Preliminary Draft | For the purposes of discussion

RE: APPLICATION FOR CONDONATION OF DELAY IN REGISTRATION OF CHARGE

1. Position in law prior to the Companies (Amendment) Ordinance, 2018 of 2 November 2018:

Section 77 of the Companies Act, 2013 (“Act”) provide for registration of charges and condonation of
delay:

“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:

Provided that the Registrar may, on an application by the company, allow such registration to be
made within a period of three hundred days of such creation on payment of such additional fees as
may be prescribed:

Provided further that if registration is not made within a period of three hundred days of such
creation, the company shall seek extension of time in accordance with section 87: Provided also that
any subsequent registration of a charge shall not prejudice any right acquired in respect of any
property before the charge is actually registered.”

Section 87 which deals with rectification by Central Government in register of charges:

‘The Central Government on being satisfied that—

(i) (a) the omission to file with the Registrar the particulars of any charge created by a company or
any charge subject to which any property has been acquired by a company or any modification of
such charge; or

(b) the omission to register any charge within the time required under this Chapter or the omission to
give intimation to the Registrar of the payment or the satisfaction of a charge, within the time
required under this Chapter; or

(c) the omission or mis-statement 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; or

(ii) on any other grounds, it is just and equitable to grant relief, it may on the application of the
company or any person interested and on such terms and conditions as it may seem to the Central
Government just and expedient, direct that the time for the filing of the particulars or for the
registration of the charge or for the giving of intimation of payment or satisfaction shall be extended
or, as the case may require, that the omission or mis-statement shall be rectified.
Preliminary Draft | For the purposes of discussion

(2) Where the Central Government extends the time for the registration of a charge, the order shall
not prejudice any rights acquired in respect of the property concerned before the charge is actually
registered.’

The applicable Company rules are as follows:

Rule 4 of Companies (Registration of Charges) Rules, 2014 allows for condonation of delay by the
Registrar if the particulars and instrument of charge is not filed within 30 days:

Condonation of delay by Registrar-

(1) The Registrar may, on being satisfied that the company had sufficient cause for not filing the
particulars and instrument of charge, if any, within a period of thirty days of the date of creation of
the charge, allow the registration of the same after thirty days but within a period of three hundred
days of the date of such creation of charge or modification of charge on payment of additional fee.

(2) The application for delay shall be made in Form No.CHG-10 and supported by a declaration
from the company signed by its secretary or director that such belated filing shall not adversely affect
rights of any other intervening creditors of the company.

Rule 12 of the Companies (Registration of Charges) Rules, 2014 allows for condonation of delay by
the Central Government if the particulars and instrument of charge is not filed within a period of 3000
days:

“Condonation of delay and rectification of register of charges.-

(1) Where the instrument creating or modifying a charge is not filed within a period of three hundred
days from the date of its creation (including acquisition of a property subject to a charge) or
modification and where the satisfaction of the charge is not filed within thirty days from the date on
which such payment of satisfaction, the Registrar shall not register the same unless the delay is
condoned by the Central Government.

(2) The application for condonation of delay and for such other matters covered in sub-clause (a),(b)
and (c) of clause (i) of sub-section (1) of section 87 of the Act shall be filed with the Central
Government in Form No.CHG-8 along with the fee.

(3) The order passed by the Central Government under sub-section (1) of section 87 of the Act shall
be required to be filed with the Registrar in Form No.INC.28 along with the fee as per the conditions
stipulated in the said order.”

Rule 12 of the Companies (Registration of Offices and Fees) Rules, 2014 provides for the fee payable
with such application for condonation of delay:

“1) The documents required to be submitted, filed, registered or recorded or any fact or information
required or authorised to be registered under the Act shall be submitted, filed, registered or recorded
on payment of the fee or on payment of such additional fee as applicable, as mentioned in
Table *annexed to these rules.

(2) For the purpose of filing the documents or applications for which no e-form is prescribed under
the various rules prescribed under the Act, the document or application shall be filed through Form
Preliminary Draft | For the purposes of discussion

No.GNL.1 or GNL.2 along with fee as applicable and in case a single form is prescribed for multiple
purposes, the fee shall be paid for each of the purposes contained in the single form.

(3) For the purpose of filing information to sub-clause(60) of section 2 of the Act, such information be
filed in Form No. GNL.3 along with fee as applicable.”

Following table of additional fees shall be applicable for delays in filing of the forms other than for
increase in Nominal Sharecapital:

Sl no Period of delays Forms including charge documents

01 upto 15 days (sections 93,139 and 157) One time

02 More than 15 days and upto 30 days (Sections 93, 139 2 times of normal filing fees
and 157) and upto 30 days in remaining forms.

03 More than 30 days and upto 60 days 4 times of normal filing fees

04 More than 60 days and upto 90 days 6 times of normal filing fees

05 More than 90 days and upto 180 days 10 times of normal filing fees

06 More than 180 days and upto 270 days 12 times of normal filing fees

In Tristar Container Service (Asia) P. Ltd. v. WW Shipping Agencies P. Ltd.1 the Court held that
“the delay in registering the charges within the prescribed period was due to sufficient cause and
further it is just and equitable to grant relief in favour of the petitioners in extending the time for filing
of the particulars of charges purportedly created by the respondents, more so any extension of time to
my mind will not prejudice the position of SBI being the first charge holder. Accordingly the time for
filing of the particulars ol charges with the Registrar is extended by 30 days.” Therefore, there is
precedent in which delay in filing the particulars and instrument of charge has been condoned.

2. Position in law after the Companies (Amendment) Ordinance, 2018 of 2 November 2018:

The new law requires companies to register charges (such as mortgages) on their property within 30
days of creation of charge. The Registrar may permit the registration within 300 days of creation. If
the registration is not completed within 300 days, the company is required to seek extension of time
from the central government.

The Ordinance changes this to permit registration of charges: (i) within 300 days if the charge is
created before the Ordinance, or (ii) within 60 days if the charge is created after the Ordinance. If the
charge under the first category is not registered within 300 days, it must be completed within six
months from the date of the Ordinance. If the charge under the second category is not registered

1 2008 85 SCL 197 CLB

Preliminary Draft | For the purposes of discussion

within 60 days, the Registrar may grant another 60 days for registration. If a person wilfully furnishes
false or incorrect information, or suppresses material information which is required to be registered
under this provision, he will be liable for fraud under the Act.

3. Advice for Powerhouse Equipments:

Therefore, since there is no clarity regarding the form in which the application is to be made to the
Registrar (as the role of Central Government in regard to registration of charges under Section 87 of
the Companies Act, 2013 has been scrapped off) and the amount of fees to be paid, it would be proper
to wait for the amended rules to be notified. It is expected that this would be done within a reasonable
span of time. The filing can be pursued later as the application for condonation has to be filed and the
subsequent registration is to be done within 6 months of the Ordinance, that is, 6 months from 2nd
November, 2018 (which makes it till 2nd May, 2018).