• Topic 43: Registration by Secured and Other Creditors. The registration Chapter IVA requires.
• Topic 49: Priority of Secured Creditors (Section 26E). The priority registration secures.