Chapter 7 of 17 · Company Law and Practice

Charges

22 questionsasked in 14 of 15 attemptsOrder: by topic, latest first

Chapter weightageCh. 6Ch. 8
Questions per attemptTap a bar to filter
J23
December 2020Q. 1(c)5 marksSyllabus 2017

Comment on the following:

(c)An encumbrance may be created by a charge, pledge or a mortgage.

Read in the manual: S.2(16)
June 2021Q. 3A(iii)4 marksOld syllabusOR, alternative to Q. 3

(iii)Suraj Ltd. has a subscribed capital of ₹200 crore out of which ₹100 crore has been paid-up. The Articles of Association of the company has a provision that the company shall have a Reserve Capital of ₹50 crore which shall be called up only at the time of winding up of the company. Suraj Ltd. desires to borrow from its bankers by creating a charge on the uncalled capital and Reserve Capital. Advise the company.

Read in the manual: S.65
December 2025Q. 4(c)5 marksSyllabus 2022

(c)MNO Infrastructure Ltd., engaged in real estate development, avails a secured term loan of 50 crores from XYZ Bank Ltd. The loan is secured by a charge on the company’s land assets. The loan agreement is signed on 1st January 2025, but due to internal delays, the company failed to file the particulars of charge with the Registrar of Companies (ROC) within the prescribed period under the Companies Act, 2013.

By the time the company approaches the ROC for registration after expiry of the overall prescribed period, the ROC refused to allow the registration of charge citing non-compliance with the statutory time limits. Consequently :

•The charge remains unregistered on the MCA portal.

•A third-party lender, relying on the MCA records, provided additional secured credit to MNO Infrastructure Ltd., assuming there is no prior charge on the property. The charge so created in favour of the third-party lender was registered with the ROC.

•A dispute arises between XYZ Bank Ltd. and the third-party lender over priority of claim when the company defaults on repayment.

Considering the above scenario and in light of the provisions of the Companies Act, 2013 decide whether the refusal of registration of charge by the ROC was valid. Also assess the priority of charge of XYZ Bank Ltd. over the charge of third-party lender referring to the consequences of non-registration of a charge.

Read in the manual: S.77Also asked in: December 2022, Q. 2(c), December 2019, Q. 1(c)
June 2024Q. 4(c)5 marksSyllabus 2022

(c)Rockstar Limited (the company) is having its registered office at Hyderabad and also set-up an establishment in the Germany. It obtained a loan from the German bank creating a charge on the assets of the foreign establishment. The company received a notice from the Registrar of Companies (the Registrar) for not filing the particulars of charge created by the company on the property or assets situated outside India. The company wants to defend the notice on the ground that the company is not required to register the particulars of the charge created on the assets not located in India. Referring to the provisions of Companies Act, 2013 advise the company, whether the stand taken by the company is correct. Also, apprise the company of the provision regarding the timeline without extension, for registering the particulars of the charge and the effect of its non-registration.

Read in the manual: S.77
December 2022Q. 2(c)3 marksSyllabus 2017

(c)“Non-filing of particulars of a charge shall be void against the company as a going concern” – Examine this statement in light of the provisions of the Companies Act, 2013.

Read in the manual: S.77Also asked in: December 2025, Q. 4(c), December 2019, Q. 1(c)
December 2021Q. 2(b)3 marksSyllabus 2017

(b)XYZ Limited has an office building in London. The Company has been granted a term loan of ₹15 crore from a Bank. The Company wants to mortgage office building of London. Examining the provisions of the Companies Act, 2013, answer the following :

(i)Whether the company can mortgage the above office building ?

(ii)Whether a charge can be created for property situated outside India ?

Read in the manual: S.77Also asked in: December 2018, Q. 6(d), June 2021, Q. 2A(iv)
December 2021Q. 2A(ii)4 marksOld syllabusOR, alternative to Q. 2

(ii)A newly appointed Company Secretary of Overseas Ltd. with its headquarter in Kolkata discovered that the Company, four months ago, had created a floating charge on its assets located in Bhutan for raising a new loan and to continue its expansion of business smoothly.There was no filing of form CHG-1 and the officers believe that the charge created related to properties in Bhutan and hence no formalities were needed with ROC in India. Evaluate the stand taken and what are the options available with the Company Secretary now in this regard.

