The government with a aim to strengthen the enforcement of law against serious offences have formed Injeti Srinivas Committee (the“Committee”) on July 13, 2018, to make recommendations to the Government inter alia on re-categorisation of certain ‘acts’ punishable as compoundable offences to ‘acts’ carrying civil liabilities, improvements  to be made in the in-house adjudication mechanism, etc.

To implement the recommendation of the Committee, Ministry of Law and Justice vide its ordinance dated November 2, 2018 have promulgated Companies (Amendment) Ordinance, 2018 (“Ordinance”) bringing amendments in 31 sections of the Companies Act, 2013 (the“Act”) being enforced from the even date. The amendment includes several essential elements related to corporate governance such as declaration of commencement of business, maintenance of registered office, restructuring of Corporate Offences to relieve Special Courts from adjudicating routine offences, De-clogging the NCLT, etc. The ordinance has been published in the Official Gazette and comes into effect from November 2, 2018.

There will be probable effects of the Companies (Amendment) Ordinance, 2018 on the affairs of the Company, one such impact which drew our attention is Chapter VI pertaining to charges. The brief of the amendment along with the changes have been discussed below:

Pre-Amendment Post-Amendment Change
First and Second Proviso to Section 77 of the Companies Act, 2013

Provided that the Registrar may, on an application by the company, allow such registration to be made within a period of three hundred days of such creation on payment of such additional fees as may be prescribed:

Provided further that if registration is not made within a period of three hundred days of such creation, the company shall seek extension of time in accordance with section 87:

First and Second Proviso to Section 77 Companies  Act, 2013

Provided that the 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, 2018 within a period of three hundred days of such creation

b) In case of charges created on or after the commencement of the Companies (Amendment) Ordinance, 2018, within a period of sixty days of such creation.,

On payment of such additional fees as may be prescribed:

Provided further that if registration is not made within the period specified-

(a)  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, 2018, on payment of such additional fees as may be prescribed and diff fees may be prescribed for diff classes of companies

(b)  In clause (b) to the first proviso, the registrar may, on application, allow such registration to be made within a period of sixty days after payment of such advalorem fees

The period of 300 days for  creation and modification  of charges under Section 77 of the has been reduced to 60 days i.e 30 days of normal filing period and 30 days of additional fees.

The provision of seeking extension of time under Section 87 as per second proviso to section 77(1), is also modified, whereby a prohibitive ad valorem fees based on the amount of charge be levied for creation/modification of charge beyond 60 days but within 120 days 

 

Section 86 of the Companies Act, 2013

86. Punishment for contravention.—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 twenty five thousand rupees but which may extend to one lakh rupees, or with both

 

Section 86 of the Companies Act, 2013

86.(1) Punishment for contravention.—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 twenty five thousand rupees but which may extend to one lakh rupees, or with both.

(2) If any person wilfully 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.

 

 

 

 

Reference to Section 447 of the Companies Act, 2013 has been provided in case any person willfully furnishes any false or incorrect information or knowingly suppress any material information, required to be registered under Section 77 of the Companies Act, 2013

87. 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 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

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 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, 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 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 Clause (c) has been omitted

 

 

CG may provide relaxation in registration of charges  on being satisfied  on certain conditions:

a. Omission in giving intimation to the ROC regarding satisfaction of charge within the prescribed time

b. Omission or misstatement of an particulars w.r.t. any such charge or modification of charge or w.r.t any memorandum of satisfaction or other entry made u/s 82 or 83, was accidental or inadvertently made may direct for extending the time for intimating about the satisfaction of charge and rectification of the misstatement or omission made.

Conclusion

The aforesaid changes will ensure timely reporting of creation and modification of charges and will act as a check on laxity on the part of companies as well as creditors in timely reporting.

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