UMLA 5th Year B.B.A. L.L.B. (Hons.

Company Law Assignment

BY,

Aditya Yash Vyas

Roll No. - 40
 Topic –

CHARGE
 Index

Sr. No. Particulars Page No.

1. What is a charge? 4

2. Kinds of a charges 6

3. What is a mortgage? 10

4. Charge and pledge distinguished 12

5. Registration of charges 13

6. Subsequent registration shall not prejudice any right 16

7. Gist of E-filing under charge management 20

8. Consequences of non-registration of charge 21

9. Particulars of Charges 21

10. Procedure for registration of creation/modification satisfaction of 22

charge
 Charge

Charge

WHAT IS A CHARGE?

A charge is a security given for securing loans or debentures by way of a mortgage on the assets
of the company. A company, like a natural person, can offer security for its borrowings.
Normally, the debentures and other borrowings of the company are secured by a charge on the
assets of the company. Where property, both existing and future, is agreed to be made available
as a security for the repayment of debt and creditors have a present right to have it made
available, a charge is created. The legal right of the creditor can only be enforced at some future
date if certain conditions governing the loan are not met. The creditor gets no legal right either
.solute or special to the property charged. He only gets the right to have the security made
available/enforced by an order of the Court.
In simple terms a charge is a right created by a company i.e. “Borrower” on its assets or
properties or any of its undertakings present or future, in favor of a financial institution or a bank
or any other lender, i.e. “creditor” who has agreed to extend financial assistance.
According to Section 2(16) of the Act, “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.
The Charge here has the following essential features:
 There are minirnum two parties to the transaction. the creator of the charge and the
chargeholder.
 The subject. matter of charge may be on current or future assets and properties of the
borrower.
 The intention of the borrower to offer one or more of its specific asset or properties as
security for repayment of the borrowed money together with payment of interest at the
agreed rate etc should manifest from an agreement entered by him in favour of the
lender, written or othemise.
The key words mentioned in the definition are “interest” and “lien”, The meaning of -interesr as
per Black's law dictionary is 'legal share in something: all or part of a legal or equitable claim to
a right in property <right, title, and interest>. Collectively, the word includes any aggregation of
rights, privileges, powers and immunities; distributively, it refers to anyone right, privilege,
power, or immunity.’
The meaning of “lien” as per the Black's Law dictionar y legal right or interest that a creditor has
in another's properly lasting usually until a debt or duty it secures is satisfied.’Lien’ strictly, is

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simply a right to possess and retain property until some daim attaching to it is satisfied or
discharged.
In both the cases whether “interest” and “lien” a charge is to be created.
Need For Creating A Charge On Company’s Assets
Almost all the large and small companies depend upon share capital and borrowed capital for
financing their projects. Borrowed capital may consist of funds raised by issuing debentures,
which may be secured or unsecured, or by obtaining financial assistance from financial
institution or banks.
The financial institutions/banks do not lend their monies unless they are sure that their funds are
safe and they would be repaid as per agreed repayment schedule along with payment of interest.
In order to secure their loans they resort to creating right in the assets and properties of the
borrowing companies, which is known as a charge on assets. This is done by executing loan
agreements, hypothecation agreements. mortgage deeds and other similar documents, which the
borrowing company is required to execute in favour of the lending institutions/ banks, etc.
As a matter of convenience and practice, as and when more funds are required by companies,
they approach the same institutions/banks or certain new institutions/ banks and offer same
assets as security for fresh loans.
However, when the same assets are charged for second and subsequent times, a very important
question arises as to priority in respect of the charges in favour of different institutions. This
situation is managed by securing consent of the earlier lending institutions to the creation of
second and subsequent charges on the same assets. With their consents, the charges of all the
lending institutions ranks pari passu, i.e.. on the same footing.
However, the earlier lending institution may not give its consent to the creation of second charge
on the ground that the realisable value of the asset charged in its favour is not adequate to cover
its loan and as such it cannot share its right of charge with the lending institutions which seek
second and subsequent charges.
The real question which alerts the lending institutions is how to ensure that the assets being
offered as security for their proposed loans are not already encumbered.

