Whenever a company avail any financial assistance from The Bank/ Financial Institutions, Bank/ Financial Institutions requires security for loan provided. The Bank/ Financial Institutions do not lend their monies unless they are sure that their funds including Principal amount and Interest amount are safe and they would be paid/ repaid as per agreed conditions.
The Banks/ Financial Institutions use various legal documents like mortgage deeds, loan agreements, hypothecation agreements to secure the funds provided to borrower. These documents cover all the terms and conditions of the loan, interest and repayment schedule and security of repayment etc.
Charge
Charge is The right of Bank/ Financial Institutions who lend funds to a company to receive money from the company’s assets if the debt is not paid on time.
As per section 2(16) of the Companies Act, 2013 define charges as to mean an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes as mortgage.
Registation of Charges
As per section 77 of the Companies Act, 2013, every company creation a charge shall register the particulars of charges signed by the company and its charge-holder together with the instruments creating.
Every charge created within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and situated in or outside, liable to register under section 77 of Companies Act, 2013.
Time Limit for Registration of Charge
- Company is required to register Charge with registrar within 30 days of its creation in prescribed form CHG – 1 (for other than debentures) or Form CHG -9 (for debentures including rectification) on payment of prescribed fee.
Additional period to register the Charge:
- The Registrar may on application by the Company in prescribed form CHG-10 may allow registration of charge within 300 days of creation or modification of charge on payment of additional fee. If Company fails to register the charge even within this period of three hundred days it may seek extension of time from the Central Government.
Registration of Charge by Lender
As per Section 77 it is duty of Company to Create charge, But if company fails to register the charge within the period specified in section 77, The person in whose favour the charge is created may apply to the Registrar for registration of the charge along with the instrument created for the charge.
On such application the Registrar will give a 14 days show cause notice to company, if company fails to registers the charge itself or doesn’t shows sufficient cause why such charge should not be registered, The Registrar may allow such registration.
Where registration is effected on application of the person in whose favour the charge is created, that person shall be entitled to recover from the company the amount of any fees or additional fees paid by him to the Registrar for the purpose of registration of charge.
Certificate of registration of charge
On registration of charge with the registrar, Registrar shall issue a certificate of registration of charge in Form No. CHG 2 or certificate of modification of charge in Form CHG 3.The Certificate issued by the Registrar whether in case of registration of charge or registration of modification, shall be conclusive evidence that requirements of chapter VI of the Act and related rules made there under as to registration of creation or modification of charge have been complied with.
Satisfaction of charge
As per section 82 of companies Act, 2013 read with the rules, the company shall give intimation to Registrar of payment or satisfaction in full of any charge within a period of 30 days from the date of such payment or satisfaction in Form No. CHG 4 along with the prescribed fee.
The Registrar shall, on receipt of intimation under sub-section (1), cause a notice under sec 82(2) to be sent to the holder of the charge calling upon him to show cause within such time not exceeding fourteen days, as may be specified in such notice, as to why payment or satisfaction in full should not be recorded as intimated to the Registrar, and if no cause is shown, by such holder of the charge, the Registrar shall order that a memorandum of satisfaction shall be entered in the register of charges kept by him under section 81 and shall issue a certificate of registration of satisfaction of charge in Form No. CHG 5.
The notice referred to in this sub-section shall not be required to be sent, in case the intimation to the Registrar in this regard is in the specified form and signed by the holder of charge.
Intimation of appointment of receiver or manager.
According to section 84 (1), If any person obtains an order for the appointment of a receiver of, or of a person to manage, the property, subject to a charge, of a company or if any person appoints such receiver or person under any power contained in any instrument, he shall, within a period of thirty days from the date of the passing of the order or of the making of the appointment, give notice of such appointment to the company and the Registrar along with a copy of the order or instrument and the Registrar shall, on payment of the prescribed fees, register particulars of the receiver, person or instrument in the register of charges.
Any person appointed under sub-section (1) shall, on ceasing to hold such appointment, give to the company and the Registrar a notice to that effect and the Registrar shall register such notice
Company‘s register of charges.
- Every company shall keep at its registered office a register of charges in such form and in such manner as may be prescribed.
- Register shall include therein all charges and floating charges affecting any property or assets of the company or any of its undertakings, indicating in each case such particulars as may be prescribed.
- A copy of the instrument creating the charge shall also be kept at the registered office of the company along with the register of charges.
- The register of charges and instrument of charges, shall be open for inspection during business hours by (a) any member or creditor without any payment of fees; or (b) any other person on payment of such fees as may be prescribed, subject to such reasonable restrictions as the company may, by its articles, impose.
Punishment for contravention.
Section 86 states that if any company contravenes any provision of this Chapter, the company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to ten lakh rupees and every officer of the company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twentyfive thousand rupees but which may extend to one lakh rupees, or with both.
Rectification by Central Government in register of charges.
(1) The Central Government on being satisfied that:
(i) (a) the omission to file with the Registrar the particulars of any charge created by a company or any charge subject to which any property has been acquired by a company or any modification of such charge; or
(b) the omission to register any charge within the time required under this Chapter or the omission to give intimation to the Registrar of the payment or the satisfaction of a charge, within the time required under this Chapter; or
(c) the omission or mis-statement of any particular with respect to any such charge or modification or with respect to any memorandum of satisfaction or other entry made in pursuance of section 82 or section 83, was accidental or due to inadvertence or some other sufficient cause or it is not of a nature to prejudice the position of creditors or shareholders of the company; or
(ii) on any other grounds, it is just and equitable to grant relief, it may on the application of the company or any person interested and on such terms and conditions as it may seem to the Central Government just and expedient, direct that the time for the filing of the 63 particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or mis-statement shall be rectified.
(2) Where the Central Government extends the time for the registration of a charge, the order shall not prejudice any rights acquired in respect of the property concerned before the charge is actually registered.
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