Duty to Register Charges, etc.

6.1 Section 77 of the Act mandates registration of charges with the Registrar. During the process of public consultation, it was pointed out that unlike the Companies Act, 1956, a specific list of charges to be so registered had not been included in the new Act or the Rules. Thus, in the absence of a specific list of charges to be registered, and the wide definition of the word “charge”, ‘pledges’ and ‘liens’ were also required to be registered. These were earlier exempted from registration requirements under the previous Act. It was stated before the Committee that registration of pledges and liens created various practical difficulties, relating to the quantum and frequency of registrations required, etc. for example members of the ‘Clearing Corporation’ (CC) deposited cash, bank guarantees, FDRs, approved securities etc. with the Corporation towards meeting the margin and security deposit requirements would require registration of charges, creating operational difficulties.

6.2 In this regard, the Committee felt that there was no need for the definition of the term ‘charge’ to be changed, since relevant judicial precedents specified that charges included pledges. However, Section 77(3) may provide for prescriptive powers to allow certain liens or securities or pledges to be exempted from filing. This would address the practical problems in case of transactions by NBFCs engaged in financing of assets, and for members/agents of the Clearing Corporation, etc.

Company to report satisfaction of charge

6.3 Section 82 of the Act provides that a company shall give intimation to the Registrar of the payment or satisfaction in full, of any registered charge so registered within thirty days from the date of such payment or satisfaction. Further, sub-section (1) of Section 77 shall, as far as may be, apply to an intimation given under this Section. It has been suggested to the Committee that similar time limits, as provided for under Section 77 for registration of charge, ought to be allowed for reporting satisfaction of charges under Section 82 too. The Committee felt that, as it would generally be in a company’s interest to report satisfaction of charges, there should not be any regulatory concern in allowing similar timelines as allowed for registering a charge and, therefore, recommended for the same.

Registration of charges: proposed exemptions for liens and pledges to reduce operational burdens on clearing participants and NBFCs. The Committee recommends retaining the existing definition of 'charge' while empowering the Registrar to exempt specified liens, securities or pledges from registration to address operational burdens for Clearing Corporation members and NBFCs. It further recommends aligning the time limits for companies to report satisfaction of registered charges with the timelines applicable to registration to reduce procedural friction.