2. Duty to Register (Sec 77)

• It's the company's duty to register particulars of any charge it creates (within or outside India).
• This applies to all types of property - tangible or intangible, located in or outside India.

How to Register?

• File particulars of the charge in Form CHG-1 (or CHG-9 for debentures).
• Include a copy of the instrument creating the charge.
• This must be done within 30 days of creating the charge.

Who can register?

• Primarily the company creating the charge.
• If the company fails, the charge-holder (lender) can apply for registration (Sec 78).
• A company acquiring property that is already subject to a charge must also register it (Sec 79).

3. Registration Timeline (Post 02-11-2018)

• Initial Period: First 30 Days
  Register the charge normally.
• First Extension: Next 30 Days
  (i.e., within 60 days of creation)
  Requires payment of additional fees.
• Second Extension: Further 60 Days
  (i.e., within 120 days of creation)
  Requires payment of ad valorem fees and a declaration.

4. Consequences of Non-Registration

• The charge becomes VOID against the liquidator and other creditors.
• This means the charge-holder loses their security and becomes an unsecured creditor during winding up.
• However, the debt is still valid. The company is still obligated to repay the loan, but the security is lost.
• The charge-holder loses priority. A later charge that is registered properly will get priority over an earlier, unregistered charge.

Deemed Notice (Sec 80)

Once a charge is registered, it acts as constructive notice to the public. Anyone dealing with the company (e.g., buying property from it) is assumed to know about the registered charge, even if they haven't checked the records.

5. Registration by Charge-Holder (Sec 78)

• Company Fails to Register
  If the company doesn't register the charge within 30 days...
• Charge-Holder Applies
  The lender (charge-holder) can apply to the Registrar (RoC).
• RoC Gives Notice
  The RoC sends a notice to the company. What happens next?

  If Company Objects...

  If the company provides a good reason why the charge shouldn't be registered, or registers it themselves...

  » Registration is NOT allowed.

  If No Objection...

  If the company does not object within 14 days...

  » RoC registers the charge.

6. Modification of Charge (Sec 79)

• Any modification in the terms, conditions, or extent of a registered charge must also be registered.
• This is treated just like a new registration and must follow the same process and timelines.

Examples of Modification:

• Change in the rate of interest.
• Change in the repayment schedule.
• Enhancing or decreasing the loan limit.
• Partial release of a charged property.

The Registrar will issue a Certificate of Modification in Form CHG-3.

7. Satisfaction of Charge (Sec 82)

• When a loan is fully paid off, the company must inform the Registrar within 30 days.
• This is done by filing Form CHG-4.
• The timeline can be extended to 300 days with additional fees.

Process:

• On receiving Form CHG-4, the Registrar sends a notice to the charge-holder.
• The holder has 14 days to show cause why the satisfaction shouldn't be recorded.
• If no cause is shown, the Registrar enters a memorandum of satisfaction.
• A Certificate of Registration of Satisfaction (Form CHG-5) is then issued.

If the form is signed by the charge-holder, no notice is needed.

8. Registers, Penalties & Rectification

Register of Charges (Sec 85)

• Every company must keep a Register of Charges in Form CHG-7 at its registered office.
• A copy of the instrument creating the charge must also be kept.
• The register is to be preserved permanently; instruments for 8 years after satisfaction.

Punishment for Contravention (Sec 86)

• Company: Penalty of ₹5,00,000.
• Officer in Default: Penalty of ₹50,000.
• Wilfully providing false info attracts fraud provisions under Section 447.

Rectification by Govt. (Sec 87)

The Central Govt. (powers delegated to Regional Director) can order rectification of the register if there was an omission or misstatement due to accident, inadvertence, or other sufficient cause.