As per section 2(16) of the Companies Act, 2013, Charge means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage;
In laymen language, Charge is a right created by a company i.e. “Borrower” in favour of a financial institution or a bank or any other lender, i.e. “creditor” who has agreed to extend financial assistance to the company on its assets or properties or any of its undertakings present and future.
Applicable provisions: Section 77 to 87 of the Companies Act, 2013 read with Companies (Registration of Charges) Rule, 2014.
As per section 77: Every Company requires to create charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and situated in or outside India, to register the particulars of the charge signed by the company and the charge-holder together with the instruments, if any, creating or modifying such charge in the Form CHG-1 and Form CHG-9 (in case of debentures), on payment of such fees and in such manner as may be prescribed, with the Registrar within 30 days of its creation:
Proviso: Registrar may, on an application by the company, allow such registration to be made:
(a) In case of charges created before the commencement of the Companies (Amendment) Ordinance, [2019], within a period of three hundred days of such creation; or
(b) In case of charges created on or after the commencement of the Companies (Amendment) Ordinance, [2019], within a period of sixty days of such creation, on payment of such additional fees as may be prescribed:
(c) in clause (a) to the first proviso, the registration of the charge shall be made within six months from the date of commencement of the Companies (Amendment) Ordinance, [2019], on payment of such additional fees as may be prescribed and different fees may be prescribed for different classes of companies;
(d) in clause (b) to the first proviso, the Registrar may, on an application, allow such registration to be made within a further period of sixty days after payment of such advalorem fees as may be prescribed.
| If charge is created before 02nd November, 2018 | |
| Within 30 days of creation | Normal fee |
| Within 300 days of creation | Normal fee+ Additional Fees |
| After 300 days | Seek extension of time in accordance with Section 87, Condonation of Delay from the Central Government. |
| Within 30 days of creation | Normal fee |
| Within 60 days of creation | Normal fee+ Additional Fees |
| After 60 days but within 120 days | Normal fee+ Additional Fees+ Advalorem Fees |
Proviso: Any subsequent registration of a charge shall not prejudice any right acquired in respect of any property before the charge is actually registered. Also noted that, this section shall not apply to such charges as may be prescribed in consultation with the Reserve Bank of India.
(2) Where a charge is registered with the Registrar under sub-section (1), he shall issue a certificate of registration of such charge in the Form CHG-2 and in case of registration of particulars of modification of charge; the Registrar shall issue a certificate of modification of charge in Form CHG-3.
(3) Notwithstanding anything contained in any other law for the time being in force, no charge created by a company shall be taken into account by the liquidator “appointed under this Act or the Insolvency and Bankruptcy Code, 2016, as the case may be, or any other creditor unless it is duly registered under sub-section (1) and a certificate of registration of such charge is given by the Registrar under sub-section (2).
(4) Nothing in sub-section (3) shall prejudice any contract or obligation for the repayment of the money secured by a charge.
Section 78: Application for registration of Charge
When a company fails to register the charge within the stipulated time mentioned under section 77 of the companies act, 2013, the person in whose favour the charge is created (charge holder) may apply to the Registrar for registration of charge along with the instrument created for the charge, within such time and in the E-form CHG-1 or CHG-9, as the case may be and the Registrar may, on such application, within a period of 14 days after giving notice to the company, unless the company itself registers the charge or shows sufficient cause why such charge should not be registered, allow such registration on payment of such fees, as may be prescribed:
Proviso: Where registration is effected on application of the person in whose favor the charge is created, that person shall be entitled to recover from the company the amount of any fees or additional fees or advalorem fees paid by him to the Registrar for the purpose of registration of charge.
Section 80: Date of Notice of charge
Where any charge on any property or assets of a company or any of its undertakings is registered under section 77, any person acquiring such property, assets, undertakings or part thereof or any share or interest therein shall be deemed to have notice of the charge from the date of such registration.
Section 81: Register of Charge
The Registrar shall, in respect of every company, keep a registrar containing particulars of the charges registered under this Chapter in such form and such manner as may be prescribed. The register shall be open to inspection by any person on payment of fee.
Section 82: Company to Report Satisfaction of Charge
For the purpose of satisfaction of charge, company shall give intimation to the Registrar in the Form CHG -4 within a period of 300 days from the date of the payment of satisfaction of full charge.
Where the Registrar enters a memorandum of satisfaction of charge in full in pursuance of section 82 or 83, he shall issue a certificate of registration of satisfaction of charge in Form No.CHG-5.
The Registrar shall, on receipt of intimation under sub-section (1), cause a notice to be sent to the holder of the charge calling upon him, to show cause within such time not exceeding 14 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 inform the company that he has done so:
Proviso: That the notice above mentioned 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.
Section 84: Intimation of Appointment of Receiver or Manager
(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 30 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.
(2) 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.
The notice of appointment or cessation of a receiver of, or of a person to manage, the property, subject to charge, of a company shall be filed with the Registrar in Form No. CHG.6 along with fee.
Section 85: Company’s Register of Charges
Every company shall keep at its registered office a register of charges in the Form CHG 7, which 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:
The entries in the register of charges maintained by the company shall be made forthwith after the creation, modification or satisfaction of charge, as the case may be.
Entries in the register shall be authenticated by a director or the secretary of the company or any other person authorized by the Board for the purpose. The register of charges shall be preserved permanently and the instrument creating a charge or modification thereon shall be preserved for a period of 8 years from the date of satisfaction of charge by the company.
Section 86: Punishment for Contravention.
If any company is in default in complying with any of the provisions of this Chapter, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.
If any person willfully furnishes any false or incorrect information or knowingly suppresses any material information, required to be registered in accordance with the provisions of section 77, he shall be liable for action under section 447.
Section 87: Rectification by Central Government in Register of Charges
The Central Government on being satisfied that—
(a) the omission to give intimation to the Registrar of the payment or satisfaction of a charge, within the time required under this Chapter; or
(b) the omission or misstatement of any particulars, in any filing previously made to the Registrar with respect to any such charge or modification thereof 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, it may, on the application of the company or any person interested and on such terms and conditions as it deems just and expedient, direct that the time for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or misstatement shall be rectified.
GIST OF E-FILING UNDER CHARGE MANAGEMENT:
| CHG 1 | Creating or Modifying charge (for other than Debentures) |
| CHG 2 | Certificate of Registration of Charge |
| CHG 3 | Certificate of Modification of Charge |
| CHG 4 | Intimation of the satisfaction to the Registrar |
| CHG 5 | Memorandum of satisfaction of Charge |
| CHG 6 | Notice of appointment or cessation or receiver or manager. |
| CHG 7 | Register of Charge |
| CHG 8 | Application for condonation of delay shall be filed the Central Government. |
| CHG 9 | Creating or modifying the charge in (for debentures including rectification) |
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Disclaimer: –The above mentioned article has been based on relevant provisions of Companies Act, 2013. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.
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