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Kinds of Charges

A. On the basis of the nature of charge,

A charge on the property of the company as security for debts may be of the following kinds,
namely:
(i) Fixed or specific charge;
(ii) Floating charge,

Fixed or Specific Charge

A charge is called fixed or specific when it is created to cover assets which are ascertained and
definite or are capable of being ascertained and defined, at the time of creating the charge e.g.,
land, building, or plant and machinery. A fixed charge, therefore, is a security in terms of certain
specific property and the company gives up its right to dispose off that properly until the charge
is satisfied. In other words, the company can deal with such properly, subject to the charge so
that the charge holder's interest in the properly is not affected and the charge holder gets priority
over all subsequent transferees except a bona fide transferee for consideration without notice of
the earlier charge. In the winding-up/Liquidation of the company, a debenture holder secured by
a specific charge will be placed in the highest ranking class of creditors.
Floating Charge
A floating charge, as a type of security, is peculiar to companies as borrowers. A floating charge
is not attached to any definite property but covers property of a fluctuating type e.g., stock-in-
trade and is thus necessarily equitable. A floating charge is a charge on a class of assets present
and future which in the ordinary course of business is changing from time to lime and leaves the
company free to deal with the properly as it sees fit until the holders of charge take steps to
enforce their security. “The essence of a floating charge is that the security remains dorrnant
until it is fixed or crystallised.” But a floating security is not a future security. It is a present
security, which presently affects all the assets of the company expressed to be included in it. On
the other hand, it is not a specific security; the holder of such charge cannot affirm that the assets
are specifically mortgaged to him. The assets are mortgaged in such a way that the mortgagor i.e.
the company can deal with them without the concurrence of the mortgagee.
The advantage of a floating charge is that the company may continue to deal in any way with the
property which has been charged. The company may sell. mortgage or lease such property in the
ordinary course of its business if it is authorised by its memorandum of association.
B. On the basis on the conditions of the charge

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• pari-passu charge- Under, this the charge is shared by rnore than one lender in the ratio of their
outstanding amount. The prior consent of the existing charge holder is required by the company.
• Exclusive charge- The security under the exclusive charge is provided to a particular lender
only.
• Further charge. With the consent on the first charge holder, the particular assets on which
charge is already created may be provided to other lenders as second charge. In case of
liquidation ol assets, the first charge holder has the right to recover his dues and the balance is
recovered by the second charge holder followed by others.
CASE LAWS
Sorne Judicial pronouncements about different types of charges
1. Official Liquidator v. Sri Krishna Deo, (1959) 29 Com Cases 476: AIR 1959 All 247 and
Roy & Bros. v. Ramnath Das, (1945) 15 Com Cases 69, 75 (Cal), The plant and machinery of
a company embedded in the earth or permanently fastened to things attached to the earth became
a part of the company's immovable property and therefore apart from the registration under the
Companies Act, registration under the Indian Registration Act would also be necessary to make
the charge valid and effective.
2. Cosslett (Contractors) Ltd., Re. (1996) 1 BCLC 407 (Ch D) A construction company's
washing machine which was in use at the site was declared under the terms of the contract to be
the employer's property during the period of construction. This was held to have created a fixed
charge and not a floating charge on the machine because the machine was only one fixed item
and was not likely to change.
3. A "floating security-. observed Lord Macnaghten in Government Stock investment
Company Ltd. v. Manila Rly. Company Ltd., (1897) A.C. 81, "is an equitable charge on the
assets for the time being of a going concern. It attaches to the subject charged in the varying
condition in which it happens to be from time to time. It is the essence of such a charge that it
rernains dormant until the undertaking charged ceases to be a going concern, or until the person
in whose favour the charge is created intervenes".
4. Illingworth & Another v. Holdsworth & Another, (Ibid), "A floating charge is ambulatory
and shifting in its nature hovering over and so to speak floating with the property which it is
intended to affect until some event occurs or act is done which causes it to settle and fasten on
the subject of the charge within its reach and grasp
5. Maturi U. Rao v. Pendyala A.LR. 1970 A.P. 225 When the floating charge crystallizes it
becomes fixed and the assets comprised therein are subject to the same restrictions as the fixed
charge.
6. In Smith v. Bridgend County Borougn Council (2002) BCLC 77 (HC), the agreement was
held to constitute a floating charge, in so far as it allowed the employer in various situations of
default by the contractor, to sell the contractor's plant and equipment and apply the proceeds in

