What Is Registration of Charges? Section 77

The section 77 duty to register charges is what turns a lender's security into something the law will recognise. Every company that creates a charge on its property or assets must register the particulars with the Registrar within thirty days. Miss it, and section 77(3) says the charge is not taken into account by a liquidator or any other creditor at all.

What the section 77 duty to register charges actually covers

Section 77(1) is drafted broadly on purpose. The duty attaches to every company creating a charge:

• within or outside India
• on its property or assets or any of its undertakings
• whether tangible or otherwise
• situated in or outside India

What gets filed is the particulars of the charge, signed by the company and the charge-holder, together with the instruments creating the charge, in the prescribed form and on payment of the prescribed fees.

Section 79 extends the same machinery to two situations that are easy to miss: a company acquiring property that is already subject to a charge, and any modification in the terms, conditions, extent or operation of a charge already registered.

The four provisos, and which one applies to you

The provisos to section 77(1) are the part most often misread, because two of them are transitional and split on a single date: the commencement of the Companies (Amendment) Act, 2019.

The first and second provisos were substituted together by Act 22 of 2019, section 11, with effect from 2 November 2018. The fourth was inserted by Act 1 of 2018, section 18, with effect from 7 May 2018. The classes of charge excluded under it sit in the rules made in consultation with the Reserve Bank, not in the section.

The certificate, and why it decides priority

Section 77(2) requires the Registrar, on registering a charge, to issue a certificate of registration in the prescribed form to the company and to the person in whose favour the charge is created.

Section 77(3) is the consequence that gives the whole chapter its force. Notwithstanding anything in any other law, no charge created by a company shall be taken into account by the liquidator appointed under the Act or the Insolvency and Bankruptcy Code, 2016, or by any other creditor, unless it is duly registered under sub-section (1) and a certificate has been given under sub-section (2). The reference to a liquidator appointed under the Insolvency and Bankruptcy Code was inserted by Act 31 of 2016, section 255 and the Eleventh Schedule, with effect from 15 November 2016.

Section 77(4) draws the boundary. Nothing in sub-section (3) prejudices any contract or obligation for the repayment of the money secured by the charge. An unregistered charge does not cancel the debt; it loses its standing as security.

Section 80 completes the picture from the other side. Where a charge is registered under section 77, any person acquiring the property, assets or undertaking, or any share or interest in it, is deemed to have notice of the charge from the date of registration.

When the lender registers instead

Section 78 exists because the duty sits on the company while the risk sits with the lender. Where a company fails to register the charge within the thirty days referred to in section 77(1), and without prejudice to its liability for any offence, the person in whose favour the charge is created may apply to the Registrar in the prescribed form.

The Registrar may allow that registration within fourteen days after giving notice to the company, unless the company itself registers the charge or shows sufficient cause why it should not be registered. The proviso lets that person recover from the company any fees or additional fees paid to the Registrar for the purpose.

The words "register the charge within the period of thirty days referred to in sub-section (1) of section 77" were substituted into section 78 by Act 1 of 2018, section 19, with effect from 7 May 2018, replacing a reference to the period specified in section 77 generally.

What a default costs

Section 86(1), as substituted by Act 29 of 2020, section 16, with effect from 21 December 2020, sets a single penalty for the whole of Chapter VI, which covers registration of charges: a company in default is liable to a penalty of five lakh rupees, and every officer of the company who is in default to fifty thousand rupees.

Section 86(2), inserted by Act 22 of 2019, section 12, with effect from 2 November 2018, goes further for a specific act. If any person wilfully furnishes false or incorrect information, or knowingly suppresses material information required to be registered under section 77, he is liable for action under section 447, the Act's fraud provision.

Where this sits in the disclosure picture

A registered charge is a public fact about a listed company's balance sheet that does not appear in its shareholding pattern. It sits in the Registrar's records and in the company's own register.

• Which provisions apply to a foreign company covers section 384(4), which applies this whole chapter to charges a foreign company creates or acquires.
• What is the company's register of charges covers the section 85 register the company keeps at its registered office, including floating charges.
• How to check a company's registered charges covers the section 81 register the Registrar keeps and who may inspect it.
• What is satisfaction of charge covers what happens under section 82 when the debt behind a registered charge is paid off.
• What is promoter pledging is the separate, SEBI-side disclosure of security created over promoter shareholding.

Flock reports the filings themselves, each stamped with its date and linked back to the exchange or regulator that published it. What any of it means for you is your call to make.