MCA vide its General Circular no. 23/2020 dated June 17, 2020 has issued Scheme for relaxation of time for filing forms related to creation or modification of charges under the Companies Act, 2013 (“the Act”).

Synopsis of provisions related to filing (section 77 & 78 of the Act)

  • As per section 77, the charge shall be registered with the Registrar within 30 days from its creation or modification in e-form CHG-1 (for other than debenture) or in e-form CHG-9 (for debentures). The time period can be extended up to 120 days which would attract late fees.
  • In simple word the companies are required to file forms related to creation or modification of charges within the timelines provided in section 77 i.e. a total of 120 days of the creation or modification of charge.
  • In case if company fails to register such charge then the charge holder may file the form related to creation or modification of charges pursuant to section 78 (within the overall timelines for filing of such forms as specified in section 77)

Why such Initiative taken by Ministry

  • Ministry had received several representation, due to the situation of pandemic, requesting the relaxation in timelines for the filing of certain charge related forms.
  • As we also know the fact that under the Companies Fresh Start Scheme, 2020, the benefit of waiver of additional fees was not extended to the charge related documents. Thus Ministry took an initiative and came out with this new scheme with a thought to condone the delay in filing certain forms related to creation/modification of charges.

Effective from

  • The scheme shall come into effect from the date of issue of this Circular i.e. June 17, 2020

Applicability of Scheme

Scheme shall apply in respect of filing of given two e-forms for creation/modification of charge by company or charge holder

a) Form CHG-1 – for other than Debentures

b) Form CHG-9 – for Debentures

The scheme provides two different time frames on which it is applicable as explained below:

A. If the date of creation/modification of charge is before March 01, 2020 but the timeline for filing such forms had not expired under section 77 (i.e. 120days) as on March 01, 2020

I. Relaxation of Time

  • The period beginning from March 01, 2020 and ending on September 30, 2020 shall not be reckoned for the purpose of counting the number of days under section 77 or section 78.
  • If in case the form is not filed within such period i.e. till September 30, 2020, the first day after February 29, 2020 shall be reckoned as October 01, 2020 for the purpose of counting the number of days within which the form is required to be filed under section 77 or section 78 of the Act.

Let’s understand it with some examples:

1. If the charge is created on 01.01.2020 and if company files form on any date between the period beginning from 01.03.2020 and ending on 30.09.2020 then what will be due date as per scheme?

> As time frame 01.03.2020 to 30.09.2020 will not be taken up for counting, thus counting will begin from the date of creation i.e. 01.01.2020 till 29.02.2020 = 59 days and as form filed after 30 days but before 60 days thus will attract normal fees as well as additional fee.

2. If the charge is created on 01.01.2020 and if company files form on any date after 30.09.2020 then what will be due date as per scheme?

> As time frame 01.03.2020 to 30.09.2020 will not be taken up for counting, thus counting will begin from the date of creation i.e. 01.01.2020 till 29.02.2020 = 59 days and 01.10.2020 shall be taken as 60th day for counting and fee purpose.

In simple words the period beginning from March 01, 2020 and ending on September 09, 2020 will be exempted from being counted for the purpose of counting the number of days under section 77 or section 78.

II. Applicable Fees

  • If the form is filed on or before 30.09.2020 – the fees payable as on 29.02.2020 under the Fees Rules for the said form shall be charged.
  • If form filed after 30.09.2020 – the applicable fees shall be charged under the Fees Rules after adding the number of days beginning from 01.10.2020 and, ending on the date of filing plus the time period lapsed from the date of the creation of charge till 29.02.2020

B. If the date of creation/modification of charge falls on any date between March 01, 2020 to September 30, 2020 (both dates inclusive)

I. Relaxation of Time

  • The period beginning from the date of creation/modification of charge and ending on September 30, 2020 shall not be reckoned for the purpose of counting the number of days under section 77 or section 78.
  • If in case the form is not filed within such period i.e. till September 30, 2020, the first day after the date of creation/modification be reckoned as October 01, 2020 for the purpose of counting the number of days within which the form is required to be filed under section 77 or section 78 of the Act. (120 days)

Let’s understand it with example:

If the charge is created on 01.04.2020 and if company files form on any date between the period beginning from 01.04.2020 and ending on 30.09.2020 then only normal fees will apply. If in case company file it after 30.09.2020 then 01.10.2020 shall be considered as 1st day for counting and fee purpose.

II. Applicable Fees

  • If the form is filed on or before 30.09.2020 –Normal fees under the Fees Rules for the said form shall be charged.
  • If form filed thereafter –the First day after the date of creation/modification of charge shall be reckoned as 01.10.2020 and the number of days till the date of filing of the form shall be counted accordingly for the purposes of payment of fees under the Fees.

Non – applicability of the Scheme

The scheme shall not apply in following cases-

a) The forms i.e. CHG-1 and CHG-9 had already been filed before the date of issue of this Circular;

b) The timeline for filing the form has already expired under section 77 or section 78 of the Act prior to 01.03.2020;

c) The timeline for filing the form expires at a future date;

d) Filing of Form CHG-4 for satisfaction of charges.

The article is based on the relevant provisions and as per the information existing at the time of the preparation. In no event Author shall be liable for any direct and indirect result from this article. This is only a knowledge sharing initiative.

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