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discharge of its obligations. A right to sell an asset belonging to a cebtor and appropriate the
proceeds to payment of the debt could not be anything other than a charge. It was a floating
charge because the property in question was a fluctuating body of assets which could be
consumed or removed from the site in the ordinary course of the contractor's business.
Crystallisation of Floating Charge
A floating charge attaches to the company's property generally and remains dormant till it
crystallizes or becomes fixed. The company has a right to carry on its business with the help of
assets over which a floating charge has been created till the happening of some event which
determines this right. A floating charge crystallises and the security becomes fixed in the
following cases:
(a) when the company goes into liquidation;
(b) when the company ceases to carry on its business;
(c) when the creditors of the debenture holders take steps to enforce their security;
(d) on the happening of the event specified in the deed.
In the aforesaid circumstances, the floating charge is said to become fixed or to have crystallised.
Until the charge crystallises or attaches or becomes fixed, the company can deal with the
property so charged in any manner it likes.
Although a floating charge is a present security, yet it leaves the company free to create a
specific mortgage on its property having priority over the floating charge. In Government Stock
Investment Co. Ltd. v. Manda Railway Co. Ltd. (1897) A.C. 811, the debentures were secured by
a floating charge. Three months' interest became due but the debenture holders took no steps and
so the charge did not crystallize but remained floating. The company then made a mortgage of a
specific part of its property. Held, the mortgagee had priority. The security for the debentures
remained merely a floating security as the debenture holders had taken no steps to enforce their
security.
In Parmanent Houses (Holdings) Ltd. 1988 BCLC 563(CH D)2 where a cornpany issued
debenture creating a charge in favor of a lending bank mentioning that the charge shall
crystallize on happening of an event or default in payrnent. When the payment was not made on
demand by bank, it was held that the charge was no longer a floating charge at the time when
receiver was appointed.

Effect of Crystallisation of a Floating Charge

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On crystallization, the floating charge converts into a fix. charge on the property of the company.
It has priority over any subsequent equitable charge and other unsecured creditors. But
preferential creditors who have priority for payment over secured creditors in the winding-up get
priority over the claims of the debenture holders having floating charge.
Postponement of a Floating Charge
The creation of a floating charge leaves the company free to create a legal and equitable
mortgage on the same properly until the floating charge crystallises. Where such a mortgage is
created it has priority over the floating charge which gets postponed. The floating charge is
postponed in favour of the following persons if they act before the crystallization of the security:
(a) a landlord who distrains for rent;
(b) a creditor who obtains a garnishee order absolute;
(c) a judgement creditor who attaches goods of the company and gets them sold (But if the goods
are not sold and the debenture holders take action in the meantime, the floating charge has
priority):
(d) the employees of the company, as well as other preferential creditors in the event of winding-
up of the company;
(e) the supplier of goods to the company under a hire-purchase agreement on terms that goods
are to remain the property of the seller until they are paid for in full, has priority over the floating
charge, whether such hire-purchase agreement is made before or after the issue of the debentures
with a floating charge.
Debenture-holders with a floating charge do not, therefore, enjoy the same rights as the secured
creditors, for claims against the company. The deed creating the floating charge may, however,
contain a clause restricting the power of the company to create charges in priority to or pari
passu with it. But even in such a case a person who takes mortgage without notice of floating
charge gets priority. But such a contingency can be safeguarded by registering the charge. In
terms of Section 803 of the Act. where a mortgage or charge on any property or assets of a
company or any of its undertakings required to be registered under Section 774 of the Act has
been so registered, any person acquiring such property, assets, undertakings or any part thereof
or any interest or share therein shall be deemed to have notice of the charge as from the date of
such registration.

