On December 26, 2019, the Ministry of Finance (Department of Financial Services) issued a notification appointing January 24, 2020 as the date on which sections 17, 18 and 19 of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016 (“Amendment Act”) shall come into force.
Sections 17, 18 and 19 of the Amendment Act deal with amendments to certain provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (“SARFAESI Act”).
Section 17 of the Amendment Act amends section 23 of the SARFAESI Act, which deals with filing of particulars of transactions of securitisation, reconstruction and creation of security interest with the Central Registry of Securitisation Asset Reconstruction and Security Interest (“CERSAI”). The timeline of 30 (thirty) days for filing the aforesaid particulars has been omitted pursuant to the Amendment Act.
Section 18 of the Amendment Act introduces Chapter IVA in the SARFAESI Act, which deals with registration of the particulars of transactions of creation, modification or satisfaction of any security interest by secured creditors and other creditors with CERSAI. Section 26E of the aforesaid Chapter is a non-obstante provision, which states that, upon registration of a security interest with CERSAI, the debts due to any secured creditor shall be paid in priority to all other debts, all revenues, taxes, cesses and other rates payable to the Central Government/ State Government/ local authority. However, in cases where insolvency/ bankruptcy proceedings are pending in respect of secured assets of the concerned borrower, priority to secured creditors in payment of debt shall be subject to the provisions of the Insolvency and Bankruptcy Code, 2016.
Section 19 of the Amendment Act amends section 27 of the SARFAESI Act, which deals with penalties for default in filing of particulars of transactions of securitisation, reconstruction and creation/ modification/ satisfaction of security interest. Pursuant to the Amendment Act, section 27 of the SARFAESI Act shall be deemed to have been omitted.
This update has been contributed by Aastha (Partner) and Ashwarya Bhargava (Associate).
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