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Judiciary & Law Notes Series

THE COMPANIES ACT, 2013

CHAPTER VI

Registration of Charges

Sections 77–87

For Judicial Service Aspirants & Law Students

RJS • DJS • PCS-J • HJS • UPJS • BJS • MPCJ

Fixed vs Floating Charges • 120-Day Timeline • Register

— Enriched with landmark judgments and illustrative case law —

Chapter VI — Registration of Charges (Sections 77–87)

Chapter VI concerns the creation, modification, and satisfaction of charges on the property of a company. Its economic purpose is to give publicity to encumbrances on a company's assets, protecting future creditors and lenders who deal with the company. Non-registration of a charge, though not voidable against the company per se, is fatal against the liquidator and other creditors, as Section 77(3) declares.

Meaning of 'Charge' [Section 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.

Classification of Charges

Fixed Charge	Floating Charge
Attaches to specific, identifiable property (e.g., land, machinery).	Attaches to a class of assets (e.g., stock-in-trade, book debts) which changes in the ordinary course of business.
The company cannot dispose of the property in the ordinary course of business without the consent of the charge-holder.	The company may deal with the assets in the ordinary course of business until the charge crystallises.
Example: mortgage on a factory building.	Example: charge on book debts and current assets.
Attaches immediately on creation.	Attaches on crystallisation — i.e., on default, winding up, appointment of receiver, or cessation of business.
Ranks above a subsequent floating charge on the same property.	Ranks below pre-existing fixed charges; may rank above a subsequent floating charge only if so agreed.

⚖ Case Law — Illingworth v. Houldsworth, [1904] AC 355 (HL)

Lord Macnaghten supplied the classical definition of a floating charge: 'A specific charge ... is one that without more fastens on ascertained and definite property or property capable of being ascertained and defined; a floating charge, on the other hand, is ambulatory and shifting in its nature, hovering over and, so to speak, floating with the property which it is intended to affect until some event occurs or some act is done which causes it to settle and fasten on the subject of the charge within its reach and grasp.' This definition has been quoted with approval by Indian courts repeatedly.

⚖ Case Law — Re Yorkshire Woolcombers Association Ltd., [1903] 2 Ch 284 (CA)

Romer LJ laid down the three tests of a floating charge: (i) it is a charge on a class of assets of the company present and future; (ii) that class is, in the ordinary course of business of the company, changing from time to time; and (iii) it is contemplated that, until some future step is taken by or on behalf of the mortgagees, the company may carry on its business in the ordinary way as regards the particular class of assets. These three tests are still applied.

Section 77: Duty to Register Charges

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.

Extension of Time for Registration

The Registrar may, on an application by the company, allow such registration to be made within a period of sixty days of such creation on payment of such additional fees as may be prescribed (i.e., a further thirty days beyond the initial thirty).

If the charge is not registered within sixty days, the Registrar may, on an application, allow such registration to be made within a further period of sixty days after payment of such advalorem fees as may be prescribed.

Charges created before 2nd November 2018 — total available window is 300 days; charges created on or after 2nd November 2018 — total window is 120 days, with the structure 30 + 30 + 60 days as described.

Certificate of Registration

Where a charge is registered with the Registrar under Section 77(1), 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, as the case may be, to the person in whose favour the charge is created.

Consequences of Non-Registration [Section 77(3)–(4)]

Notwithstanding anything contained in any other law for the time being in force, no charge created by a company shall be taken into account by the liquidator appointed under this Act or the Insolvency and Bankruptcy Code, 2016, as the case may be, 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).

Nothing in sub-section (3) shall prejudice any contract or obligation for the repayment of the money secured by a charge — i.e., the debt survives even if the security does not, as between the company and the chargee.