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Restraint on the Power to Create Charges with Priority to a Floating Charge

As the floating charge allows wide powers to the company to deal with its property subject to the
floating charge, it is common to insert a clause restricting the powers of the company to create
charge with priority to or pari passu with it. Thus, if the company creates a mortgage in favour of
any person who has notice of the floating charge and restriction, such person ranks after the
floating charge. But a person who obtains a valid mortgage, and can show either (i) that he was
not aware of the existence of the floating charge; (ii) that though he was aware of the charge, he
was not aware of the restriction. is entitled to priority by virtue of the legal estate. Furthermore,
where a specific charge is created expressly subject to a floating charge, the specific charge is
postponed as from the date when the floating charge crystallises by the appointment of a
receiver.
Invalidity of Floating Charge
A floating charge remains afloat until a winding up commences, unless it has already crystallised
through the intervention of the debenture holders or the creditors. Also, a floating charge is valid
only against the unsecured creditors, whether in a winding-up/liquidation or otherwise. But the
Act prevents an unsecured creditor to get priority over the other creditors by obtaining a
liquidation/floating charge when he learns that the company, liquidation is imminent.
Accordingly, Section 332 of the Companies Act, 2013 provides that a floating charge on the
undertakings or property of the company, which is created within 12 months immediately
preceding the commencement of the winding up proceedings of a company shall be invalid,
unless it is proved that the company was solvent immediately after the creation of the charge.
But the charge will be valid to the extent of the amount of any cash paid to the company at the
time of or after the creation of, and in consideration for the charge, together with interest on that
amount at 5 per cent per annum or such other rate as may be notified by the Central Government.

WHAT IS A MORTGAGE?
A mortgage is the transfer of an interest in specific immoveable property for the purpose of
securing the payment of money advanced or to be advanced by way of loan, an existing or future
debt or the performance of an agreement which may give rise to pecuniary liability.

Difference between Mortgage and Charge

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S.no. Mortgage Charge

1. A mortgage is created by the act of the parties. A charge may be created

either through the act of
parties or by operation of law.

2. A mortgage requires registration under the Transfer A charge created by operation

of Properly Act, 1882. of law does not require
registration. But a charge
created by act of parties
requires registration.

3. A mortgage is for a fixed term. The charge may be in

perpetuity.

4. A mortgage is a transfer of an interest in specific A charge only gives a right to

immovable property. receive payment out of a
particular properly.

5. A mortgage is good against subsocluont transfers A charge is good against

mortgage is good against subsequent transferees. subsequent transferees with
notice.

6. A simple mortgage carries personal liability unless In case of charge, no personal

excluded by express contract. liability is created. However,
where a charge is the result of
a contract. there rnay be a
personal remedy.

7. A mortgage is a transfer of an interest in a specific There is no such transfer of

immovable property. interest in the case of a charge.
Charge does not operate as
transfer of an interest in the
property and a transferee of
the property gets the property
free from the charge provided
he purchases it for value
without notice of the charge.

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Charge And Pledge Distinguished

According to the generally accepted definition, a 'pledge' is a bailment of personal property as
security for some debt or engagement, redeemable on certain terms, and with an implied power
of sale on default. It consists of a delivery of goods by a debtor to his creditor as security for a
debt or other obligation, to be held until the debt is repaid along with interest or other obligation
of the debtors is discharged, and then to be delivered back to the pledger, the title not being
changed during the continuance of the pledge.
Unlike a pledge, a 'charge' is not a transfer of property of one to another. It is a right created in
favour of one, referred to as “the lender" in the immovable property of another, referred to as
"the borrower" as security for repayment of the loan and payment of interest on the terms and
conditions contained in the loan documents evidencing charge.
Both a pledge a charge are the result of voluntary act of parties. Both create security but the
nature of the security is different.

