SARFAESI-Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act.
CERSAI-Central Registry of Securitisation Asset Reconstruction and Security Interest of India.
Sarfaesi is a law enacted by the Indian Parliament to enable banks and other financial institutions to speedily recover the dues without the intervention of the Courts. Cersai is a company formed as per the stipulation contained in Section 20 of the Sarfaesi Act and registered under Section 25 of the Companies Act to register Equitable Mortgages created with the banks and financial institutions.
Sarfaesi Act stipulates many things for the law to be applied. There are certain exemptions from the applicability of the Act also. These are contained in Section 31 of the Act. Some important things can be noted here. Sarfaesi Act will not apply to pledge of movable property. It will not apply to any security interest for securing repayment of any financial asset not exceeding the value of one lakh rupees. The Act cannot be applied to any case of mortgage of agricultural land.
Now the system of CERSAI which is formed as per the mandate contained in Section 20 of the Act does not conform with the above stipulations in the case of registration of mortgages. However the CERSAI webportal will not accept agricultural property and movable property. But it will accept any amount. The stipulation contained in Sarfaesi regarding minimum limit of One lakh rupees is not applicable to CERSAI. It may be noted that in the earlier version of CERSAI website which was termed as Phase One never had a distinction regarding the nature of property. There is a still a confusion and argument regarding CERSAI being the process of registering such transactions only for which any action can be proceeded under SARFAESI Act. For a clarification we may refer Section 20 of the SARFAESI Act:"The Central Government may, by notification, set up or cause to be set up from such date as it may specify in such notification, a registry to be known as Central Registry with its own seal for the purposes of registration of transaction of securitisation and reconstruction of financial assets and creation of security interest under this Act." We will not get much more meaning from the ending words "under this Act". The only thing clear from the above section are the words "for the purpose of registration of transaction of securitisation and reconstruction of financial assets and creation of security interest".
In nutshell CERSAI is not in strict conformity with SARFAESI with regard to registering of transactions. But CERSAI indeed helps financial institutions in finding out existing mortgages over a specific property. SARFAESI will be complete with the proper application of CERSAI. SARFAESI recovery will have less hindrance with the system of CERSAI as banks and other financial institutions who becomes mortgagee may find out any existing encumbrance over the property by using the system of CERSAI.