⚖ Case Law — Independent Automatic Sales Ltd. v. Knowles & Foster, [1962] 1 WLR 974

An unregistered charge, though valid as between the company and the chargee, is void against the liquidator and creditors of the company. The Court held that this does not relieve the company of its obligation to repay the debt — the charge-holder becomes an unsecured creditor and may prove in winding-up as such. This illustrates the distinction between the invalidity of the security and the invalidity of the debt.

Section 78: Application for Registration of Charge

Where a company fails to register the charge within the period of thirty days referred to in sub-section (1) of Section 77, without prejudice to its liability in respect of any offence under this Chapter, the person in whose favour the charge is created may apply to the Registrar for registration of the charge along with the instrument created for the charge, within such time and in such form and manner as may be prescribed 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.

Where registration is effected on an application by the charge-holder under this section, such charge-holder 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: Section 77 to Apply in Certain Matters

The provisions of Section 77 relating to registration of charges shall, so far as may be, apply to —

a company acquiring any property subject to a charge within the meaning of that section; or
any modification in the terms or conditions or the extent or operation of any charge registered under that section.

Section 80: Date of Notice of Charge

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.

This is the doctrine of constructive notice of registered charges. It protects the chargee by informing the world of the encumbrance.

Section 81: Register of Charges to be Kept by Registrar

The Registrar shall, in respect of every company, keep a register containing particulars of the charges registered under this Chapter in such form and in such manner as may be prescribed. A register kept in pursuance of this section shall be open to inspection by any person on payment of such fees as may be prescribed for each inspection.

Section 82: Company to Report Satisfaction of Charge

A company shall give intimation to the Registrar in the prescribed form, of the payment or satisfaction in full of any charge registered under this Chapter within a period of thirty days from the date of such payment or satisfaction. 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 fourteen days, as may be specified in such notice, as to why payment or satisfaction in full should not be recorded as intimated to the Registrar.

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 and shall inform the company that he has done so. If the cause is shown, the Registrar shall record a note to that effect in the register of charges and shall inform the company accordingly.

Companies (Amendment) Act, 2019 permitted extension of the 30-day period by the Central Government — the Registrar may allow the intimation of satisfaction within a further period of three hundred days on payment of additional fees.

Section 83: Power of Registrar to Make Entries of Satisfaction and Release in Absence of Intimation from Company

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.

Section 84: Intimation of Appointment of Receiver or Manager

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 prescribed fees, register particulars of the receiver, person or instrument in the register of charges.

Section 85: Company's Register of Charges

Every company shall keep at its registered office a register of charges in such form and in such manner as may be prescribed, 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. The register of charges and the instrument of charges kept under sub-section (1) shall be open for inspection during business hours — (a) by any member or creditor without any payment of fees; or (b) by any other person on payment of such fees as may be prescribed.

Section 86: Punishment for Contravention

If any company is in default in complying with any of the provisions of this Chapter, 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.

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 under Section 447 — i.e., prosecution for fraud.

Section 87: Rectification by Central Government in Register of Charges

The Central Government on being satisfied that —

the omission to give intimation to the Registrar of the payment or satisfaction of a charge, within the time required under this Chapter; or
the omission or misstatement of any particular with respect to any such charge or modification or with respect to any memorandum of satisfaction or other entry made in pursuance of Section 82 or Section 83,

was accidental or due to inadvertence or some other sufficient cause or it is not of a nature to prejudice the position of creditors or shareholders of the company, it may, on the application of the company or any person interested and on such terms and conditions as it deems just and expedient, direct that the time for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or misstatement shall be rectified.

Erstwhile Section 87 also permitted rectification of omission in registering a charge — but this has now been curtailed; the Companies (Amendment) Act, 2019 removed the power of Central Government/NCLT to condone delay in registration of a charge beyond what is permitted under Section 77 itself. Therefore, the outer time limit of 60 + 60 = 120 days for post-2nd November 2018 charges is absolute.