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Registration of charges- Section 77(1)

Any charge created
(a) within or outside India.
(b) on its property or assets or any at its undertakings.
(c) whether tangible or otherwise. and situated in or outside India shall be registered.
(i) Particulars of charges that is being tiled with Registrar of Companies is to be signed by
the company creating the charge and the charge holder in Form No. CHG-1 (for other
than Debentures) or Form CHG-9 (for debentures) as the case rnay be.
(ii) The Charge has to be registered within 30 days of its creation. It may bo registered on an
application by the company to the registrar beyond 30 days but before 300 days on
payment of additional fees.

Fourth Proviso to Section 77(1) states that the section w.r.t. registration of charges, shall not
apply to such charges as may be prescribed in consultation with the Reserve Bank of India.
Condonation of delay by Registrar- within 300 days from the date of creation of charge/its
modification
Proviso to Section 77(1) states that the Registrar may on an application by the company allow
registration of charge within three hundred days of creation or modification of charge on
payment of additional fee. The Registrar may, on being satisfied that the company had sufficient
cause for not filing the particulars and instrument of charge, if any, within a period of thirty days
of the date of creation of the charge, allow the registration of the same after thirty days but
within a period of three hundred days of the date of such creation of charge or modification of
charge on payment of additional fee.
The application for delay shall be made and supported by a declaration from the company signed
by its secretary or director that such belated filing shall not adversely affect rights of any other
intervening creditors of the company.
Condonation of delay by the Central Government beyond 300 days from the date of
creation
If company fails to register the charge even within this period of three hundred days, it may seek
extension of time in accordance with Section 87 from the Central Govemment.
Section 87 (1) states that 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

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(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, 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.
Section 87 (2) states that when 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 of Companies (Registration of Charges) Rules, 2014

When the instrument creating or modifying a charge is not filed within a period of three hundred
days from the date of its creation (including acquisition of a property subject to a charge) or
modification and where the satisfaction of the charge is not filed within thirty days from the date
on which such payment of satisfaction, the Registrar shall not register the same unless the delay
is condoned by the Central Govemment.
The application for condonation of delay and for such other matters covered in sub-clause (a), (b)
and (c) of clause (i) of sub.section (1) of section 87 of the Act shall be filed with the Central
Government in Form No.CHG-8 along with the fee.
The order passed by the Central Government under sub-section (1) of section 87 of the Act shall
be required to be filed with the Registrar in Form No INC.28 along with the fee as per the
conditions stipulated in the said order.

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Subsequent Registration Shall Not Prejudice Any Right

Third Proviso to Section 77(1) states that any subsequent registration of a charge shall not
prejudice any right acquired in respect of any property before the charge is actually registered.
Application for registration of charge by the charge-holder, when company fails to register
a charge
According to Section 78 where a company fails to register the charge within the period of 30
days referred to in sub-section (i) of Section 77, the person in whose favour the charge is created
may apply to the Registrar for registration of the charge alongwith the instrument created for the
charge in Forrn No.CHG-1 or Form No.CHG-9, as the case may be, duly signed along with fee.
The registrar rnay, on such application, give notice to the company about such application. The
cornpany may either itself register the charge or shows sufficient cause why such charge should
not be registered.
On failure on part of the company, the Registrar may allow registration of such charge within
fourteen days after giving notice to the company shall allow such registration.
Where registration is affected on application of the person in whose favour the charge is created,
that person shall be entitled to recover from the company, the amount of any fee or additional
fees paid by him to the Registrar for the purpose of registration of charge.
Certificate of Registration of Charge/Modification of charge
According to Section 77(2) mad with Rule 6 of Companies (Registration of Charges) Rules,
2014, when a charge is registered with the Registrar. Registrar shall issue a certificate of
registration of charge in Form No.CHG-2 and for registration of modification of charge in Form
No.CHG-3 to the company and to the person in whose favour the charge is created.
The certificate issued by the Registrar whether in case of registration of charge or registration of
modification, as the case may be shall be conclusive evidence that the requirements of Chapter
VI of the Act (Registration of Charges) and the rules made thereunder as to registration of
creation or modification of charge, as the case may be, have been complied with.
Further, Section 77(3) provides that no charge created by the 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 and a certificate of
registration is given by the Registrar. However, this does not prejudice any contract or obligation
for the repayment of the money secured by a charge.
Acquiring Property under Charge and Modification of Charge
Section 79 of the Act makes it clear that the requirement of registering the charge shall also
apply to a company acquiring any property subject to charge or any modification in terms and
conditions of any charge already registered.

