Registration of Charge by Bank/Charge holder

Can a bank/charge holder make application for registration of charge?

YES!.

Section 78 of the Companies Act, 2013 allows a bank/charge holder to make application for registration of charge.

Section 77 of the companies act, prescribes registration of charge as a duty of every company within 30 days of its creation, or within a period of 300 days from the creation of charge on reasonable grounds for delay.
In case, the company fails to register the charge within 30 days, section 78 of the Act empowers the charge holder (the person in whose favor the charge is created) to make application for the registration of charge along with the instrument created for the charge.

What is the corresponding e-form for making application for registration of charge by the charge holder

e-form CHG-1 (in point no.4, whether the applicant is ‘The Company’ or ‘The Charge Holder’, second option should be selected)

Did the e-form CHG-1 requires DSC/Digital signature of any Director of the Company

No, form filed by the charge holder do not require the signature of any director of the company. Signature of the Manager/authorized person of the charge holder is sufficient

What is the time limit for filing e-form CHG-1 for registration of charge

After 30 days but before 300 days from the date of creation of charge

Will the Registrar of companies send any intimation to the company

Yes, on filing of e-form CHG-1 by the charge holder, Registrar will send a notice to the company

How long will it take to register the charge

As the e-form CHG-1 is filed by the charge holder, Registrar of Companies will send a show cause notice to the company seeking their objections, if any. So, it will take at least 15 days to register the charge and to issue the registration certificate

What about registration of modification of charge

Time period/e-form/Notice as required for registration of charge will be applicable to the modification of charge too.

Can the charge holder recover the costs incurred in registration of charges from the company

Yes, section 78 empowers the charge holder to recover from the company the amount of any fees or additional fees paid by him to the Registrar for the purpose of registration of charge.

What are the relevant sections

  • SECTION 2(16) ―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;
  • SECTIION 77. Duty to register charges, etc.—
    (1) It shall be the duty of every company creating a charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, and 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 such form, on payment of such fees and in such manner as may be prescribed, with the Registrar within thirty days of its creation:
    Provided that the Registrar may, on an application by the company, allow such registration to be made within a period of three hundred days of such creation on payment of such additional fees as may be prescribed:
    Provided further that if registration is not made within a period of three hundred days of such creation, the company shall seek extension of time in accordance with section 87:
    Provided also that any subsequent registration of a charge shall not prejudice any right acquired in respect of any property before the charge is actually registered.
    (2) Where a charge is registered with the Registrar under sub-section (1), he shall issue a certificate of registration of such charge in such form and in such manner as may be prescribed to the company and, as the case may be, to the person in whose favour the charge is created.
    (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).
    (4) Nothing in sub-section (3) shall prejudice any contract or obligation for the repayment of the money secured by a charge.
  • SECTION 78. Application for registration of charge.—Where a company fails to register the charge within the period specified in section 77, without prejudice to its liability in respect of any offence under this Chapter, the person in whose favour the charge is created may apply to the Registrar for registration of the charge along with the instrument created for the charge, within such time and in such form and manner as may be prescribed and the Registrar may, on such application, within a period of fourteen days after giving notice to the company, 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 favour the charge is created, that person shall be entitled to recover from the company the amount of any fees or additional fees paid by him to the Registrar for the purpose of registration of charge.

Sreenu T
 

Sreenu is a consultant interested in corporate laws and education. He enjoys learning, discovering, growing and sharing knowledge. Besides this he is a faculty in the field of Financial Management, Forex, Goods and Services Tax and a Guitarist. Read More For assistance Contact Author

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