REGULATION OF SECURITISATION AND RECONSTRUCTION OF FINANCIALASSETS OF BANKS AND FINANCIALINSTITUTIONSCentral

Section 8 of The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002

Notwithstanding anything contained in sub-section (1) of section 17 of the Registration Act, 1908 (16 of 1908),--

(a)any security receipt issued by the 1[asset reconstruction company], as the case may be, under sub-section (1) of section 7, and not creating, declaring, assigning, limiting or extinguishing any right, title or interest, to or in immovable property except in so far as it entitles the holder of the security receipt to an undivided interest afforded by a registered instrument; or
(b)any transfer of security receipts, shall not require compulsory registration.

Summary

Security receipts issued by an asset reconstruction company do not need to be registered with the government.
This exemption applies even if the receipt gives the holder an interest in a property through a registered document.
The transfer of these receipts from one person to another also does not require compulsory registration.
This rule overrides the general requirement for registration found in the Registration Act of 1908.
This makes buying, selling, and moving these financial interests much faster and cheaper.

Practical examples

1A large investment fund decides to sell its security receipts in a housing project recovery scheme to a private bank. Usually, transferring interests in property involves a long trip to the local registrar's office and paying extra fees. Because of this law, they can complete the transfer by simply signing a contract without registering it with the government.

2An insurance company holds a security receipt that entitles them to a share of the money recovered from a factory's land. Even though this receipt is linked to a physical building and land, the insurance company does not have to go through the formal property registration process to prove they own the receipt.

FAQ

1. Does a security receipt need to be registered under the Registration Act of 1908 as per Section 8 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002?

No, Section 8 of the Act specifically provides an exemption, stating that these receipts do not require compulsory registration despite what is written in the Registration Act.

2. Does the exemption in Section 8 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 also apply when a receipt is sold to someone else?

Yes, Section 8(b) of the Act states that any transfer of security receipts shall not require compulsory registration.

3. Under Section 8 of this finance law, does the receipt have to be related to a registered instrument to get the exemption?

Section 8(a) mentions the exemption applies even if the receipt entitles the holder to an undivided interest afforded by a registered instrument.

Test yourself

Q1.Section 8 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 provides an exemption from which other law?

Q2.Under Section 8 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, what type of action regarding security receipts is exempt from registration?

Q3.According to Section 8 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, what kind of interest in property can a security receipt represent without needing registration?

Q4.Comparing Section 7 and Section 8 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, which statement is true?

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