Registration of Charges

(b)Section 79 provides, the provisions of section 77 relating to registration of charges shall, so far as may be, apply to:

(a)a company acquiring any property subject to a charge within the meaning of that section; or

(b)any modification in the terms or conditions or the extent or operation of any charge registered under that section.

Thus, in case of a property where charge is already registered and if it is sold with the permission of the holder of charge, it shall be the duty of the company acquiring it to get the charge registered in accordance with section 77.

(i)In the given question, PQR Limited has acquired the property subject to an existing charge created by ABC Limited, with the permission of the charge-holder. Therefore, it is the duty of PQR Limited, being the acquiring company, to get the charge registered in accordance with section 77.

Thus, PQR Limited cannot contend that since a charge had already been created on the property, it has no further obligation. PQR Limited is required to ensure registration of the charge in accordance with the provisions of the Act.

(ii)Modification of charge: Means change in terms and conditions or change in extent or operation of any charge, etc. ‘Modification’ includes variation in any of the terms and conditions of the agreement including change in rate of interest which may be by mutual agreement or by operation of law. Variation in extent or operation of any charge is also a kind of modification. Even if the rights of a charge holder are assigned to a third party, it will be regarded as a modification.

In the given question, if the bank agrees to enhance the borrowing limit and consequently alters the terms, conditions or extent of the existing charge, such alteration would amount to modification of charge. The modified charge would also be required to be registered in accordance with section 77, as made applicable by section 79(b).

PQR Limited is required to comply with the registration requirements in respect of the charge on the property acquired by it. Further, any alteration in the terms, conditions or extent of the registered charge consequent to enhancement of the borrowing limit would constitute a modification of charge, which is also required to be registered.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2026, 3(b) (New Scheme).

(b)(i) According to section 82(1) of the Companies Act, 2013, a company shall give intimation to the Registrar in the prescribed form, of the payment or satisfaction in full of any charge registered within a period of thirty days from the date of such payment or satisfaction.

Provided that the Registrar may, on an application by the company or the charge holder, allow such intimation of payment or satisfaction to be made within a period of three hundred days of such payment or satisfaction on payment of precribed additional fees.

As per section 86(1), if any company is in default in complying with any of the provisions of this Chapter (Chapter VI: Registration of Charges), the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.

In the present case, Nandan Dairy Products Ltd. was responsible for filing the satisfaction of charge with the Registrar (within 30 days) after repayment of the loan secured by hypothecation of cows.

Since, the company failed to file the satisfaction within the prescribed period, it is in contravention of section 82 and will be liable to above mentioned penalties.

(ii)According to section 83 of the Companies Act, 2013,

(1)The Registrar may, on evidence being given to his satisfaction with respect to any registered charge:

(a)that the debt for which the charge was given has been paid or satisfied in whole or in part; or

(b)that part of the property or undertaking charged has been released from the charge or has ceased to form part of the company’s property or undertaking,

enter in the register of charges a memorandum of satisfaction in whole or in part, or of the fact that part of the property or undertaking has been released from the charge or has ceased to form part of the company’s property or undertaking, as the case may be, notwithstanding the fact that no intimation has been received by him from the company.

(2)The Registrar shall inform the affected parties within thirty days of making the entry in the register of charges kept under subsection (1) of section 81.

According to section 82(4), nothing in section 82 shall be deemed to affect the powers of the Registrar to make an entry in the register of charges under section 83 or otherwise than on receipt of an intimation from the company i.e. even if no intimation is received by him from the company.

In the given question, the Registrar came to know that the company has fully liquidated the loan against the livestock raised by it and have also disposed off such livestock. Thus, the property (cows) has been released from the charge.

Hence, the Registrar is empowered to make entries of satisfaction and release of charge in the Register of Charges even without intimation from Nandan Dairy Products Ltd.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2026, 2(b) (New Scheme).

(b)According to Rule 10(1) of the Companies (Registration of Charges), 2014, the company shall enter in the Register of charges, particulars of all the charges registered with the Registrar on any of its property, assets or undertakings and the particulars of any property acquired subject to a charge as well as particulars of any modification of a charge and satisfaction of charge.

According to Rule 10(2), the entries in the Register shall be made forthwith after the creation, modification or satisfaction of charge, as the case may be.

