CHARGES
Sections 124 to 145 of the Companies Act, 1956
deal with registration of charges by companies. The subject can be conveniently
divided in five topics :-
Ø Filing of particulars of charge created.
Ø Filing of particulars of modification of charge.
Ø Filing of particulars of series of debentures.
Ø Filing of particulars of satisfaction of charge.
Ø Condonation of delay in filing of particulars of
charges created / modified / satisfied.
This section does not define the term ‘charge’ but states that a charge includes ‘mortgage’. For the applicability of section 124 – 145, charge would include a mortgage but shall exclude a pledge.
Charge has been defined in the Transfer of Property Act, 1882 under section 100 as “where immovable property of one person is by act of parties or operation of law made security for payment of money to another and the transaction does not amount to a mortgage, the later person is said to have a charge on the property”.
Charges include lien as well as an equitable charge whether created or evidenced by an instrument in writing or by deposit of title deeds or by an agreement to deposit. Deposit of title deeds results in creation of charges on the land even where the depositor is not a debtor. This section would apply to both Indian and Foreign companies. The ‘charge’ is no where defined in the Company Act 1956.
1. Fixed Charges: In a fixed charge a company creating a charge can only deal with the property subject to charge. The identification of the company does not change during the period for which the charge is created.
2. Floating Charge: In floating charge, Identification of the charge goes on changing and the final identification is at the time when the charge gets crystallized.
CREATION OF CHARGE (Section 125)
If a charge
created by the company falls within any of the classes as specified in section
125 (4), its particulars shall be filed with the Registrar of Companies Act,
1956 within 30 days of creation of charge. If particulars of charge could not
be filed within 30 days, the ROC has power to extend the said period by 30 more
days subject to payment of additional filing fee by the Company.
Particulars
of creation of charge shall be filed in Form No. 8 & 13, in 3 sets,
alongwith all the papers / instruments relating to creation of charge. Form No. 8 includes the following details :
·
Description of instrument
creating the charge
·
Amount secured
·
Property charged
·
Terms & conditions of
charge
·
Name & address of person
entitled to charge
Registrar of
Companies (ROC) will verify the particulars filed under Form No. 8 & 13 and
thereafter shall register charge which is conclusive evidence of compliance
with the requirements as to registration of the charge. ROC shall deliver 2
sets duly registered under seal and signature, one for lender and second for borrower.
If a
registerable charge is not registered, the transaction does not become void or
debt does not become irrecoverable but the security created by the charge or
mortgage becomes void against liquidator and creditors.
It is mandatory for a company to file the particulars of charge and
failure to do so or contravene the provisions of section 125 are punishable
under section 142 with fine extending up to rupees Five
Hundred for every day of default.
Offences
punishable under section 142 are compoundable under section 621A.
Charges were
held to be void against the liquidator or creditor unless registered. Court
observed that filing of copy of document of charge with Registrar is not the
formality but a definite legal requirement and that non-filing creates a
certain legal impediments. ANTIFRICTION BEARING CORPORATION LTD V. STATE OF
MAHARASTRA (1999) 20 SCL, 373 (Bom)
This section provides that any person acquiring the property or any share therein which is subject to charge shall be deemed to have notice from the date of registration. From the date of registration, doctrine of deemed notice (constructive notice) shall apply. This constructive notice is general and to all concerned about registration of charge and not about terms and condition or contents of the charge.
It must be noted that registration charges is an important requirement to alert public (Investors) about the existence of the charge.
This section contains the provisions relating to registration of charges on property acquired subject to charge. This section deals where a company acquires a property which is already charged and such charge is not registered. In such a case, charge can be got registered by the acquiring company within a period of thirty days. This section require a company to file the particulars of property, if any, acquired by its, subject to charge. Such filing is required to be done within 30 days from which acquisition was completed.
In case of properties situated outside India, period of thirty days are
counted from the date on which copy of instrument dispatched by the post with
due diligence, have been received in India.
