Registration of Charges
Section 77. Duty to register charges, etc.
77(1).
Whenever a company creates a charge whether:
(a). Inside or outside India.
(b). On property or assets situated within or outside India.
(c). On any of its undertakings, including intangible assets such as goodwill or trademarks.
It must register the details of that charge with the Registrar of Companies (ROC).
The registration must include:
The particulars of the charge.
The signatures of both the company and the charge-holder (lender or creditor).
The instrument (document) creating the charge.
All submitted in the prescribed form along with the applicable fees, within 30 days from the date of creation of the charge.
If the company fails to register the charge within 30 days, the law provides additional time depending on when the charge was created.
For charges created before the Companies (Amendment) Act, 2019, registration can be completed within 300 days of creation by paying additional fees.
For charges created after the Companies (Amendment) Act, 2019, registration may be done within 60 days of creation, subject to payment of additional fees.
If the charge still isn’t registered within these extended periods, there’s one last chance:
For older charges (created before the 2019 Amendment):
They can still be registered within 6 months from the commencement of the 2019 Act, with additional fees.
For newer charges (created after the 2019 Act):
The Registrar may allow another 60 days to register the charge, but the company must pay ad valorem fees.
Ad Valorem means fees based on the value of the charge.
If someone acquires rights over a property before the charge is actually registered, those earlier rights will not be affected by the later registration.
The Central Government may, after consulting the Reserve Bank of India (RBI), exempt certain types of charges from this registration requirement.
77(2).
Once the Registrar successfully registers the charge, he must issue a certificate of registration to:
The company.
The person (lender/charge-holder) in whose favour the charge was created.
This certificate serves as legal proof that the charge has been duly registered.
77(3).
If a company fails to register the charge:
It cannot be recognized by the liquidator or by any other creditor.
Unregistered charges are invalid against other creditors and have no legal standing in liquidation proceedings.
77(4).
Even though an unregistered charge is not legally recognized, this does not cancel the loan or the obligation to repay.
The debt itself remains valid only the security interest becomes unenforceable.
Section 78. Application for registration of a charge.
If a company does not register the charge with the Registrar of Companies (ROC) within 30 days, then:
The law allows the charge-holder (the creditor or lender) to take the initiative.
Without affecting the company’s liability for violating the law , the charge-holder may apply directly to the Registrar to have the charge registered.
The person in whose favour the charge is created typically a bank, financial institution, or lender can submit an application to the Registrar.
This application must:
Be made within the time.
In the form and manner prescribed (as per rules) and should include the instrument (the legal document that created the charge).
After receiving such an application, the Registrar has 14 days to act.
Before proceeding, the Registrar must give notice to the company informing it that the charge-holder has applied for registration.
Now, the company has two choices:
1. It may itself proceed to register the charge.
2. It may show valid reasons (sufficient cause) explaining why the charge should not be registered.
If the company does neither, the Registrar can go ahead and register the charge based on the application of the charge-holder.
For such registration, prescribed fees (and if delayed, additional fees) must be paid to the Registrar.
Usually, these are paid by the charge-holder at the time of applying for registration.
If the charge-holder pays fees to get the charge registered he has the legal right to recover the amount of those fees & any extra charges from the company.
Section 79. Section 77 applies to certain matters.
If a company purchases or acquires any property and that property is already encumbered by a charge then:
The company must register that charge with the Registrar of Companies as if it had created it itself.
Essentially , when the company becomes the new owner of a property that already has a charge attached, the law requires that the existing charge be formally registered in the company’s name.
If there is any change in the terms, conditions, extent, or operation of an already registered charge, then such modification must also be registered with the Registrar.
This means that whenever the company and the lender alter the terms of the charge:
Increasing or decreasing the loan amount.
Changing the interest rate.
Adding or removing property from the security.
Modifying repayment terms.
The company must file and register those changes, following the same procedure as in Section 77.
Section 80. Date of notice of charge.
When a company creates a charge and registers that charge as required by law, then:
Any person who later acquires that property whether by purchase, transfer, or otherwise is legally considered to know that the property is already subject to a charge.
Section 81. Register of charges to be kept by Registrar.
81(1).
The Registrar of Companies (ROC) must maintain a register for every company, containing complete details of all the charges that have been registered under this Chapter of the Companies Act.
A charge means any interest or right that a lender (such as a bank or financial institution) has over the assets or property of a company as security for a loan.
The register maintained by the Registrar will include:
The particulars of each charge created by the company.
Details such as the amount secured, the date of creation, the property or asset charged.
The name of the charge-holder (that is, the lender or creditor).
