Section 77 exclusively talks about ‘creation of charge’. Sub-section (1) of Section 77 states that it shall be the duty of every company creating a charge within in India or outside India, on its property or assets whether 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 such charge in Form CHG-1(other than debentures) and CHG-9 (for debentures), on payment of such fees and in such manner as may be prescribed, with the Registrar within 30 days of its creation.
First proviso conveys the remedy available with the company in case if it fails to register the creation of charge within 30 days. In such case company can apply for extension with Registrar and Registrar on an application by the company, allow such registration to be made within a period of 300 days of such creation on payment of additional fees as may be prescribed.
But what if company still fails to register it within 300 days then in that case it shall seek extension of time in accordance with section 87 says the second proviso. Section 87 requires company to go for the CG (RD) approval in case where the limit of 300 days is crossed. Further we will discuss Section 87 in detail.
Third proviso protects the rights created in the property before the charge is actually registered. It claims that any subsequent registration of a charge shall not prejudice any right acquired in respect of any property before the charge is actually registered.
For instance X ltd. a company has created charge on its property ‘P’ in favor of ‘Mr. A’ but it fails to register the same within 30 days. Later X ltd. created the charge on the same property in favor of ‘Mr. B’ and register the same. After some time X ltd. with the ROC approval registers the charge created in favor of ‘Mr. A’ within 300 days but such subsequent registration shall not prejudice the rights of ‘Mr. B’ (i.e. ‘Mr. B’ will have the first charge on such property as it was registered prior to the charge registered in favor of ‘Mr. A’ irrespective of the fact that it was created after the charge created in favor of ‘Mr. A’)
Section 77(2) Where a charge is registered with the Registrar under sub-section (1), he shall issue a certificate of registration of such charge in as may be prescribed to the company and, as the case may be, to the person in whose favor the charge is created.
Section 77(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 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). In short registered charge holder shall have preference over unregistered one.
Section 77(4) nothing in sub-section (3) shall mean that the company can skip from the obligation for repayment of the money secured by a charge.
Section 78 Where a company fails to register the charge within the period of 30 days the person in whose favor the charge is created(i.e. charge holder) may apply to the Registrar for registration of the charge along with the instrument created for the charge, and the Registrar may, on such application after giving notice to the company within a period of 14 days, 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:
Provided that 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 fees and additional fees paid by him to the ROC for the purpose of registration.
Section 79 provides that the provisions of section 77 shall also, so far as may be, apply to-
a) A company acquiring any property on which charge is already created.
b) Any modification in the terms, extent or operations of any charge already registered.
It means in both the above cases CHG-1 or CHG-9, as the case may be, is to be filed with ROC within 30 days.
Rule 5 is the corresponding rule to section 79, it says that Rule 4(i.e. condonation of delay by ROC) shall apply mutatis mutandis to above both the cases.
Rule 4 Condonation of delay by ROC- In case where company fails to register the creation of charge (including acquisition of property subject to charge) or modification of charge within 30 days of such creation or modification then in that case it shall apply to the ROC for the extension in Form CHG-10 supported by declaration from the company signed by its secretary or director that such belated filing shall not prejudice the rights of any intervening creditors of the company, and the ROC may on being satisfied that company had sufficient cause for not doing so , allow the registration of the same after 30 days but within 300 days of the date of such creation and modification of charge on payment of additional fees.
Rule 6 Certificate of registration.
(1) Where a charge is registered with the Registrar under sub-section (1) of section 77 or section 78(i.e. by the charge holder), he shall issue a certificate of registration of such charge in Form No.CHG-2
(2) Where the particulars of modification of charge is registered under section 79, the Registrar shall issue a certificate of modification of charge in Form No. CHG-3
(3) The certificate issued by the Registrar under sub-rule (1) and sub-rule (2) shall be conclusive evidence that the requirements of the Act and the rules made thereunder as to registration of creation or modification of charge, as the case may be, have been complied with.
Section 82 deals with the satisfaction of charge.
Sub-section(1) conveys that a company shall give intimation to the ROC in Form CHG-4 about the payment or satisfaction in full of any charge registered within 30 days from the date of such payment or satisfaction. It also states that provision of section 77(1) shall, as far as may be, apply to an intimation given under this section. The above sentence has raised a doubt that whether the proviso’s given under sub-section (1) of section 77 shall apply or not. Let’s discuss the consequences in both the case –
What if it applies?
Then in such case if satisfaction of charge is not intimated within 30 days to ROC, company may apply, to ROC up to 300 days from satisfaction of charge, and thereafter to CG if the delay is beyond 300 days.
What if it doesn’t?
Then in that case if satisfaction is not intimated within 30 days to ROC, company shall apply directly to CG for condonation.
Well Rule 12(1) had made it clear that proviso’s given thereunder shall not apply. How? That we will discuss while doing Rule 12.
Section 82(2) 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:
Provided that 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.
Section 82(3) if any cause is shown, the Registrar shall record a note to that effect in the register of charges and shall inform the company.
Section 82(4) nothing in this section shall be deemed to affect the powers of the Registrar to make an entry in the register of charges under section 83 or otherwise than on receipt of an intimation from the company.
Section 87 provides for the rectification by CG (RD) in Register of Charges.
Sub-section (1) announces the power of CG to grant extension and direct for rectification.
The CG on being satisfied that-
(i)(a) the omission to file with the Registrar the particulars of any charge created by a company including acquisition of any property subject to charge or any modification of such charge(Here there is an omission to ‘file’ with ROC some ‘particulars’ of charge created or modification done); 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(Here there is an omission to ‘register’ ,any charge or satisfaction of charge); 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
(In this case, registration of charge, modification, satisfaction is duly made but there is an ‘omission’ or ‘mis-statement’ of ‘any particular’ while registering the same); or
(ii) On any other grounds, it is just and equitable to grant relief,
It (CG) may on the application in Form CHG-8 by 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.
Rule 12 –Condonation of delay and rectification of register of charges.
It proclaims that in case where the creation and modification is not registered within 300 days from its creation (including acquisition of any property subject to charge) or modification and where the satisfaction of charge is not filed within 30 days from the date on which such payment of satisfaction, the ROC shall not register the same unless the delay is condoned by CG.
To capsulate it in nutshell, we can say –
Where the delay is beyond 30 days in case of creation and modification, application to ROC is to be made in Form CHG-10 and where the delay is beyond 300 days application shall be made to CG for condonation in Form CHG-8.
Where the satisfaction of charge is not filed within 30 days application to CG is to be made in Form CHG-8 for condonation.
The application for condonation of delay and for such other matter covered under section 87 shall be filed with CG in Form CHG-8 along with the fees.
The order passed by CG shall be filed in Form INC-28 along with the fees to ROC for registration.
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