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;

Applicable Section 77 to 87 of Companies Act, 2013.

Applicable Rules The Companies (Registration of Charges) Rules, 2014

CHARGE CREATION REQUIRMENT

Charge is a type of security created on some property of the company to secure company lent. Charge can be fixed if it is attached to a specific item of property (for example land); a floating charge is created when charge is created over changing assets (for example cash, receivables). It is the duty of every company to register with the Registrar of Companies specific charges created by the company on its assets. The purpose of registration of charge is to provide public notice to those who contemplate giving credit to the company on how far the property of the company is encumbered.

In the present scenario, no of Non Performing Assest are increasing due to this financial and lending institutions do not lent money unless they feel secure that lent amount and interest is secure and are in safe hands. To secure their loans they resort to crate right on the assets of the borrowing company.

Charge is created on the basis of instruments like mortgage deed, hypothecation deed, loan agreement or any other documents.

Who can file application for registration of Charge?

  • It is duty of Company to Create charge.
  • Where a company fails to register the charge within the period of thirty days referred to in sub-section (1) of section 77, without prejudice to its liability in respect of any offence under this Chapter, 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.The person is entitled to recover from the company the amount of fees.

But before filling of form person will give 14 days’ notice to Company. If company doesn’t register the charge or show sufficient cause then person himself will file the form with ROC

TIME LIMIT FOR CREATION AND MODIFICATION OF CHARGE 

1. If charge is created before date of Ordinance i.e. 02.11.2018

The, Companies (Amendment) Ordinance 2018 as replaced by The, Companies (Amendment) Ordinance 2019 dated 12th January,2019 has completely changed the scenario for creation and modification of charge and reduced the time limit from 300 days to 120 days and no chance to Condon the delay after120 days.

As per Section 77 of Companies Act, 2013, Company have to create charge with the Registrar within 30 days of creation of Charge.

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

Provided further that if the registration is not made within the period as specified above i.e 30+30=60 days —

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.

The total time can be understood from following table.

Steps Particulars Time Period Days Fees
First Step Registration of Charge with ROC Within 30 days of Creation 0+30 Normal Fees
Second Step If Fails to file with in 30, days within a period of 60 days of such creation 0+30+30 = 60 Normal Fees +

Additional Fees

Third Step If Fails to file with in 60, days Registrar may, on an application, allow such registration to be made within a further period of sixty days 0+30+30+60 = 120 Normal Fees +

Additional Fees + *Advalorem Fees

  • If Company fails to create charge as specified in the above table then there is no way to Condonation for creation/ modification.

The following additional fees or advalorem fees as the case may be, shall be payable with effect from August 1, 2019

Period of delay Small Companies and One Person Company Other than Small Companies and One Person Company
Up to 30 days 3 times of normal fees 6 times of normal fees
More than 30 days and up to 90 days 3 times of normal fees plus an ad valorem fee of 0.025 per cent. of the amount secured by the charge, subject to the maximum of one lakh rupees. 6 times of normal fees, plus an ad valorem fee of 0.05 per cent. of the amount secured by the charge, subject to the maximum of five lakh rupees”.

Example 1_Suppose Loan/ Charge Amount is INR 1 Cr.

1. Within 30 days – Maximum Fees Rs.600/-

2. Delay Up to 30 days – Total Rs.4200/- (Rs.600/- + Rs.3600/-)

3. Delay More than 30 days and up to 90 days – Rs.9200/- {Rs.4200/- + Rs.5000/- (i.e. 0.05% of Rs.1 Cr)}

Example 2___ Suppose Loan/ Charge amount -Rs.100 Cr

1. Within 30 days – Maximum Fees Rs.600/-

2. Delay Up to 30 days – Total Rs.4200/- (Rs.600/- + Rs.3600/-)

Delay More than 30 days and up to 90 days –  Roc fees Rs.4200/- + advalorem fees Rs.5 Lac=Rs.504200/-

The power to Condon the delay lies in Section 87 of CA, 2013 and as per Ordinance, 2018 there is modification in Section 87 of Companies Act, 2018.

Before Ordinance After Ordinance
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

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

Note: After ordinance, i.e. 02.11.2018 clause relating to Condonation of delay in creation/ modification of charge has been removed from Section 87.

2. If charge is created before date of Ordinance i.e. 02.11.2018

As per Section 77 of Companies Act, 2013, Company have to create charge with the Registrar within 30 days of creation of Charge.

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:

Condonation: 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”

Provided further that if the registration is not made within the period specified i.e. 300 days from such creation then 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 different fees may be prescribed for different classes of companies.

SATISFACTION OF CHARGE

In case of Charge satisfaction before and after 02.11.2018 in such case following shall be period for filling e-form CHG-4 for satisfaction of charge with ROC.

Steps Particulars Time Period Days Fees
1 Satisfaction of Charge with ROC Within 30 days of Satisfaction 0+30 = 30 Days Normal Fees
2 If fails to file within 30 days Within a period of 300 days of such satisfaction 30+270 = 300 Days Normal Fees +

Additional Fees

3 If fails to file within 300 days Filing of form with RD for satisfaction of Charge After 30+270+= ∞∞ Normal Fees + Additional Fees + CONDONATION

FEES

Delay can be condoned by filling application with Regional Director.

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION. For further clarification contact at 85600-29055 or via mail at csgovindjaiswal@gmail.com

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3 Comments

  1. Rabi Narayan says:

    With regard to who can file application for registration of Charge?, it is the law that

    a) It is duty of Company to Create charge.

    b) Where a company fails to register the charge within the period of thirty days referred to in sub-section (1) of section 77, without prejudice to its liability in respect of any offence under this Chapter, 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.The person is entitled to recover from the company the amount of fees. But before filling of form person will give 14 days’ notice to Company. If company doesn’t register the charge or show sufficient cause then person himself will file the form with ROC

    However is that true in practice? Lenders are interested in catching good borrowers and once disbursement is made they never shares even documents and please note that without the digital signature of bank , company can not file the e-form where as lender can file without Company DSC. Hence in my opinion lender must be punished not Company if we really support Ease of doing business. This is my view

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