The format and method of maintaining this register are prescribed by the government through the Companies (Registration of Charges) Rules — meaning the government decides exactly how and where the register is maintained, whether digitally or otherwise.
81(2).
Any person whether they are a shareholder, creditor, potential investor, or even a member of the public may inspect this register upon payment of a small prescribed fee.
This means that anyone can verify whether a company has any existing charges or borrowings secured against its assets before doing business with it.
For example:
If a bank wants to know whether a company has already pledged its property as security, it can inspect this register.
Similarly, an investor or buyer can check whether the company’s assets are free from encumbrances.
Section 82. The company is to report the satisfaction of the charge.
82(1).
When a company repays the entire loan or the debt secured by a charge (for example, after paying back a bank loan for which its property was mortgaged), the company must inform the Registrar of Companies (ROC).
This intimation has to be made:
In the prescribed form,
Within 30 days from the date of such payment or satisfaction (i.e., the date on which the debt is fully paid off or settled).
If the company fails to give this intimation within 30 days, the Registrar may allow an additional period of up to 300 days, upon application by:
The company.
The charge-holder (the lender/creditor) but only after payment of additional prescribed fees.
82(2)
Once the Registrar receives the company’s intimation of full payment or satisfaction, the Registrar will:
Send a notice to the charge-holder (creditor) asking them to confirm that the charge has indeed been fully satisfied.
The charge-holder has up to 14 days to respond and show cause if they disagree with the company’s statement.
If the charge-holder does not respond within 14 days, the Registrar will assume that the information given by the company is correct and will:
Enter a memorandum of satisfaction in the Register of Charges (maintained under Section 81), and
Inform the company that the entry has been made.
Exception:
If the company’s intimation is in the prescribed format and is signed by the charge-holder, then this notice to the charge-holder is not necessary because the creditor’s signature itself confirms the satisfaction of the charge.
82(3).
If the charge-holder disagrees and shows cause (for example, claims that the debt has not been fully paid), then:
The Registrar will record a note of this objection in the Register of Charges, and
Will inform the company about the same.
82(4).
Even if the company does not send any intimation, the Registrar still has the power to make entries in the Register of Charges —
Under Section 83, or
On his own initiative (if he obtains proof or information that a charge has been satisfied).
Section 83. Power of Registrar to make entries of satisfaction and release in the absence of intimation from the company.
83(1)
The Registrar may, based on sufficient evidence, determine that the debt for which a charge was created has been paid or satisfied, either fully or partially.
Alternatively, the Registrar may find that a portion of the property or asset that was previously under charge has been released from that charge or has ceased to be part of the company’s property.
When such evidence is provided and the Registrar is satisfied that the repayment or release is genuine, he may enter in the Register of Charge:
(a). A memorandum of full satisfaction (If the loan has been completely paid off).
(b). A memorandum of partial satisfaction (If only part of the loan has been repaid)
(c). A a note of release (If a portion of the company’s property is no longer subject to the charge).
This action can be taken by the Registrar even if the company has not formally informed him of the repayment or release.
83(2).
Once the Registrar records an entry in the Register of Charges whether it is for:
Full satisfaction of a charge.
Partial satisfaction.
Release of property from the charge,
He is legally required to notify all the parties affected by this change.
This includes both the company that created the charge and the charge-holder.
The Registrar must send this intimation within 30 days of making the entry in the Register of Charges.
The Registrar sends the notice to ensure that both parties are officially informed of the updated status of the charge.
Section 84. Intimation of appointment of receiver or manager
84(1).
If any person such as a lender, bank, or court obtains an order for appointing a receiver or a person to manage property that is subject to a charge (security), or if such an appointment is made under a power given in an agreement or instrument (like a debenture trust deed or loan agreement), certain legal steps must be followed.
The person who obtains or makes the appointment must give a written notice of the appointment within 30 days, counted from either:
The date of the court order.
The date of the actual appointment.
This notice must be sent to:
The company whose property is affected.
The Registrar of Companies (ROC).
Along with the notice, a copy of the order or instrument authorizing the appointment must also be submitted.
Once the Registrar receives the notice along with the prescribed fees, he will record the details of:
The receiver or manager appointed.
The instrument or court order authorizing such appointment in the Register of Charges maintained under Section 81 of the Companies Act.
84(2).
When the appointment of a receiver or manager comes to an end, for instance:
When the company repays the loan in full, or
When the receiver’s duties are completed, certain formalities must be followed.
1. The receiver or manager himself is responsible for giving notice that he has ceased to hold the appointment.
2. This notice must be sent to:
The company whose property was under charge.
