CAIIB BRBL Module B Unit 7 : Creation/Registration And Satisfaction Of Charges

26/10/2023

Table of Contents

CAIIB Paper 4 BRBL Module B Unit 7 : Creation/Registration And Satisfaction Of Charges (New Syllabus)

IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Paper 4 (BANKING REGULATIONS AND BUSINESS LAWS) includes an important topic called “Creation/Registration And Satisfaction Of Charges”. Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.

In this article, we are going to cover all the necessary details of CAIIB Paper 4 (BRBL) Module B (IMPORTANT ACTS/LAWS & LEGAL ASPECTS OF BANKING OPERATIONS – PART A) Unit 7 : Creation/Registration And Satisfaction Of Charges, Aspirants must go through this article to better understand the topic, Creation/Registration And Satisfaction Of Charges and practice using our Online Mock Test Series to strengthen their knowledge of Creation/Registration And Satisfaction Of Charges. Unit 7 : Creation/Registration And Satisfaction Of Charges

Charge

‘Charge’ has been defined in section 2 (16) of the Companies Act 2013. As per section 2(16) a ‘charge’ would be

An interest or lien
Created on the property or assets of a corporation or any of its undertakings or both as security and
Includes a mortgage.

It is mandatory for every company to register with the Registrar of Companies (ROC) specific charges created by it on its assets as well as on modification of the charge or its satisfaction. No registration of the charge deprives the creditor the benefit of the security under such circumstances such as when the company is wound up.

Charges requiring registration

The following charges were required to be filed with the ROC

A charge for the purpose of securing any issue of debentures
A charge on uncalled share capital of the company
A charge on any immovable property, wherever situated.
A charge on any book debts of the company
A charge, not being a pledge, on any movable property of the company
A floating charge on the undertaking or any property of the company including stock in trade
A charge on calls made but not paid
A charge on a ship or any share in a ship
A charge on goodwill, on a patent or a license under a patent, on a trade mark, or on a copyright or a license under a copyright.

Rule for registration is that all types of charges are required to be registered with the ROC, within stipulated period, irrespective of whether the charge created is

Within or outside India
On its property or assets or any of its undertakings
Whether tangible or otherwise, fixed or floating
Situated in or outside India.

Charges not requiring registration

Corporate Guarantee
Arising due to the operation of some specific law where registration is not required
Hundi, which is a Negotiable instrument

Types Of Charges

Fixed charge:

‘Fixed charge’ is also called ‘specific charge’. It extends over a specific property or properties of the company.
It may be noted, that charges specified in Section 77 of the Companies Act, 2013, created in conformity with the provisions of the said Act over a specific property gives right to the creditor so secured, to sell the said property through a Court of Law/ Tribunal (DRT) or under the provisions of SARFESAI Act and claim and appropriate the proceeds towards the dues payable by the company.

Floating charge:

A ‘floating charge’ means a ‘charge’ that is general and not specific.
That floats over the present and future property of the company, which means it does not fasten on or attach to any particular property.
That does not restrict the company from assigning the property, subject to charge to third persons, whether by way of sale or security
That on happening of an event or contingency, crystallizes as a fixed charge.

When floating charge becomes fixed or crystallized/attached

When the debtor company ceases to carry on business or goes into liquidation or some other act which affects the powers of the company to dispose the assets charged. A floating charge may also crystallize on the happening of an event specified in a charge deed.

Effect of floating charge becoming fixed or crystallized

When a floating security upon all the property or assets of the company becomes fixed, it constitutes a charge upon all the property or assets then belonging to the company. It has priority over the subsequent equitable charges and over unsecured creditors.

Procedure For Registration Of Charge

A charge created by a company is required to be registered with the Registrar within thirty days of its creation in such form and on payment of such fees as may be prescribed.

For charges created/ modified before 2 November, 2018

In respect of Creation/Modification of Charge after 2 November, 2018 (after ordinance).

The application for delay has to be made to the registrar in Form No. CHG-10 and supported by a declaration from the company signed by its secretary or director that such delay in filing shall not adversely affect the rights of any other intervening creditors of the company.
Where a charge is registered successfully with the ROC under sub-section (1), he/she would issue a certificate of registration of such charge to the company and to the person/entity in whose favor the charge is created. It is issued by the ROC in Form CHG 2.

Effect Of Registration Of Charges

In terms of Section 80 of the Companies Act 2013 “Where any charge on any property or assets of a company or any of its undertakings 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”.
The date of registration of charge is important for considering priority and the charge registered first will get the priority over all charges registered later, in the absence of any agreement between the charge holders to the contrary (for example a pari – passu charge agreement).

In terms of section 77(3) of the Act amended vide Companies (Registration of Charges) Amendment Rules, 2019: No charge created by a company shall be taken into account by the liquidator appointed under the Act or the Insolvency and Bankruptcy Code (IBC), 2016, or any other creditor unless it is duly registered under sub-section (1) and a certificate of registration of such charge is given by the Registrar under sub-section (2).

Provisions Of Companies Act 2013 Relating To Registration Of Charges

Chapter VI comprising of Sections 77 to 87 of the Companies Act, 2013 provides for the registration of charges. They can be stated briefly as follows:

Section 77: This Section has already been dealt with in detail hereinabove
Section 78: This Section provides that in case the charge is not registered by the Company within the period referred to in Section 77, the charge- holder may apply for filing of charge in the prescribed manner and “the Registrar may, on such application, within a period of fourteen days after giving notice to the company, unless the company itself registers the charge or shows sufficient cause why such charge should not be registered, allow such registration on payment of such fees, as may be prescribed: Provided that where registration is effected on application of the person in whose favour the charge is created, that person shall be entitled to recover from the company the amount of any fees or additional fees paid by him to the Registrar for the purpose of registration of charge.”
Section 79: In terms of Section 79 “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.”
Section 80: This Section provides that after registration of charge created, any other person acquiring such property charged or any party thereof, shall be deemed to have notice of the charge registered and shall take the property subject to such charge.
Section 81: It is provided under this Section that Registrar of Companies shall keep a register of charges containing particulars of all charges requiring registration. This Section further provides that a copy of particulars contained in the register of charges can be obtained by any person on payment of fee.
Section 82: This section provides that the Company shall intimate the Registrar of any payment/ satisfaction in full of any charge registered within a period of 30 (thirty) days. 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 such additional fees as may be prescribed.