Additional Landmark Judgments on Charges

⚖ Case Law — In Re Panama, New Zealand and Australian Royal Mail Co., (1870) LR 5 Ch App 318

Early authority articulating the concept of a floating charge as a charge on a fund of assets that fluctuates; until crystallisation, the company may deal with the assets in the ordinary course. A foundational decision often cited in Indian courts.

⚖ Case Law — Siemens Ltd. v. Jindal India Thermal Power Ltd., (2018) SCC OnLine Del 7158

The Delhi High Court discussed the effect of non-registration of a charge under the 2013 Act. Held that the charge is void as against the liquidator and other creditors, but the underlying debt survives. The decision aligns with the long-established English position (Independent Automatic Sales Ltd.) and clarifies the position post-IBC.

⚖ Case Law — Shanti Prasad Jain v. Director of Enforcement, AIR 1962 SC 1764

The Supreme Court considered a bank guarantee backed by a charge on fixed deposits. In the course of analysis, the Court examined when an equitable charge is created and the circumstances of its crystallisation. The judgment is relied upon for the proposition that intention to create a charge must be clear, and mere book entries or nominal documents do not create a charge.

📝 Exam Pointers — Chapter VI

• Memorise time-limits: 30 days (creation), +30 days (with additional fees), +60 days (with ad valorem fees) — total 120 days for post-2018 charges.

• Consequences of non-registration: void against liquidator/creditors (Sec. 77(3)) BUT debt survives (Sec. 77(4)).

• Distinction between fixed and floating charge — Illingworth v. Houldsworth and Yorkshire Woolcombers tests.

• Section 80 — deemed notice of registered charge; Section 82 — satisfaction within 30 days.

• Section 86 — penalty; Section 447 liability for fraudulent suppression.

• Post-2019 Amendment, rectification of omission in registration cannot be made beyond the 120-day window.

Landmark Judgments — Consolidated Index

For quick revision before an examination, the following judgments span Chapters I to VI and constitute the doctrinal core of the topics examined. Students are advised to memorise (a) the name and citation, (b) the legal proposition in one line, and (c) the factual anchor.

Separate Legal Entity and Veil-Lifting

Salomon v. Salomon & Co. Ltd., [1897] AC 22 — foundational authority on separate legal entity.
Lee v. Lee's Air Farming Ltd., [1961] AC 12 — a shareholder-director can be the company's employee.
Tata Engineering & Locomotive Co. v. State of Bihar, AIR 1965 SC 40 — company not a citizen for Article 19.
Daimler v. Continental Tyre, [1916] 2 AC 307 — veil lifted to ascertain enemy character.
Gilford Motor Co. v. Horne, [1933] Ch 935 — veil lifted to prevent evasion of contractual duty.
Jones v. Lipman, [1962] 1 WLR 832 — 'mask' doctrine of veil-lifting.
LIC v. Escorts Ltd., (1986) 1 SCC 264 — veil may be lifted for public convenience, fraud, justice.
State of U.P. v. Renusagar Power Co., (1988) 4 SCC 59 — single economic entity test.
Vodafone International Holdings v. Union of India, (2012) 6 SCC 613 — 'look-at' vs. 'look-through'.
Balwant Rai Saluja v. Air India, (2014) 9 SCC 407 — modern restatement of piercing tests.

Incorporation & Memorandum / Articles

Ewing v. Buttercup Margarine, [1917] 2 Ch 1 — injunction against deceptive corporate name.
Ashbury Railway Carriage v. Riche, (1875) LR 7 HL 653 — doctrine of ultra vires.
A. Lakshmanaswami Mudaliar v. LIC, AIR 1963 SC 1185 — ultra vires donation; directors liable.
Moosa Goolam Ariff v. Ebrahim, (1912) ILR 40 Cal 1 — certificate of incorporation is conclusive.
Jubilee Cotton Mills v. Lewis, [1924] AC 958 — conclusive evidence rule reaffirmed.
Hickman v. Kent/Romney Marsh, [1915] 1 Ch 881 — articles bind members qua members.
Eley v. Positive Govt. Security Life, (1876) 1 Ex D 88 — no outsider rights from articles.
Allen v. Gold Reefs, [1900] 1 Ch 656 — bona fide test for alteration of articles.
Brown v. British Abrasive Wheel, [1919] 1 Ch 290 — expropriation of minority struck down.
Royal British Bank v. Turquand, (1856) 6 E&B 327 — indoor management rule.
Ruben v. Great Fingall Consolidated, [1906] AC 439 — rule does not validate forgery.
Kelner v. Baxter, (1866) LR 2 CP 174 — pre-incorporation contracts; promoters personally liable.