According to Rule 10(3), the entries in the Register (of charges) shall be authenticated by a director or the secretary of the company or any other person authorised by the Board for the purpose.

In the question given, the entry made by the accounts officer in the register of charges is not legally valid as it must be authenticated by a director, the company secretary or any other person specifically authorised by the Board for this purpose.

According to section 86 (1) of the Companies Act, 2013, if any company is in default in complying with any of the provisions related to charges created, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.

Alternative Answer - With the assumption that the charge was already registered with the ROC by the time dispute has arisen -

According to Rule 10(1) of the Companies (Registration of Charges), 2014, the company shall enter in the Register of charges, particulars of all the charges registered with the Registrar on any of its property, assets or undertakings and the particulars of any property acquired subject to a charge as well as particulars of any modification of a charge and satisfaction of charge.

According to Rule 10(2), the entries in the Register shall be made forthwith after the creation, modification or satisfaction of charge, as the case may be.

According to Rule 10(3), the entries in the Register (of charges) shall be authenticated by a director or the secretary of the company or any other person authorised by the Board for the purpose.

As per the provision of Section (2) of Section 77 of the Companies Act, 2013, read with Rule 6 of the Companies (Registration of Charges) Rules, 2014, where a charge is registered with the Registrar, 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 the certificate issued by the Registrar is conclusive proof that the charge is registered and valid.

In the question given, the entry made by the accounts officer in the register of charges is not properly made as it must be authenticated by a director, the company secretary or any other person specifically authorised by the Board for this purpose.

The internal irregularity (lack of Board authorization) does not affect the rights of the secured creditor (financial institution) who relied on the registration and the creditor’s challenge can succeed only to the extent of procedural non-compliance, not to invalidate the charge or alter its statutory priority.

According to section 86 (1) of the Companies Act, 2013, if any company is in default in complying with any of the provisions related to charges created, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2026, 3(b) (New Scheme).

(b)Registration by the Company creating a Charge

According to Section 77 of the Companies Act, 2013, 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.

In the given question, Vital Pharmacy has raised funds by creating charge on its stock and patent rights in Germany. As per the provisions of the Companies Act, 2013, the company is required to register charge on its tangible as well as intangible assets, and situated in or outside India. However, in the given question, the company has registered charge on its stock but not on the patents (being outside India and intangible in nature).

In the light of the provisions of the Act and facts of the question, the contention of the company is incorrect, as it is the duty of the company to register the charge on its tangible as well as intangible assets, and situated in or outside India.

OR

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2025, 3(b) (New Scheme).

(a)1. Intimation regarding Satisfaction of Charge: Section 82 of the Companies Act, 2013, requires a company to give intimation of payment or satisfaction in full of any charge earlier registered, to the Registrar in the prescribed form. The intimation needs to be given within a period of 30 days from the date of such payment or satisfaction.

Extended Period of intimation: Proviso to Section 82(1) extends the period of intimation from 30 days to 300 days. Accordingly, it is provided that the Registrar may, on an application by the company or the charge holder, allow such intimation of payment or satisfaction to be made within a period of three hundred days of such payment or satisfaction on payment of prescribed additional fees.

2.Notice to the Holder of Charge by the Registrar: On receipt of

intimation, the Registrar shall cause a notice to be sent to the holder of the charge calling upon him to show cause within such time as specified in the notice but not exceeding 14 days, as to why payment or satisfaction in full should not be recorded.

If no cause is shown by the charge-holder , the Registrar shall order

entering of a memorandum of satisfaction in the register of charges kept by him and accordingly, he shall inform the company of having done so.

However, no notice is required to be sent, in case the intimation to the Registrar in this regard is in the specified form [CHG - 4] and signed by the holder of charge.

If any cause is shown by the charge-holder, the Registrar shall

record a note to that effect in the register of charges and inform the company.

3.Issue of Certificate: As per Rule 8 (2) of the Companies (Registration of Charges) Rules, 2014, in case the Registrar enters a memorandum of satisfaction of charge in full, he shall issue a certificate of registration of satisfaction of charge in Form No. CHG-5.

In the instant case, DNC Hydro Limited has to follow the above legal and procedural steps to remove the old charge from ROC records.

