Satisfaction of charge & Penalty for Contraventions of registration of charge

CHAPTER VI (Remaining to Part-1)

The Companies Act, 2013 and the Companies (Registration of Charge) Rules, 2014

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. Section 2(16)

A charge is a way of security to the creditor/lender of his interest/right on the properties of the company for the amounts due to him by the company. The Company may also issue Debentures to raise funds which may carry a right/ interest in the Assets/Properties of the company. The loan/debt is of two categories:

1.      Secured Loan: A Loan is granted by banks or financial institutions against security.

2.      Unsecured Loan: Any loan or debt which is not protected by a guarantor.

After Creation/Modification of charge as per the provisions of Chapter VI under Companies Act, 2013, Satisfaction of charge is also an equally important provision under this chapter. As we have already discussed in previous part the provision of registration of charge, now let’s discuss the provisions of satisfaction of charge and penalty for contraventions of this chapter:

Section 82: Company to report satisfaction of charge

(1) A company shall give intimation of the payment or satisfaction in full of any charge registered under this Chapter to the ROC in form CHG-4 within a period of 30 days from the date of such payment or satisfaction.

Provided that:

On an application by the company or the charge holder:

The ROC may allow such intimation of payment or satisfaction to be made within a period of 300 days of such payment or satisfaction on payment of such additional fees as may be prescribed.

Rule 8:  Satisfaction of Charge

(1) A company or charge holder shall within a period of 300 days from the date of the payment or satisfaction in full of any charge registered under Chapter VI, give intimation of the same to the Registrar in Form No. CHG-4 along with the fee.

(2) Where the ROC enters a memorandum of satisfaction of charge in full in pursuance of section 82 or 83, he shall issue a certificate of registration of satisfaction of charge in Form No.CHG-5.

(2) The ROC shall 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 such notice, as to why payment or satisfaction in full should not be recorded as intimated to the ROC, on receipt of intimation u/s 82(1), on receipt of intimation u/s 82(1),

and if no cause is shown, by such holder of the charge, the ROC shall order that a memorandum of satisfaction shall be entered in the register of charges kept by him under section 81 and shall inform the company that he has done so:

However, In case the intimation is given to the ROC in Form CHG-4 and signed by the holder of charge, the notice is not required to be sent.

(3) If any cause is shown, the ROC shall record a note to that effect in the register of charges and shall inform the Company.

(4) Nothing in this section 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 intimation from the company.

Condonation of Delay for Satisfaction of Charge (CHG -4)

Where any charge form CHG-4 is not filled within 300 days (30 days + 270 days) as per section 441 of the Companies Act, 2013 from the date of satisfaction of charge the ROC shall not register the same unless the delay is condoned by the Central Government. Without Condonation of delay charge cannot be registered with ROC.

Section 83: Power of ROC to make entries of satisfaction and release in absence of intimation from company.

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

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

• 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. 

 (2) The ROC shall inform the affected parties within 30 days of making the entry in the register of charges kept under sub-section (1) of section 81.

Section 84: Intimation of appointment of receiver or manager

(1) If any person obtains an order for the appointment of a receiver/manager of the property of a company, subject to a charge.

Such receiver or person shall give notice of such appointment to the Company and the ROC within a period of 30 days from the date of the passing of such order or of the making of such appointment along with a copy of the order or instrument.

(2) Any person appointed u/s 84(1) shall give a notice to the Company and ROC on ceasing to hold such appointment and the ROC shall register such notice.

Rule 9: Intimation of Appointment of Receiver or Manager

The notice of appointment or cessation of a receiver of, or of a person to manage, the property, subject to charge, of a company shall be filed with the ROC in Form No. CHG.6 along with fee.

Maintenance of Register of charge

Section 85: Company‘s register of charges

(1) Every company shall keep at its registered office a register of charges in Form CHG-7 and in such manner as may be prescribed in Rule 10, which shall include therein all charges and floating charges affecting any property or assets of the company or any of its undertakings, indicating in each case such particulars as may be prescribed:

A copy of the instrument creating the charge shall also be kept at the registered office of the company along with the register of charges.

(2) The register of charges and instrument of charges, kept under sub-section (1) shall be open for inspection during business hours:

•              by any member or creditor without any payment of fees; or

•         by any other person on payment of such fees as may be prescribed, subject to such reasonable restrictions as the company may impose by its articles.

Rule 11: Register Open for Inspection

The register of charges and the instrument of charges kept by the company shall be open for inspection-

(a) by any member or creditor of the company without fees;

(b) by any other person on payment of fee.

Section 86: Punishment for contravention

(1) If any company contravenes any provision of this Chapter;

Company: Punishable with fine which shall not be less than 1 lakh rupees but which may extend to 10 lakh rupees and

Every officer in default: Punishable with imprisonment for a term which may extend to 6 months or with fine which shall not be less than Rs. 25000/- but which may extend to 1 lakh rupees, or with both.

(2) If any person wilfully furnishes any false or incorrect information or knowingly suppresses any material information required to be registered in accordance with the provisions of section 77, he shall be liable for action u/s 447.

Section 447:

Punishment for Fraud

Without prejudice to any liability including repayment of any debt under this Act or any other law for the time being in force, any person who is found to be guilty of fraud involving an amount of at least 10 lakh rupees or 1% of the turnover of the company, whichever is lower :

Punishable with imprisonment for a term which shall not be less than 6 months but which may extend to 10 years and shall also be liable to fine which shall not be less than the amount involved in the fraud, but which may extend to 3 times the amount involved in the fraud:

Provided that where the fraud in question involves public interest, the term of imprisonment shall not be less than 3 years.

Provided further that where the fraud involves an amount less than 10 lakh rupees or 1% of the turnover of the company, whichever is lower, and does not involve public interest, any person guilty of such fraud shall be punishable with imprisonment for a term which may extend to five years or with fine which may extend to fifty lakh rupees or with both.

Also Read:

My previous blog on Registration of charge under companies, 2013

https://bhuwantaragi.blogspot.com/2020/05/registration-of-charge-under-companies.html

Thanks and Regards

Also visit my Youtube channel  to download for easy understanding of the above provision: CS Bhuwan Taragi

CS Bhuwan Taragi