Read in the manual: S.77 S.87Also asked in: December 2018, Q. 6(d)
June 2021Q. 2A(iv)3 marksSyllabus 2017OR, alternative to Q. 2

(iv)ABC Products Ltd. has taken term loan of ₹5 crore from bank and has given the properties situated at Maldives as a prime security of loan. Can the company give the properties situated outside India for security of loan ? Referring to the provisions of the Companies Act, 2013, discuss.

Read in the manual: S.77Also asked in: December 2018, Q. 6(d), December 2021, Q. 2(b)
December 2019Q. 1(c)5 marksSyllabus 2017

Comment on the following :

(c)An unregistered charge shall be void against the liquidator and other creditors of the company.

Read in the manual: S.77Also asked in: December 2022, Q. 2(c), December 2025, Q. 4(c)
June 2019Q. 4(c)4 marksOld syllabus

(c)You have joined as a compliance officer of a company on 1st June, 2019. You realize that a charge which was created on 15th Feb., 2019 has not yet been registered. What immediate steps would you take to avoid legal action due to non-compliance ?

Read in the manual: S.77
December 2018Q. 6(d)4 marksOld syllabus

(d)Zinc Ltd. has acquired an immovable property in London and created a Charge in favour of a Bank in UNITED KINGDOM for having availed a loan against the said property under the Companies Act of United Kingdom on September 30th 2018. Advise whether the company has to create a charge under the provisions of the Companies Act, 2013 in India also ?

Read in the manual: S.77Also asked in: December 2021, Q. 2A(ii), June 2021, Q. 2A(iv), December 2021, Q. 2(b)
December 2024Q. 2(a)3 marksSyllabus 2022

(a)NSG Ltd. created a charge in favour of Bank A for a loan it took, and the particulars of the charge have already been registered with the Registrar of Companies. Later, Bank A transferred or assigned this charge to Bank B as part of a loan portfolio sale, without altering any other terms and conditions of the original loan agreement. Are there any compliance requirements related to the registration of charges under the Companies Act, 2013, in this case ?

Read in the manual: S.79 S.77
June 2022Q. 2(d)3 marksSyllabus 2017

(d)While sanctioning working capital limits, the rate of interest has been fixed at a specified percentage above the bank rate as notified by the Reserve Bank of India (RBI). But later on, there was a change in the interest rate due to RBI notification. Thelending bank insisted on filing necessary documents and forms for modification of charge under section 79 of the Companies Act, 2013. Decide if the claim of the lending bank is tenable.

Read in the manual: S.79
June 2026Q. 2(a)3 marksSyllabus 2022

(a)Blue Crest Industries Ltd. created a combined charge over two factories to secure a loan of ₹ 100 crore, which was also registered with the ROC. After repaying ₹ 95 crore along with interest, the lender agreed to release the charge with respect to Factory-1. The company then filed satisfaction of charge with the Registrar of Companies (ROC) seeking deletion of the charge on Factory-1.

As the Company Secretary, examine whether the ROC would issue a certificate of satisfaction of charge relating to Factory-1 under the Companies Act, 2013.

Read in the manual: S.82
December 2023Q. 2(c)3 marksSyllabus 2022

(c)Edge Ltd. had borrowed ₹50 crore from a scheduled bank and repaid entire loan amount along with interest thereon. The company wants to file satisfaction of charge with the Registrar only after receiving no due certificate and a release letter from the bank. If company delays the filing of satisfaction of charge for the default of bank in not issuing these documents, whether the company will be liable for late filing of satisfaction of charge under the Companies Act, 2013?

Read in the manual: S.82Also asked in: June 2021, Q. 2(a)
June 2021Q. 2(a)3 marksSyllabus 2017

(a)As a Company Secretary, explain the procedure of satisfaction of charge.

Read in the manual: S.82Also asked in: December 2023, Q. 2(c)
June 2024Q. 2(c)3 marksSyllabus 2017

(c)After a lot of discussion, negotiation, submission of information and explanations. Enkebee Ltd was sanctioned term loan of ₹ 200 lakh by the corporate office of Unity Bank on 10th March, 2023. Charge was created on 12th March. 2023. Sayani, Senior Manager (Accounts) of the company, made entry in the register of charges on 19th March, 2023.