SERIES OF DEBENTURES (Section 128)
Particulars
of series of debentures, containing or giving by reference to any other
instrument any charge giving pari passu (equal) benefit to the debentureholders
shall be filed with ROC within 30 days of execution of the deed containing the
charge in Form No. 10 & 13 together with the supporting documents of such
charge.
Registration of charge by ROC as in the case of
creation of charge on being satisfied of the contents.
It prescribes register of charges to be kept by Registrar of Company in the prescribed manner. Every company is required to forward to the Registrar pf Company the particular of charges in Form 13 along with a fee of Rs. 10/- for being entered in the register of charge. Form 13 is to be filed with Form nos. 8, 10 or 17 as the case may be.
SECTION 132:
This section provides that the Registrar should issue a Certificate of Registration for registering the charge. This certificate should be given under his hand and shall state the amount of security. Issue of such certificate is the conclusive evidence of compliance of provisions of part V of the Act.
MODIFICATION OF CHARGE (Section 135)
Any change
in terms / conditions / extent of operation of any charge already registered
tantamount to modification under Companies Act, 1956, such as : -
·
Change in rate of interest
(other than bank rate), repayment period or any other material term of loan.
·
Further charge for the same
loan by way of additional security.
·
Increase in limit.
·
Change in nature of security in
respect of charge already created.
Again Form
No. 8 & 13, in 3 sets, are required to be filed with ROC within 30 days (
within 60 days with additional fee ). The said forms will include the
instrument modifying the original charge.
ROC will
register the same under seal and signature and will deliver 2 sets of
modifications, one for lender and second for borrower.
SATISFACTION OF CHARGE (Section 138)
On
satisfaction of charge in full an intimation thereof shall be given to ROC
within 30 days of satisfaction of the charge by filing Form No. 17 & 13
together with a letter or certificate given by the charge holder confirming
that the charge has been satisfied in full.
ROC will
register Form No. 17 & 13 regarding satisfaction of charge and will deliver
2 sets of satisfaction, one for lender and second for borrower. Please note
that in this case no grace period is allowed under the Companies Act, 1956
unlike creation and modification.
PETITION TO CLB FOR CONDONATION OF DELAY / RECTIFICATION OF CHARGE (Sec. 141)
If for any
reason charge ( creation or modification ) could not be filed with ROC within
60 days ( 30 days under law + 30 days with additional fee under ROC power ) and
in case of satisfaction 30 days, then the Company have to take the condonation
of delay in filing such particulars with Company Law Board.
In case of
rectification / corrections required in a registered charge, the same can be
done only with the order of Company Law Board under this section.
The
condonation petition under section 141 include the following :
·
Petition containing details
about company, charge delayed and reason thereof.
·
Affidavit verifying the
petition.
·
Board Resolution authorising
director to make affidavit.
·
Memorandum of Appearance by
professional appearing on behalf of the company.
The Company
Law Board on hearing of the case or otherwise decide about the genuinity of the
case on the ground of just and equitable will levy cost for such delay and
condone the delay / rectification by issuing order in this behalf.
The Company
will file the copy of order alongwith Form No. 21 with ROC and get the
registration in this behalf.
PENALTY FOR CONTRAVENTION (Section 142)
If default
is made in filing of any charge created by the company or of the payment or
satisfaction of a debt in respect of which a charge has been registered or of
the issues of debentures of a series, requiring registration then, unless the
registration has been effected on the application of some other person, the
company, and every officer of the company or other person who is in default
shall be punishable with fine which may extend to Rs.5000/- for every day
during which the default continues.
In case of
default in compliance of any of the other requirements of this act, the
company, and every officer of the company who is in default, shall, without
prejudice to any other liability, be punishable with fine which may extend to Rs.10000/-.
ENTRIES IN THE REGISTER OF CHARGES (Section 143)
Every
company shall keep register of charges and enter therein all charges
specifically affecting property of the company, giving the details of :
Ø Date of charge
Ø Property charged
Ø Amount of charge
Ø Charge holder
In case of
default in compliance with the said section, any officer who knowingly omits or
wilfully authorises or permits the omission, shall be punishable with fine
which may extend to Rs.5000/-.
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