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Sunday, May 11, 2014

Registration of Charges: Procedure, Modification and Satisfaction

Compulsory Registration of the charge:
Under Section 125(4) of the Companies Act, 1956, the following are the assets of a company, if any charge or mortgage created, must be registered with the Registrar of Companies:
1. A charge for the purpose of securing any issue of debentures;
2. A charge on uncalled share capital of the company;
3. A charge on any immovable property, wherever situate or any interest therein;
4. A charge on any book debts of the company;
5. A charge, not being a pledge, on any moveable property of the company;
6. A floating charge on the undertaking or any property of the company including stock in trade;
7. A charge on calls made, but not paid;
8. A charge on a ship or any share in a ship;

9. A charge on goodwill, or a patent or a license under a patent, on a trademark, or on a copyright or a license under a copyright.

Procedure for registration, Modification and Satisfaction of charges:
Procedure of Registration
A charge which is not created by a company does not require registration. Under Section 127(1) of the Companies Act, 1956, where a company acquires any property which is subject to a charge of any such kind as would, if it had been created by the company after the acquisition of the property, have been required to be registered under Part V of the said Act. The steps to be followed in registration of charge are mentioned below:
Ø  The prescribed particulars together with copy of the instrument creating the charge or modification thereof or satisfaction of charge shall be filed with the Registrar in Form 8, or form 10, or Form 17 as the case may be, in triplicate
Ø  A copy of every instrument evidencing any charge or modification of charge and required to be filed with the Registrar in pursuance of sections 125, 127, 128 and 135 shall be verified as follows:
1.       Where the instrument or deed relates solely to property situate outside India, a copy shall be verified by a certificate either under the seal of the company, or under the hand of a responsible officer of the company, or under the hand of some person interested in mortgage or charge on behalf of any person other than the company, stating that it is a true copy.

2.       Where the instrument or deed relates, whether wholly or partly, to property situate in India, the copy shall be verified by a certificate of a responsible officer of the company stating that it is true copy or by a certificate of public officer given under and in accordance with the provisions of Section 76 of the Indian evidence Act, 1872.
Ø  Form 13 shall be filed in triplicate, along with the relevant Form 8, or Form 10, or Form 17, as the case may be, with a fee of rupees ten.
Ø  Form 8, or Form 10, or Form 17, as the case may be, shall be signed on behalf of the company and the charge-holder.
Ø  For the purposes of Section 132, the Registrar shall affix stamp on the relative Forms and accompanying instruments with the word “Registered” under his signature with date and a copy thereof be delivered to the company and the charge-holder.
Ø  The register kept in pursuance to sub-section (3) of Section 130 shall be open for inspection by any person on payment of a fee of rupees ten for each inspection
 The particulars of charges in connection with issue of debentures of a series shall be filed with Registrar of Companies in Form 10, along with copy of instrument creating the charge and with the required filing fees as per Schedule X to the Companies Act, 1956, within a period of 30 days after the execution of deed containing the charge or if there is no such deed, after the execution of any debentures of the series, failing which the company and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. However, the Registrar may extend the time up to the next thirty days, if he is convinced of the sufficiency of the cause for the default.
Modification of charge [Section 135]
Whenever the terms or condition or extent and operation, of any charge registered are modified, it shall be duty of the company to send the registrar the particulars of such modification in form No.8 within 30 days of modification.
Satisfaction of charge [Section 138]
Ø  The Company is required to give intimation to the registrar of the payment or satisfaction, in full, of any charge relating to the company and requiring registration under the companies Act, within 30 days from the date of payment or satisfaction.
Ø  On receipt of information regarding satisfaction of charge, the Registrar shall invite objection, if any, within specified time (not exceeding 14 days).
Ø  If no objection is received, the Registrar shall order that a memorandum of satisfaction be entered in the resister of charges.
Ø  Notwithstanding that no intimation has been received from the company the Registrar can, under Section 139 of the Act, register satisfaction with respect to any registered charge if he is satisfied on the evidence produced before him that:
(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 of undertaking charged has been realised from the charge or has been released from the charge of has ceased to form part of the company's property or undertaking.
Power of Central Govt. to extend time for Registration
Under Section 141 of the Act, the Central govt. has powers to grant extension of time for filing of particulars of any charges or any modification thereof or for giving of any intimation about the payment or satisfaction of change, if the board is satisfied that the omission to do so within the prescribed time.
(i) Is accident; or
(ii) Is due to inadvertence; or
(iii) Is not of a nature as to prejudice the position of creditors or shareholders of the company; or

(iv) It is just and equitable to grant relief on other grounds.