Alternate Conclusion:

As the SPM bank has already issued a no dues certificate, DNC Hydro Limited should file the form CHG-4 within the extended period of limitation i.e. within 30 to 300 days. Accordingly, the Registrar may, on an application by the company allow such intimation of payment or satisfaction to be made within a period of three hundred days of such payment or satisfaction on payment of prescribed fees. The Registrar shall not cause any notice to be sent to SPM Bank in this case as NOC has been issued by it and just register the satisfaction after payment of prescribed fees.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2025, 6(a) (New Scheme).

(b)(i) According to section 77(1) of the Companies Act, 2013, it shall be the duty of a company creating a charge to register it with the Registrar of Companies within 30 days from the date of creation of the charge. The obligation to register a charge arises not merely at the time of sanctioning the credit limit but when the charge is created.

Whenever a company borrows money by way of loans including term loans or working capital loans from financial institutions or banks or any other persons, by offering its property or assets, as security a charge is created on such property or assets in favor of the lender.

The Trigger point for registration of charge arises when the Bank has sanctioned the mortgaged backed credit limit, documentation was done, papers of the property for creation of the mortgage was tendered by the company for creation of fixation of the credit limits.

Here, the words ‘creating a charge’ refers to the accepting of the property papers for the purpose of creation of charge. Thus, it is the date when the credit limits were sanctioned as assigned to the company and not the date when the company had actually drawn a cheque from such credit limit.

(ii)Consequence of non-registration of charge [Section 77 (3) & (4)]

No charge created by a company shall be taken into account by the liquidator appointed under the Companies Act, 2013 or the Insolvency and Bankruptcy Code, 2016 or any other creditor unless it is duly registered and a certificate of registration of such charge is given by the Registrar.

This means that the charge will become void against the liquidator and other creditors of the company. That is to say, at the time of winding up, the creditor whose charge has not been registered will be reduced to the level of an unsecured creditor. Neither the liquidator nor any other creditor will give legal recognition to a charge that is not registered.

Another important consequence of non-registration is that the charge-holder loses priority. Any subsequent registration of a charge (i.e. even if it is registered within the extended period instead of original thirty days) shall not prejudice any right acquired in respect of any property before the charge is actually registered.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2024, 3(b) (New Scheme).

(b)Registration of Charge to act as Constructive Notice (Section 80 of the Companies

Act, 2013): Section 80 provides that where any charge is registered under section 77, any person acquiring such property, assets, undertakings or part thereof or any share or interest therein shall be deemed to have notice of the charge from the date of such registration.

Thus, every person proposing to deal with a company, should verify whether the asset has any charge by going through the record of charges maintained at the office of registrar of companies before entering into the transaction.

Yes, in compliance to stated law, such registration of charge be deemed to be notice of charge to any person who wishes to lend money to the company against the security of such property.

Extension of Time Limit: The original period within which a charge needs to be registered is 30 days from the date of creation of charge.

In the given case, City Bakers Limited obtained a term loan from DNB Bank Ltd. by creating a charge on its office building which was duly registered within 20 days from date of creation of charge.

Extension of time may be granted where registration of charge was not effected within the original period of 30 days. In such case, the Registrar may, on an application by the company, allow such registration to be made within a period of 60 days of such creation (i.e. a grace period of another 30 days is granted after the expiry of the original 30 days), on payment of additional fees as prescribed.

If the charge is not registered within the extended period also, then the company shall make an application and the Registrar is empowered to allow such registration to be made within a further period of sixty days after payment of prescribed ad valorem fees.

Alternate Answer to this part of question (Extension of Time Limit)

Extension of Time Limit: The original period within which a charge needs to be registered is 30 days from the date of creation of charge. Provisions relating to extension of time limit as under:

(i)Charges created before 02-11-2018: In such cases, where charge was created before 02-11-2018 but was not registered within the original period of 30 days, the Registrar may, on an application by the company, allow such registration to be made within a period of 300 days of such creation.

Further, if the charge is not registered within the extended period of 300 days, it shall be done within six months from 02-11-2018 on payment of prescribed additional fees.

(ii)Charges created on or after 02-11-2018: In such cases (i.e. where the charge was created on or after 02-11-2018 but the registration of charge was not effected within the original period of 30 days), the Registrar may, on an application by the company, allow such registration to be made within a period of 60 days of such creation (i.e. a grace period of another 30 days is granted after the expiry of the original 30 days), on payment of additional fees as prescribed.

