A company’s borrowings are often backed by securities, on the strength of which loans are given by the banks and financial institutions. The security is given for securing loans or debentures by way of mortgage on the assets of the company when the Charge is created. The Companies Act, 2013 covers the provisions relating to registration, modification, the satisfaction of Charges, consequences of failure in registration inclusive of delay in registration.
The main purpose of registration of a Charge is to give notice to the Registrar of Companies (“RoC“) and to people who intend to advance money to the company about the encumbrance created on the assets of the company. The prospective lender may inspect the index of Charges and forms on the Ministry of Corporate Affairs portal.
The central govt. under section 87 of the 2013 Act can extend the time for the registration of charges if the company failed to register in the prescribed time limit with the Registrar. Proviso to section 87(1) states that the govt. may extend the time limit if the default was accidental or due to inadvertence or some other sufficient cause or it is not of nature to prejudice the position of creditors or shareholders and 87(2) allows to extend on just & equitable ground.
The company first of all the file the application of condonation of delay with the central govt. on the sufficient cause being shown by it under the given facts & circumstances of the case. The delay can be satisfactorily be condoned by the company to the government. However, such application might be granted by taking into account the interest of the chare-holder and of the creditors, if such delay is prejudicial to them then it cannot grant the extension.
Thereafter, in the above situation after the refusal by the central govt. the company may apply to the tribunal to ratify the default made by it if the tribunal is satisfied with the sufficient cause being shown by the company and it will be rejected only if there was an unexplained delay or when the company goes into the liquidation. In Radha Kishen Moti Lal v. Ram Narain, an extension was allowed but the due safeguards to the rights acquired by the persons prior to actual registration were taken into the consideration before allowing for the extension of time.
The extension of time is based on the discretion of the tribunal and such discretion is to be exercised judicially and not to the prejudiced to the interest of the shareholders or creditors of the company. The rule does not apply when the company itself is at the fault. It is the duty of every company creating a charge under section 77 to register it with the registrar of the company within 30 days of the creation of the charge.
A charge created on property or assets whether tangible or intangible and situated inside or outside of India has to be registered with the Registrar. The instrument is to be signed by both the company and charge and has to be registered with 30 days of its creation with required fees. Without the certificate of registration, the charge will not be taken into consideration at the time winding up by the liquidator or the creditors. Thereafter the register of charge has to be kept by both the Registrar and the Company.