CA GURPREET SINGH 1

REGISTRATION OF CHARGES
Definition of Charge [Section 2(16)]

Charge means
▪ an interest or lien
▪ created on the property or assets of Co.
▪ or any of its undertaking
▪ or both
▪ as security (for repayment of loan)
▪ and includes a mortgage

Types of Charge

Fixed Charge Floating Charge

1. Created on specific asset 1. Created on Fluctuating assets

2. Example:- Land/Building/Machinery
etc.
3. Not allowed to sale without approval
of chargeholder but Co. may use them
4. Charge is vacated when money repaid
in full
2. Example:- Raw Material, Stock-in-trade,
debtors etc.
3. Permitted to use them for trading or
producing final goods for sale
4. Floating charge become fixed on
crystallization of floating charge

Events in which floating charge crystalize

▪ When terms & condition of floating charge are violated
▪ Co. ceases to continue its business
▪ Co. goes into liquidation
▪ Creditor enforce the security covered by floating charge

Duty to Register Charges, ETC. [Section 77]

1. Duty of Co. to register the charge with RoC within 30 days of creation of charge.
2. Charges may be created within India/Outside India (i.e. Property may be situated in India/
outside India).
3. Property or Assets may be tangible/intangible
4. File CHG-9 for debentures or CHG-1 for other than debentures with RoC
5. File instrument, if any, signed by Co. & charge holder with RoC along with
CHG-1/CHG-9
6. Time limit for registration of charges created on or after 2nd Nov 2018 :-
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30 days 30 days 60 days 120th day

30th day 60th day
days days
0

Creation Registered with Registered with Register with

Of ROC within 30 days ROC by paying ROC by paying
Charge Normal Fee additional Fees advolerm Fees
7. Verification of Instrument of Charges

Property o/s India Property in India

(wholly) (partly or wholly)
a. Under the hand of a. Under the hand of
▪ Director or ▪ Director or
▪ CS or ▪ CS or
▪ Authorised officer of charge holder ▪ Authorised officer of charge
holder
Under the Seal, if any, of the Co.

Under the hand of some person other than the

Co. who is interested in mortgage or charge

8. Any charge created by banking Co. in favour of RBI need not be registered with RoC
9. Certificate of Registration / Modification
A. Where a charge or modification is duly registered, then ROC issues Certificate of
Registration (CHG-2) or Certificate of Modification (CHG-3) as the case may be.
B. The Certificate issued by ROC is conclusive evidence that provision of this chapter
are complied with.
10. Consequences of Non - Registration of Charge :-
a) Charge is not taken into consideration by
▪ Liquidator
▪ Any other Creditor
b) Charge holder looses priority
Note :- In case of non-registration of charge, only security is lost but Co. is liable to repay the
money.
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Application for Registration of Charge by Charge - Holder [Section 78]

If Co. fails to register charge within 30 days of creation of charge


Charge holder may apply to ROC for registration of charge

ROC shall give notice to the Co.

Register the Charge Do not allow registration by charge holders


If no objection is If Co. show sufficient If Co. itself register
received from Co. cause why such the charge
within 14 days charge should not be
registered
Note:- Chargeholder is entitled to recover from Co. the amt. of fees/additional fees paid by
him to ROC.

Section 77 to apply in Certain Matters [Section 79]

The Provisions of section 77 relating to registration of charges shall apply to:-

1. Co. acquiring any property subject to charge
2. Modification in terms & conditions of already registered charge
Examples of Modification
A. Varying terms & Condition of existing charge through agreement
B. Enhancing or decreasing the limits
C. Change in rate of interest (other than bank rates in case of fluctuating loans)
D. Ceding a pari passu charge
E. Change in repayment schedule of loan
F. Partial release of charge on a particular Asset

Deemed Notice of Charge [Section 80]

Where any charge is registered under section 77, any person acquiring such property, assets,
undertaking or part thereof or any share or interest therein shall be deemed to have notice of
charge from the date of such registration
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Section 81 :- Register of charges kept by ROC