If the charge is not registered within the extended period as above, the company shall make an application and the Registrar is empowered to allow such registration to be made within a further period of sixty days after payment of prescribed ad valorem fees.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2023, 5(b) (Old Scheme).

(b)According to section 84 of the Companies Act, 2013,

(1)if any person obtains an order for the appointment of a receiver of, or of a person to manage, the property, subject to a charge, of a company or if any person appoints such receiver or person under any power contained in any instrument, he shall, within a period of thirty days from the date of the passing of the order or of the making of the appointment, give notice of such appointment to the company and the Registrar along with a copy of the order or instrument and the Registrar shall, on payment of the fees, register particulars of the receiver, person or instrument in the register of charges.

(2)Any person appointed shall, on ceasing to hold such appointment, give to the company and the Registrar a notice to that effect and the Registrar shall register such notice.

In the light of the given facts, following are the answers in the given question:

(i)The Appointment Date is 1st March 2026.

Statutory Timelines for intimation: The notice should have been given to both Parul Ltd. and the ROC within 30 days, which was on or before 31st March, 2026.

Actual information date: The bank informed Parul Ltd. on 10th April,

2026.

Actual filing date: The notice was filed with the ROC on 15th April,

2026.

Here, both intimations were delayed and were done after the mandatory 30 days’ time period i.e., after 31st March, 2026.

XYZ Bank Ltd. has not complied with the relevant statutory provisions regarding the intimation of the appointment of the receiver.

Therefore, the XYZ Bank Ltd. is in default under section 84(1) of the Companies Act, 2013.

(ii)Yes, there is a compliance requirement upon the cessation of the receiver's appointment. As per section 84(2), Mr. Rajesh Mehta (the Receiver) is required to give notice of his cessation to both Parul Ltd. and the Registrar.

Since, Mr. Rajesh Mehta ceased to act as Receiver on 30th September,

2026, but no notice regarding cessation was filed with Registrar, Mr. Rajesh Mehta is in default under section 84 (2) of the Companies Act, 2013.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2026, 6(b) (New Scheme).

(b)In the given question, Nivedita Limited could not get response from the bank with respect to a letter confirming the settlement of term loan for which the charge was created. The below steps shall be applicable to register the charge in the given circumstances:

According to Section 82(2) of the Companies Act, 2013, the Registrar shall, on receipt of intimation under sub-section (1), cause a notice to be sent to the holder of the charge calling upon him to show cause within such time not exceeding 14 days, as may be specified in the notice, as to why payment or satisfaction in full should not be recorded as intimated to the registrar and if no cause is shown by such holder of the charge, the registrar shall order that a memorandum of satisfaction shall be entered in the register of charges kept by him under Section 81 of the Act and shall inform the company that he has done so.

Intimation regarding Satisfaction of Charge

Section 82 of the Companies Act, 2013, requires a company to give intimation of payment or satisfaction in full of any charge earlier registered, to the Registrar in the prescribed form. The intimation needs to be given within a period of 30 days from the date of such payment or satisfaction.

Extended period of intimation: Proviso to Section 82 (1) extends the period of intimation from 30 days to 300 days. Accordingly, it is provided that the Registrar may, on an application by the company or the charge holder, allow such intimation of payment or satisfaction to be made within a period of three hundred days of such payment or satisfaction on payment of prescribed additional fees.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, November 2022, 5(b) (Old Scheme).

(b)Floating Charge

A ‘Floating Charge’ is created on assets or a class of assets which are of fluctuating or changing in nature- like raw material, stock-in-trade, debtors, etc. It is a charge upon assets both present and future.

The assets under floating charge keep on changing because the borrowing company is permitted to use them for trading or producing final goods for sale. Thus, a floating charge is a charge that floats above ever-changing assets.

Conversion - Crystallization of a Floating Charge

When the creditor enforces the security due to the breach of terms and conditions of floating charge or the company goes into liquidation, the floating charge will become a fixed charge on all the assets available on that date. This is called crystallization of a floating charge.

A floating charge remains dormant until it becomes fixed or crystallizes. On crystallization of charge, the security (i.e. raw material, stock-in-trade, etc.) becomes fixed and is available for realization by the lender so that borrowed money is repaid.

Crystallization of floating charge may occur when the terms and conditions of floating charge are violated or the company ceases to continue its business or the company goes into liquidation or the creditors enforce the security covered by the floating charge.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2025, 3(b) OR (New Scheme).