Registration of Charges: The Changes made in Companies Act 2013

REGISTRATION OF CHARGES: COMPARISON OF 1956 ACT & 2013 ACT

CS. K. SANKARA SUBRAMANIAN, 

Company Secretary, Cethar Energy Limited, Trichy

Registration of Charges is dealt in a separate Chapter (VI) under Companies Act, 2013.  There are 11 Sections (Section 77 to 87) that deal with Charges.

Increase of time limit upto 300 days (without applying to RD) Charges by Charge holder, enhanced penalty for non filing are some of the important changes made in the new Act. Let us discuss the changes in detail by comparing the old Act and new Act.

SL. NO.	THE COMPANIES ACT, 1956	THE COMPANIES ACT, 2013
1.	Section 124 to 145 [Part - V]	Section 77 to 87 [Chapter - VI]
2.	Definition: S.124 - In this part the expression Charge includes a Mortgage The above definition is not exhaustive and hence reference is often made to S.100 of Transfer of Property Act.	Definition: S.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
3.	Period of filing of creation/ modification of Charge [S.125 (1) and first proviso]: Particulars of creation/ modification of Charge should be filed with the RoC within 30 days after the date of its creation/ modification. The said particulars shall also be filed within 30 days next following the expiry of the aforesaid period of 30 days on payment of additional fee. If the said particulars were not registered even within the extended time (30+30 days), the Company has to seek extension of time in accordance with S.141	Period of filing of creation/ modification of Charge [S.77(1), First and Second Proviso]: Particulars of creation/ modification of Charge should be filed with the RoC within 30 days from the date of its creation/ modification. The Registrar may, on an application by the Company, allow such registration to be made within a period of 300 days of such creation/ modification on payment of such additional fees as may be prescribed If the said particulars were not registered even within the extended time (30+300 days), the Company has to seek extension of time in accordance with S.87
4.	Reckoning of 30 days [S.125 (1)]: S.125(1) clearly uses the term “… within [thirty] days after the date of its creation” i.e. the period of 30 days will commence after the date of creation/ modification of Charge	Reckoning of 30 days [S.77 (1)]: S.77 (1) uses the term “…and in such manner as may be prescribed, with the Registrar within thirty days of its creation” i.e. the period of 30 days will commence from the date of creation/ modification of Charge

SL. NO.	THE COMPANIES ACT, 1956	THE COMPANIES ACT, 2013
5.	Registration of Charge Vs Liquidators and Creditors [S.125(1)]: Unless the Charge is registered with the RoC, it is void against the liquidator or creditors of the Company and they cannot take into account such Charge.	Registration of Charge Vs Liquidators and Creditors [S.77(3): No Charge created by a Company shall be taken into account by the liquidator or any other creditor unless it is duly registered under S.77 (1) and a certificate of registration of such Charge is given by the Registrar under S.77(2)
6.	Hypothecation of Motor Vehicle: N.A	Hypothecation of Motor Vehicle [Draft Rules 6.1 (4)]: No charge by way of hypothecation of a motor vehicle shall require registration unless the financier, so requires. Provided the disclosures shall be given in the Balance Sheet regarding all such charges created by way of hypothecation of motor vehicles and the fact that charge has not been registered and the financiers have not required so.
7.	Charges requiring registration [S.125 (4)]: The charges requiring registration is expressly mentioned in S.125 (4). Regarding Intangibles [S.125(4)(i)] the Act uses an exhaustive phrase. i.e. “a charge on goodwill, on a patent or a license under a patent, on a trademark, or on a copyright or a license under a copyright”	Charges requiring registration [Draft Rules 6.1 (3)]: The charges requiring registration is not expressly mentioned in the Act, but given in the draft Rules 6.1 (3). Other things remaining the same, regarding Intangibles [Rule 6.1 (3)(i)] the Rule uses an inclusive phrase. i.e. “a charge on intangible assets, including goodwill, patent, a license under a patent, trade mark, copyright or a license under a copyright”  Hence this rule would cover creation of Charge on any other form of intangible asset other than those mentioned in Rule 6.1 (3)(i)
8.	Form to be filed for creation/ modification of Charge [S.125 and S.127]: Form 8	Form to be filed for creation/ modification of Charge [Draft Rule 6.1 (1)]: Form 6.1
9.	Certificate of Registration [S.132]: No specific Form was prescribed	Certificate of Registration [S.77 (2) and Draft Rule 6.4] The draft rules [6.4 (1) & (2)] prescribes specific Forms- a.       For creation of Charge - Form 6.2 b.      For modification of Charge - Form 6.3
10.	Registration of Charge by interested party [S.134 (1)]: The Act is silent as to when and on what circumstances the interested party can effect the registration of Charge. The Act also uses a wider terminology “any person interested therein”	Registration of Charge by Charge holder [S.78] and Draft Rule 6.1 (1) First Proviso]: The Act is clear that, only if the Company fails to register the charge within the period specified in S.77 (i.e. 30 days), the person in whose favour the Charge is created may apply to the Registrar for registration of the Charge. The Act clearly prescribes that it is the person in whose favour the Charge is created is entitled to apply for registration.
11.	Effect of subsequent Registration of Charge: N.A	Effect of subsequent Registration of Charge [S.77(1), Third Proviso]: Any subsequent registration of a Charge shall not prejudice any right acquired in respect of any property before the Charge is actually registered
12.	Charge created/ property situated outside India [S.125 (5)]: In the case of Charge created outside India and the property on which a charge is created is also situated outside India, then the time limit (30 days) for filing Form 8 for registration shall commence after the date on which the instrument creating or evidencing the Charge or a copy thereof could, in due course of post and if dispatched with due diligence, have been received in India. Hence the Charge need not be registered within 30 days after the date of creation in the aforesaid case.	Charge created/ property situated outside India [S.77 (1)]: In the case of Charge created outside India and the property on which a charge is created is also situated outside India, no exemption as to computing the period as prescribed in the old Act [S.125 (5)] is available in the Companies Act, 2013. Hence even if the Charge is created outside India or the property on which a charge is created is also situated outside India, the time limit for registering the said Charge (30 days) will commence from the date of its creation.
13.	Provisions as to Debentures: Part - V of the Act dealing with Registration of Charges contains specific provisions relating to Debentures and separate Form (No.15)	Provisions as to Debentures: Chapter - VI dealing with Registration of Charges does not contain any provision relating to Debentures. However the draft rule 6.1 (3)(a) still uses the term debentures

