Effect of non registration of charge with ROC in case of SARFAESI Act
This query is : Resolved
28 March 2025
Can Bank sell the property of a company under SARFAESI Act in case of non registration of the charge over the property in ROC by the Co?.
13 April 2025
The ability of a bank to sell a company's property under the SARFAESI Act, despite non-registration of the charge with the Registrar of Companies (RoC), depends on compliance with CERSAI registration requirements under the SARFAESI Act, rather than RoC filings. :
1. Impact of Non-Registration with RoC
Validity of Charge: Non-registration with RoC under the Companies Act, 2013, renders the charge void against the liquidator or creditors in insolvency proceedings. However, this does not invalidate the security interest itself for enforcement under SARFAESI.
Penalties: The borrower faces penalties for non-registration with RoC, but this does not prevent the bank from enforcing security under SARFAESI.
2. Mandatory CERSAI Registration for SARFAESI Enforcement
Enforcement Rights: Under Rule 5 of the Security Interest (Enforcement) Rules, 2002, registration of the security interest with CERSAI is mandatory. Failure to register with CERSAI disables the bank’s ability to enforce the security under SARFAESI.
Priority of Claims: CERSAI registration ensures priority over subsequent creditors under Sections 26C, 26D, and 26E of the SARFAESI Act. Without CERSAI registration, the bank loses this priority.
3. Key Judicial Interpretations
RoC vs. CERSAI: Courts have clarified that CERSAI registration is critical for SARFAESI enforcement, while RoC registration primarily affects validity in insolvency. For example:
A charge unregistered with RoC remains enforceable under SARFAESI if CERSAI registration is complete.
Non-registration with CERSAI, however, bars enforcement under SARFAESI, even if RoC registration exists.
4. Practical Implications
SARFAESI Proceedings: Banks can proceed with auctioning the property under SARFAESI if CERSAI registration is in place, irrespective of RoC status.
Insolvency Risks: If the company enters liquidation, the bank’s claim may be treated as unsecured due to non-registration with RoC, despite CERSAI compliance.
So, bank can sell the property under SARFAESI even if the charge is unregistered with RoC, provided the security interest is registered with CERSAI.
1. Impact of Non-Registration with RoC
Validity of Charge: Non-registration with RoC under the Companies Act, 2013, renders the charge void against the liquidator or creditors in insolvency proceedings. However, this does not invalidate the security interest itself for enforcement under SARFAESI.
Penalties: The borrower faces penalties for non-registration with RoC, but this does not prevent the bank from enforcing security under SARFAESI.
2. Mandatory CERSAI Registration for SARFAESI Enforcement
Enforcement Rights: Under Rule 5 of the Security Interest (Enforcement) Rules, 2002, registration of the security interest with CERSAI is mandatory. Failure to register with CERSAI disables the bank’s ability to enforce the security under SARFAESI.
Priority of Claims: CERSAI registration ensures priority over subsequent creditors under Sections 26C, 26D, and 26E of the SARFAESI Act. Without CERSAI registration, the bank loses this priority.
3. Key Judicial Interpretations
RoC vs. CERSAI: Courts have clarified that CERSAI registration is critical for SARFAESI enforcement, while RoC registration primarily affects validity in insolvency. For example:
A charge unregistered with RoC remains enforceable under SARFAESI if CERSAI registration is complete.
Non-registration with CERSAI, however, bars enforcement under SARFAESI, even if RoC registration exists.
4. Practical Implications
SARFAESI Proceedings: Banks can proceed with auctioning the property under SARFAESI if CERSAI registration is in place, irrespective of RoC status.
Insolvency Risks: If the company enters liquidation, the bank’s claim may be treated as unsecured due to non-registration with RoC, despite CERSAI compliance.
So, bank can sell the property under SARFAESI even if the charge is unregistered with RoC, provided the security interest is registered with CERSAI.
30 September 2025
Good luck....
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- CG Tax On residential property
- Post Office RD Interest
- Applicable TDS for Purchase of Flat from NRI
- Building and other construction workers welfare cess act 1996
- Eway bill for machinery reparing
- Gift of mutual fund units to daughter
- Bank Accounts in Balance Sheet for ITR 3
- ITR 3 FILING OF AN INDIVIDUAL (PARTNER IN A PARTNERSHIP fIRM)
- Form 10BD Filling
- NRI ITR2 account in 2025-26 ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,.
- Reporting of STCG on Property in ITR
- Error while filling exam form November 2026
- Delisted shares sold in off market/ Rebate u/s87A
- In Exports Sales HSN details where to fill
- Opting out" of regime provided under subsection (1A) of Section 115BAC but Form 10IEA is not filed.
- Difference in tax comparison report
- Gst invoice numbering and delivery challan numbering
- Sales amount in Gstr1
- E Commerce GSTR1 & 3B how to file
- GST Cancellation without jurisdiction
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