Sayani believes that the register above shall have to be maintained for at least five years and the instrument creating the charge preserved for twelve years. Offer your comments referring to the provisions of the Companies Act, 2013.

Read in the manual: S.85
June 2025Q. 1(e)3 marksSyllabus 2022
Show the facts common to all parts of Q. 1

Case Study :

Sourav, Soumyadip, Sucharita and Sohini are four directors of Supershine Detergents Ltd. They decided to convene a meeting on 20th February, 2025 to discuss, consider and solve some issues the company is facing in the corporate secretarial compliances since few days. As there is no qualified Company Secretary at present in the company, they invited you, as a practising Company Secretary in the meeting, to take you valued views on the divergent issues and move forward accordingly.

Sohini started the dicussion stating that five hundred equity shares of the company are presently held jointly by Dhiman, Bobby and Sam–their names appearing in the share certificates in this order. The joint shareholders want a transposition of the names in the order Sam, Dhiman and Bobby for in respect of three hundred shares. Sohini requested the members of the Board to analyse the if this is feasible.

Sourav updated the board members that the promoters of the company want to incorporate a company in the name and style of Rimjhim Tourism Corporation Ltd. in a scenic hilly town in the state of Uttar Pradesh. The proposed new company would deal with a different line of business. The new company after some years would become a subsidiary of Supershine Detergents Ltd. This strategic decision will increase the brand value of the Group. Sourav invited comments from his co-directors and asked you to examine the matter.

Sucharita mentioned that Vinod, an MBA (Finance) who is a member of the company for ten years wants to inspect the Register of deposits maintained by the company as required under the provisions of the Companies Act, 2013 and rules made thereunder. The secretarial officer of the company has refused to show the register for inspection, as Vinod did not divulge the reasons for inspection. She requested the other directors to look into the matter. Soumyadip brought to the notice of his board colleagues that Srishti, proprietor of S. Nagori and Associates, Chartered Accountants, is holding the office of statutory auditor of the company since 2019-20. The Audit committee is very happy with the performance of the auditor. The firm has also expressed its willingness to continue as statutory auditor for FY 2024-25. Soumyadip tabled the following figures from the audited financial statements of the company for year ended 31st March, 2024 :

Items₹ in crores
Paid-up share capital6
Turnover35
Borrowings from financial institutions60
Net worth70

Soumyadip urged the other board members to examine the matter and take decision. Before conclusion of the meeting all the four directors jointly raised the topic of creation of charge on assets of the company for the loan taken from State Bank of India for ₹ 4 Crore for the purchase of raw materials keeping security of company immovable property.

They maintained their understanding that copy of every instrument evidencing any creation of charge is required to be filed with Registrar of Companies. However, the board members are confused over certain aspect of the matter and sought clarity on the matter.

Based on the above facts and integrated case, referring to the provisions of Companies Act, 2013, answer the following :

(e)Advise the directors how the instruments evidencing creation of charge to be filed with Registrar is verified.

December 2023Q. 2(a)3 marksSyllabus 2017

(a)ABC Limited has created floating charge against debentures issued for ₹100 crore. The Board of Directors (BOD) is willing to know the circumstances under which floating charge crystallizes and the security becomes fixed. As a Company Secretary advise the BOD in light of the provisions of Companies Act, 2013.

Also asked in: June 2019, Q. 2(c), December 2019, Q. 1(a)
December 2020Q. 2(d)4 marksOld syllabus

Distinguish between the following:

(d)Mortgage and Charge.

December 2019Q. 1(a)5 marksOld syllabus

Comment on the following statements :

(a)Nirja is a newly appointed company secretarial staff in the office of the Company Secretary of a listed company. She has suggested that an existing floating charge on the fixed assets of the company can be converted into fixed charge by passing only a board resolution and no steps are required in this regard by the lenders.

Also asked in: December 2023, Q. 2(a)
June 2019Q. 2(c)3 marksSyllabus 2017

(c)Explain whether a Floating charge attached to the company’s property generally remains dormant till it crystallizes or becomes fixed.

Also asked in: December 2023, Q. 2(a)
No questions in this chapter match these filters.

Also relevant to this chapter

  • June 2025, Q. 6(c) · Drafting a special resolution for creation of security on the properties of the company, S.180(1)(a) (Ch. 14)