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The provisions relating to condonation of delay shall apply. rnulatis mutandis, to the registration
of charge on any property acquired subject to such charge and modification of charge under
section 79 of the Act.
Verification of Instruments
According Rule 3(4) of the Companies (Registration of Charges) Rules, 2014, a copy of every
instrument evidencing any creation or modification of charge and required to be filed with the
Registrar in pursuance of section 77, 78 or 79 shall be verified as follows:
(a) where the instrument or deed relates solely to the property situated outside India, the
copy shall be verified by a certificate issued either under the seal if any of the company,
or under the hand of any Director or Cornpany Secretary of the cornpany or an authorised
officer of the charge holder or under the hand of some person other than the compary
who is interested in the mortgage or charge;
(b) where the instrument or deed relates; whether wholly or partly, to the property situated in
India, the copy shall be verified by a certificate issued under the hand of any Director or
Company Secretary of the company or an authorised officer ot the charge hold.
Satisfaction of Charges
According to section 82 read with the rules, the company shall give intimation to the Registrar of
the payment or satisfaction in full of any charge within a period of thirty days from the date of
such payment or satisfaction in Form No.CHG-4 along with the fee. The Registrar may, on an
application by the company or the charge holder, allow such intimation of payment or
satisfaction to be made within a period of three hundred days of such payment or satisfaction on
payment of such additional fees as rnay be prescribed.
On receipt of such intimation. the Registrar shall issue a notice to the holder of the charge calling
a show cause within such tirne not exceeding fourteen days, as to why payment or satisfaction in
full should not be recorded as intimated to the Registrar. 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 rnaintained by the registrar under section 815 and shall inform the company. If
the cause is shown to the Registrar shall record a note to that effect in the register of charges and
shall inform the company accordingly.
However the aforesaid notice shall not be sent. in case intimation to the registrar is in specified
form and is signed by the holder of charge. [Proviso to Section 82(2,]
Power of registrar to make entries of satisfaction In absence of intimation from the
company:
There may be times where a company rnay fail to send intimation of satisfaction of charge to the
Registrar but according to section 83 of the Act, registrar may on receipt of satisfactory evidence
of satisfaction register memorandum of satisfaction. The evidences may be —

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(a) The debt for which the charge was given has been paid or satisfied in whole or in part; or
(b) Part of the property or undertaking charged has been released from the charge;
(c) Part of the property or undertaking ceased to forrn part of he company's property or
undertaking.
The Registrar rnay enter in the register of charges a memorandum of satisfaction.
Section 83(2) states that the Registrar shall inform affected parties within thirty days of making
the entry in the registrar of charges.
Certificate of registration of satisfaction of charge: Where the Registrar enters a mernorandum of
satisfaction of charge in full in pursuance of section 82 or 836. he shall issue a certificate of
registration of satisfaction of charge in Form No CHG-5.
Notice of Charge
According to section 80, 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 deerned to have notice of the
charge from the date of such registration. The section clarifies that if any person acquires a
property, assets or undertaking for which a charge is already registered, it would be deemed that
he has complete knowledge of charge from the date the charge is registered.
Register of Charges Maintained in ROC's Office
In accordance wilh section 81 and the rules the Registrar of Companies shall maintain a register
containing particulars of the charges registered in respect of every company. The particulars of
charges maintained on the Ministry of Corporate Affairs portal (www.mcagov.in/MCA21) shall
be deemed to be the register of charges for the purposes of section 81 of the Act.
This charge register shall be open to inspection by any person on payment of fee for each
inspection.
Intimation of appointment of receiver or manager
Section 84 provides that if any person obtains an order for the appointment of a receiver of, or of
a person to rnanage 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
thirty 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.
Section 84(2) states that any person so appointed 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.