1. In respect of every company, RoC shall keep a register containing particulars of the
charges registered
2. Particulars of charges maintained on the Ministry of Corporate Affairs (MCA) portal
shall be deemed to be register of charges for the purpose of section 81
3. Such registrar shall be open to inspection by any person on payment of fees

Company to Report Satisfaction of Charge [Section 82]

1. Co. shall give intimation to RoC in CHG-4 within 30 days of payment/ satisfaction in full
2. On application by Co. or chargeholder, RoC may allow within 300 days of payment/
satisfaction with additional fees
3. If intimation is not signed by charge holder, the RoC send notice to charge holder as why
payment or satisfaction in full should not be recorded
4. Charge holder to reply within 14 days
5. If no cause is shown - Memorandum of satisfaction shall be enter in register of charge by
RoC & issue certificate of satisfaction of charge to the Co. in CHG-5
6. If cause is shown -RoC record note to that effect in register of charges & inform the Co.
7. Instrument creating charge/modification to be preserved for 8 years from satisfaction of
charge

Power of Registrar to Make Entries of Satisfaction and Release in Absence of

Intimation from company [Section 83]

1. On receipt of satisfactory evidence related to registered charge that it has been paid or
satisfied in whole or in part or
▪ Part of property/ undertaking has been released or
▪ part of property undertaking ceased to form part of property/undertaking then ROC
may enter in register of charges
▪ memorandum of satisfaction in whole or in part or
▪ fact that part of property/undertaking has been released or ceased to form part of Co.’s
notwithstanding that no information has been received by him from the company
2. ROC shall inform the affected parties within 30 days of making such entry in the register
of charges
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Intimation of Appointment of Receiver or Manager [Section 84]

If any person obtains an order for If any person appoints receiver or manager for
appointment of receiver or manager for the the property subject to Charge under any
property subject to charge power contained in any instrument
 
such person shall give notice in CHG-6 of such person shall give notice in CHG-6 to RoC
appointment to RoC and Co. within 30 days & Co. within 30 days of making appointment
from date of passing order along with copy along with copy of Instrument
of order
On ceasing to hold such appointment such appointed person shall give notice to Co. & RoC
and RoC shall register such notice

Section 85 - Register of charges to be kept by Co.

1. Every Co. shall keep a register of charges

2. In form- CHG-7
3. Register to be maintained at its registered office
4. Register shall include
▪ all charges and floating charges affecting
 any property or assets of the Co.
 or any of its under takings
▪ indicating in each case the prescribed particulars
5. Copy of instrument creating the charge shall be kept at the registered office along with the
register of charges
6. Entries in the register shall be made forthwith after the creation, modification or
satisfaction of charge as the case maybe
7. Entries in the register shall be authenticated by
▪ Director of the Co. or
▪ Secretary of the Co. or
▪ Any other person authorised by board for the purpose.
8. The register of charges & instrument of charges shall be open for inspection during
business hours:-
a) by any member or creditor without payment of fees
b) by any other person on payment of prescribed fees
9. The register of charges shall be preserved PERMANENTLY
10. The instrument creating charge or modification thereon shall be preserved for period of 8
years from the date of satisfaction of charge.
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Punishment for Contravention [Section 86]

If Co. is in default under this Chapter

Co. - ₹ 5 lakh and officer in default- ₹ 50000
If willfully furnishes any false or incorrect info then liable for action u/s 447

Rectification by CG in Register of Charges [Section 87]

1. Co. or any person interested in charge may apply to CG under this section
2. CG on being satisfied
a) Omission to give intimation to RoC of payment/ satisfaction of charge, within
required time or
b) Omission or misstatement of any particulars in any filing previously made to ROC
with respect to any charge/ modification
- was accidental or
- due to inadvertence or
- some other sufficient cause or
- not a nature to prejudice to creditor/shareholder,
Then CG may direct
▪ Time for giving intimation of payment / satisfaction of charge shall be extended or
▪ Rectification of omission or misstatement in register of charges