SL. NO.	THE COMPANIES ACT, 1956	THE COMPANIES ACT, 2013
14.	Satisfaction of Charge [S.138]: The Company shall give intimation to the Registrar within 30 days from the date of satisfaction in full of any Charge relating to the Company. If the Company fails to give intimation within 30 days as aforesaid, it has to seek extension of time in accordance with S.141	Satisfaction of Charge [S.82]: The Company shall give intimation to the Registrar within 30 days from the date of satisfaction in full of any Charge relating to the Company. The Registrar may, on an application by the Company, allow such registration to be made within a period of 300 days of such satisfaction, on payment of such additional fees as may be prescribed If the Company fails to give intimation even within the extended time (30+300 days), the Company has to seek extension of time in accordance with S.87
15.	Form to be filed for satisfaction of Charge [S.138 (1)]: Form 17	Form to be filed for satisfaction of Charge [S.82 (1) and Draft Rules 6.6 (1)] Form 6.4
16.	Memorandum of satisfaction of Charge [S.138 (3)] No specific Form was prescribed	Memorandum of satisfaction of Charge [S.82(2) and Draft Rules 6.6 (2)] Form 6.5
17.	Intimation to the Charge holder [S.138 (2)]: The Registrar shall give intimation to the lender to show cause within 14 days his reply when the borrower Company files satisfaction of Charge	Intimation to the Charge holder [S.82 (2)] First Proviso: If the Form (6.5) is digitally by the charge holder also then the requirement of giving intimation to the charge holder and asking him to show cause within 14 days is not required.
18.	Penalties: In Part - V, various Sections provides for fines in the case of non-compliance/ default [S.127(2), 133(2), 137(3), 142, 143(2) and 144(3)	Penalties [S.86]: The Section clearly provides that violation of any provision of this Chapter (VI) by any Company shall be punishable with fine and the Officers in default shall be punishable with imprisonment or fine or with both
19.	Quantum of Penalty: The fine ranges between a minimum of Rs.200/- per day to a maximum of Rs.10,000/- for the defaulting companies.	Quantum of Penalty: The fine ranges between a minimum of Rs.1,00,000/- to a maximum of Rs.10,00,000/- for the defaulting companies. Every Officer of the Company who is in default shall be punishable with imprisonment for a term which may extend to 6 months or with fine which shall not be less than Rs.25,000/- but which may extend to Rs.1,00,000/- or with both.
20.	Register of Charges to be kept by Companies [S.143]: S.143 deals with the matters to be maintained in the Register of Charges to be kept by Companies (3 columns viz. short description of properties, amount of charge, person entitled to Charge)	Register of Charges to be kept by Companies [S.85 and Draft Rules 6.8 and 6.9]: Form 6.7 deals with the matters to be maintained in the Register of Charges to be kept by Companies (17 columns) The entries in the Register shall be authenticated by the Secretary of the Company or any other person authorized by the Board for the purpose The Register of Charges shall be preserved permanently and the Instrument creating a Charge shall be preserved for a period of 8 years from the date of Satisfaction of Charge by the Company
21.	Right to inspection of Register of Charges and instruments creating Charges [S.144]: 1.      The reasonable restrictions for inspection may be imposed by the Company via General Meeting 2.      Not less than 2 hours in each day should be allowed for inspection 3.      Central Government may also by order compel an immediate inspection of the said copies or Register	Right to inspection of Register of Charges and instruments creating Charges [S.85 (2)]: 1.      The reasonable restrictions for inspection may be imposed by the Company via Articles of Association 2.      The Register of Charges and instrument of Charges shall be open for inspection during business hours [Business Hours defined in S.96 (2)] 3.      The provision relating to inspection through Central Government order has been dispensed with.
22.	Register of Charges to be kept by Registrar [S.130]: The Section is based on the physical maintenance of Register and contains detailed provisions	Register of Charges to be kept by Registrar [S.81 and Draft Rule 6.5]: The draft rule is based on the electronic maintenance of Register which states that the particulars of Charges maintained on the MCA Portal shall be deemed to be the Register of Charges for the purposes of Section 81

Other Interesting Points :

1. S.132 of CA, 1956 - Certificate of Registration of Charge - “The Registrar shall give a certificate under his hand…” - Even at present the Certificates are issued under the DSC of the Registrar. S.77 (2) of CA, 2013 has dispensed with the wordings “…under his hand…”

2. S.130 (2) of CA, 1956 - The Registrar shall return the instrument after entering the particulars of all Charges - Even at present no such procedure happens since the copies of instruments creating Charges are uploaded in electronic form as attachment and hence CA, 2013 has dispensed with the said provision.