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As per Rule 9 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.
Company's Register of Charges
Section 85 read with rule 10 provides that every company shall keep at its registered office a
register of charges in Form No. 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.
Such register of charges shall contain the particulars of all the charges registered with the
Registrar on any of the property, assets or undertaking of the company and the particulars of any
property acquired subject to a charge as well as particulars of any modification of a charge and
satisfaction of charge.
All the entries in the register shall authenticated by a director or the secretary of the cornpany or
any other person authorised 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 eight years from the date of satisfaction of
charge by the company.
A copy of the instrument creating the charge shall also be kept at the registered office of the
company along with the register of charges.
Inspection of Charges - Section 85(2)
The register of charges and the instrument of charges kept by the cornpany shall be open for
inspection —
(a) by any mernber or creditor of the company without fees;
(b) by any other person on payment of fee subject to reasonable restriction as the company
by its articles impose.
Liquidator or any other creditor take into account the unregistered charges.

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 Charge

Gist Of E-Filing Under Charge Management

S. No. E-Form Purpose

1 CHG-1 Application for registration of

creating or modifying the
charge (for other than the
Debentures)

2 CHG-2 Certificate of registration

3 CHG-3 Certificate of modification of

charge

4 CHG-4 Intimation of the satisfaction

to the Registrar

5 CHG-5 Memorandum of satisfaction

of charge

6 CHG-6 Notice of appointment or

cessation of receiver or
manager

7 CHG-7 Register of charges

8 CHG-8 Application for condonation

of delay shall be filed with the
Central Government
Creating or modifying the
9 CHG-9 charge in(for debentures
including rectification)

Consequences Of Non-Registration Of Charge

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 Charge

According to Section 77 of the Cornpanies Act, 2013, all types of charges created by a company
are to be registered by the ROC, where they are non-compliant and are not filed with the
Registrar of Companies for registration, it shall be void as against the liquidator and any other
creditor of the company. In the case of ONGC Ltd v. Official Liquidators of Arnbica Mills Co
Ltd (2006) 132 Comp Cas 606 (Guj), the ONGC had not been able to point out whether the so
called charge, on the basis of which it was claiming preference as a secured creditor, was
registered or not. It was held that in the light of this failure. ONCG could not be treated as a
secured creditor in view of specific provisions of section 1257 and the statutory requirement
under the said section. This does not, however, mean that the charge is altogether void and the
debt is not recoverable. So long as the company does not go into liquidation, the charge is good
and may be enforced.
Void against the liquidator means that the liquidator on winding up of the company can ignore
the charge and can treat the concerned creditor as unsecured creditor. The property will be
treated as free of charge i.e. the creditor cannot sell the property to recover its dues.
Vold against any creditor of the company means that if any subsequent charge is created on the
same property and the earlier charge is not registered, the earlier charge would have no
consequence and the latter charge if registered would enjoy priority. In other words, the latter
charge holder can have the property sold in order to recover its money.
Thus, non-filing of particulars of a charge does not invalidate the charge against the company as
a going concern. It is void only against the liquidator and the creditors at the time of liquidation.
The company itself cannot have a cause of action arising out of non-registration [Independent
Automatic Sales Ltd. vs Foster (1962) 32 Comp Cas].
Particulars Of Charges
The following particulars in respect of each charge are required to be filed with the Registrar:
(a) date and description of instrument creating charge;
(b) total amount secured by the charge;
(c) date of the resolution authorising the creation of the charge; (in case of issue of secured
debentures only);
(d) general description of the property charged;
(e) a copy of the deed/instrument containing the charge duly certified or il there is no such deed,
any other document evidencing the creation of the charge to be enclosed;
(f) list of the terms and conditions of the loan; and
(g) name and address of the charge holder.
Procedure For Registration Of Creation/Modification Satisfaction Of Charge