Prospectus & Misstatement

Derry v. Peek, (1889) 14 App Cas 337 — definition of fraud; requirement of dishonesty.
Peek v. Gurney, (1873) LR 6 HL 377 — prospectus exhausted on first allotment (substantially modified by Section 35).
R. v. Kylsant, [1932] 1 KB 442 — half-truth in prospectus amounts to untrue statement.
New Brunswick Railway v. Muggeridge, (1860) 1 Dr & Sm 363 — 'Golden Legacy' rule of full disclosure.
Sahara India Real Estate v. SEBI, (2013) 1 SCC 1 — deemed public offer, jurisdiction of SEBI.

Share Capital & Debentures

Borland's Trustee v. Steel Brothers, [1901] 1 Ch 279 — nature of a share.
Bajaj Auto Ltd. v. N.K. Firodia, (1971) 1 SCC 687 — tests for refusal of registration of transfer.
Trevor v. Whitworth, (1887) 12 App Cas 409 — rule against company buying its own shares.
British and American Trustee v. Couper, [1894] AC 399 — reduction of capital must be fair.
Sarbati Devi v. Usha Devi, (1984) 1 SCC 424 — general rule that nominee is trustee (contrast Section 72).

Deposits

Peerless General Finance v. RBI, (1992) 2 SCC 343 — substance of transaction governs deposit classification.
Delhi Cloth & General Mills v. Harnam Singh, AIR 1955 SC 590 — wide construction of 'deposit'.

Charges

Illingworth v. Houldsworth, [1904] AC 355 — classical definition of floating charge.
Re Yorkshire Woolcombers, [1903] 2 Ch 284 — three tests of a floating charge.
Independent Automatic Sales v. Knowles & Foster, [1962] 1 WLR 974 — debt survives unregistered charge.
In re Panama, New Zealand and Australian Royal Mail Co., (1870) LR 5 Ch App 318 — early floating charge case.

Revision Strategy for Judicial Examinations

Company law questions in judicial service examinations typically fall into five buckets, each of which can be prepared by mastering the definitions, the leading cases, and one or two provisions:

Theoretical — nature of a company, separate legal entity, veil-lifting (Salomon quartet).
Definitional — 'company', 'private company', 'OPC', 'holding and subsidiary', 'small company'.
Incorporation-related — memorandum vs. articles, doctrine of ultra vires, indoor management, Turquand rule.
Capital and securities — types of shares, preferential allotment, rights issue, buy-back, debentures.
Regulatory — prospectus liability, private placement, deposits, charges, Section 447 (fraud).

An answer that integrates a one-line citation of a leading case with the statutory provision will invariably score better than a bare recital of the statute. Practice writing answers with the structure: (i) identification of the issue, (ii) the applicable statutory provision quoted in brief, (iii) the leading case, (iv) application to the fact pattern, and (v) conclusion.

🎯 Final Word

The Companies Act, 2013 is a living statute, amended almost annually. For the most current position before your examination, always verify the latest amendments on the MCA website (mca.gov.in) and the Companies Rules notified thereunder. This monograph reflects the position as developed through successive amendments up to the Companies (Amendment) Act, 2020 and the Companies Rules as in force. Good luck — and may the corporate veil never lift on you!

— End of Notes —

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