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CS Professional · Corporate Restructuring, Valuation and Insolvency · Debt Recovery and SARFAESI

Kapoor Steel Pvt Ltd has created a mortgage in favour of a bank. The bank has also registered the charge with the Registrar of Companies under the Companies Act. A junior lender argues that, because a Central Registry now exists under the SARFAESI Act, the RoC registration is irrelevant to priority. Based on section 20(4) of the Act, what is the correct position?

The Central Registry provisions supplement, and do not replace, registration under laws such as the Companies Act. Section 20(4) says they are in addition to and not in derogation of those laws and do not affect priority or validity of charges under them, so RoC registration remains relevant.

  1. AThe Central Registry provisions are in addition to, and not in derogation of, laws such as the Companies Act requiring registration of charges, and do not affect priority or validity of charges under themCorrect
  2. BThe Central Registry registration overrides the Companies Act and fixes priority from the date of Central Registry filing
  3. CRoC registration becomes invalid once the Central Registry is set up
  4. DPriority of charges is decided only by the Central Registry after integration of records

Explanation

Section 20(4) states that the Act's Central Registry provisions are in addition to and not in derogation of the Registration Act, Companies Act and other laws requiring registration of charges, and do not affect the priority of charges or their validity under those laws. So the junior lender's argument fails. The option claiming override contradicts this text.

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