The Registrar of Companies (ROC).
Once the Registrar receives this notice, he will make an entry in the Register of Charges, updating the records to show that the receiver or manager’s appointment has ended.
Section 85. Company’s register of charges
85(1).
Every company is legally required to keep a Register of Charges at its registered office.
This register must be maintained in the prescribed form and in the prescribed manner, according to the rules made under the Companies Act.
The Register of Charges must include details of all charges and floating charges affecting:
Any property.
Any assets.
Any undertaking of the company.
Each entry in the register must clearly specify the full particulars of the charge, including:
The date of creation of the charge,
The amount secured,
The name of the charge-holder (lender or creditor),
The property or asset over which the charge is created, and
Any modifications made to the charge at a later stage.
A fixed charge is created over a specific identifiable asset such as land, a building, or machinery.
A floating charge is a general charge over assets that change in value or form from time to time — such as stock, inventory, or receivables.
The floating charge “floats” over these assets until it crystallizes (becomes fixed), which usually happens upon default, liquidation, or other specified events.
Along with maintaining the Register of Charges, the company must also keep a copy of the instrument that created the charge.
This refers to the actual legal document — such as a loan agreement, mortgage deed, or debenture trust deed — that establishes the charge.
These documents must be kept at the company’s registered office for reference and verification purposes by authorized persons or regulators.
85(2).
The Register of Charges and the instrument(s) (documents) kept under sub-section (1) must be open for inspection at the company’s registered office during business hours.
(a) Inspection by Members and Creditors
Members (shareholders) and creditors (those to whom the company owes money) have the right to inspect the Register of Charges free of cost.
This right allows them to verify whether the company’s property or assets are already charged, mortgaged, or pledged before they make further investments or lend additional funds.
(b) Inspection by Others (Public or Outsiders)
Any other person, such as a potential investor, supplier, or third party, may also inspect the Register of Charges.
However, such persons are required to pay the prescribed fee as specified under the Companies (Registration of Charges) Rules.
The company can impose reasonable restrictions on such inspections through its Articles of Association.
These restrictions may include:
Limiting inspection hours to certain times during business hours.
Restricting the number of persons who may inspect the register at one time.
However, the company cannot completely deny the right of inspection it can only regulate it to ensure smooth functioning and security.
Section 86. Punishment for contravention.
86(1).
If a company fails to comply with any provision of this Chapter, such as:
Not registering a charge.
Failing to report the satisfaction of a charge.
Not maintaining the Register of Charges properly,
then penalties will apply.
The company will be liable to pay a penalty of ₹5,00,000.
In addition, every officer of the company who is responsible for the default, including directors, the company secretary, or finance officers, will be required to pay a penalty of ₹50,000.
86(2).
If any person, not necessarily limited to company officers:
Will fully furnishes false or incorrect information.
Knowingly hides or suppresses important facts that are required to be registered under Section 77 then:
That person will be liable for action under Section 447 of the Companies Act, which deals with punishment for fraud.
Under Section 447:
The act of knowingly giving false information or concealing material facts is treated as fraud.
The punishment can be severe, including:
Imprisonment for a term ranging from 6 months to 10 years.
Fine which may extend to three times the amount involved in the fraud.
If the fraud involves public interest, the minimum imprisonment is 3 years.
87. Rectification by Central Government in Register of charges
The Central Government may intervene if it is satisfied that certain situations have occurred under the provisions of this Chapter.
(a).
One such situation is the omission to intimate satisfaction or payment of a charge.
If a company forgets or delays informing the Registrar that a charge has been paid off or satisfied within the prescribed time limit.
The time limit is usually 30 days under Section 82, the Central Government can extend the time period for filing such intimation.
(b).
Another situation is the omission or misstatement in previously filed details.
If a company, while filing details of a charge, accidentally omitted or misstated information such as:
The amount.
Property description.
Terms of the charge, then:
The Central Government can allow the company to correct or rectify those details in the Register of Charges.
Conditions for Granting Rectification
Before allowing any correction or extension, the Central Government must be satisfied that:
1. The mistake or omission was accidental, inadvertent, or occurred due to some sufficient reason.
2. The mistake or omission does not prejudice (harm) the interests of the creditors or shareholders of the company.
The company or any person interested (like a creditor or charge-holder) must apply to the Central Government.
The Government then examines the case and, if satisfied, issues an order:
Extending the time for filing the intimation; or
Allowing the rectification of the mistake or omission in the register.
The Government may also impose terms and conditions as it finds fair and necessary before granting such relief.