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 Charge

If a company has passed special resolutions under Section 180(2) authorising its Board of
directors to borrow funds for the requirements of the company and under Section 180(1)(a),
authorising its board of directors to create charge on the assets and properties of the company to
provide security for repayrnent of the borrowings in favour of the financial institutions/banks or
lenders and in exercise of that authority has signed the loan documents and now proposes to have
the charge, created it should follow the procedure detailed below:
1. Where the special resolution as required under section 180 is passed, Form MGT-14 of
the Companies (Management and Administration) Rules, 2014 is to be filed with the
Registrar.
2. According to section 77, every company creating any charge created within or outside
India on property or assets or any of the company's undertakings whether tangible or
otherwise, situated in or outside India shall have to be registered. For the purpose of
creating/modifying a charge file particulars of the charge with the concerned Registrar of
Companies within thirty days of creating the Form No.CHG-1 (for other than
Debentures) or Form No.CHG-9 (for debentures including rectification), as the case may
be.
3. Attach the following documents with e-Forrn No. CHG-9 / CHG-1: \
(a) A certified true copy of every instrument evidencing any creation or modification of
charge;
(b) In case of joint charge and consortium finance, particulars of other charge holders;
(c) Instrument(s) evidencing creation or modification of charge in case of acquisition of
property which is already subject to charge together with the instrument evidencing
such acquisitions.
4. Payment of fees can be made online in accordance with Annexure ‘B’ of Companies
(Registration offices and fees) Rules, 2014. Electronic payments through internet can be
made either by credit card or by internet banking facility.
5. If the particulars of charge cannot be filed within thirty days due to unavoidable reasons
then it may be filed within three hundred days of such creation after payment of such
addition prescribed under Annexure 'B' of Companies (Registration offices and fees)
Rules, 2014.
6. Such application for delay to the Registrar shall be rnade in Form No. CHG-1 and
declaration from the company signed by its secretary or director that such belated filing
shall not adversely affect rights of any other intervening creditors of the company.
7. Where a charge is registered Registrar will issue a certificate of registration of such
charge in Form No. CHG-2. Where the particulars of modification of charge are
registered the Registrar shall Issue a certificate of modification of charge in Form No.
CHG-3.
8. A cornpany shall within a period of thirty days from the date of the payment or
satisfaction in full of any charge registered, give intimation of the same to the Registrar in
Form No.CHG-4 along with the fee as prescribed under Annexure ‘B’ of Companies
(Registration Offices and Fees) Rules, 2014.

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 Charge

9. Where the Registrar enters a memorandum of satisfaction of charge in full, obtain a

certificate of registration of satisfaction of charge in Form No. CHG-5.
10. Incorporate changes in relation to creation, modification and satisfaction of charge in the
register of charges maintained by the company in Form No. CHG.7 and enter therein
particulars of all the charges registered with the Registrar on any of the property, assets or
undertaking of the company and the particulars of any property acquired subject to a
charge as well as particulars of any modification of a charge and satisfaction of charge.
Such register is to be kept at the registered office of the cornpany.
11. All the entries in the register shall be authenticated by a director or the secretary of the
company or any other person authorised by the Board for the purpose.
12. The register of charges shall be preserved permanently and the instrument creating a
charge or modification thereon shall be preserved for a period of eight years from the
date of satisfaction of charge by the cornpany.
13. Where the satisfaction of the charge is not filed with the Registrar within thirty days from
the date on such payment of satisfaction, an application for condonation of delay shall be
filed with the Central Government in Form No. CHG-8 along with the fee as prescribed
under Annexure 'B' of Companies (Registration Offices and Fees) Rules, 2014.
14. Where the instrument creating or modifying a charge is not filed with the Registrar within
a period of three hundred days from the date of its creation (including acquisition of a
property subject to a charge modificationan application for condonation of delayshall be
filed with the Central Government in Form No. CHG-8 along with the fee as prescribed
under Annexure ‘B’ of Companies (Registration Offices and Fees) Rules, 2014.
15. The oreder passed by the Central Government should be filled with the Registrar in
formNo. INC 28 along with the fee as per the conditions stipulated in the said order.
16. For all other matters other than condonation of delay, application shall be made to the
Central Government in Form No. CHG-8 along with the fee.

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 Charge

Bibliography

1. Company Law Module, CS Executive