Ad Free CAclubindia and Daily Updates on your Mobile. Subscribe Now!

ROC Charge Creation

Muralidharan (Self Employed) (1034 Points)

18 November 2009

A Company has availed car loan of Rs.6.50 lacs from Oriental Bank of Commerce. The company has executed the following documents with the bank at the time of availing the loan (1) Agreement of Term Loan (2) Common Agreement (3) General Power of Attorney.

Normally the hypothecation will be endorsed in the RC Book of the vehicle and RC book will be retained by the bank till the loan gets repaid.

The bank officer is now asking the company to create a charge in favour of the bank with ROC. My questions are (1) Whether it is mandatory to create and register the charge with ROC for car loans (2) Is the above documents are enough to file the charge with ROC (Note : The company has not executed any hypothecation deed and has executed only the above documents)

Reply
Follow
Share

17 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 18 November 2009

Hi,

No the above charge is not required to be registered with ROC as the above transaction is outside the preview of compulsorily registerable charge given under section 125(4) of the Companies Act, 1956.

You have to adopt a strict approach towards the bank.

Regards

Upgrade to CAclubindia Pro. Subscribe Now!

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 19 November 2009

Dear Murlidharan,

In my opinion charge is required to be registered with ROC under section 125(4)(e)

i.e. a charge, not being a pledge, on any movable property of the company;

Thus, it is mandatory to register the charge within 30 days from the date of execution of abovementioned documents.

Preety (Company Secretary) (96 Points)
Replied 04 December 2009

Hello everyone.

Can anyone pl tell me what are the consequences of not filing charge . In one of my Company, there is renewal of terms and condition of CC limits, Fund Based Limits and Non fund based limits and no change at all. All terms are same as that of last year.There is only Collateral Security and personal gurantee of Directors. Now Bank is saying there is no need to file Form 8 for its renewal. Now can anyone pl tell me what will be consequnces of this on the Company for not filing Form 8 for modification.Prompt reply is appreciated.

Regards

Kamal

karn (trainee) (172 Points)
Replied 04 December 2009

Preety Mam,

I have also dealt with the same issue bt we have registered the charge and after filing a letter from ROC was delivered to our corporate office stating that the charge was priorly registered only there is change in the limits as specified.

so, i suggest kindly register the same.

regards...

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 04 December 2009

Dear Preety,

The charge should be registered or modified in the above case.

It is a duty of company tofile the particulars of charges with the ROC within the stipulated time for registration or modification. Unless and until the charge is registered with the ROC, it has no sanctity notwithstanding the fact that such charge was brought into vogue by reason of agreement inter aprties between the two creditors or by registration of guarantee bond.

In case of non filing and non registration of particulars of charge following consequences shall arise:-

1. the charge becomes void against liquidator or creditors and the money secured thereby shall immediately become payable. However, it can be enfored so long as the company does not go into liquidatino.

2. The security becomes void but non registration does not affect any contract or obligation of the company as to repayment of the money secured by the charge.

3. The company and every officer of the company or other person who is in default, shall be punishable with fine which may extend to Rs. 5000/- for every dau during which the default continues. A further fine of Rs. 10000/- may also be imposed on the company and every officer of the company who is in default of any other requirements of the Act concerning registration of a charge created by the Company,

Upgrade to CAclubindia Pro. Subscribe Now!

Preety (Company Secretary) (96 Points)
Replied 04 December 2009

Thank u so much.

Actually in our Company., all form 8 are filed by the bank itself. Now how should I convince them for filing Form 8. as there are not filing it. pl suggest.

Regards

Preety

CourseCart.in (Mentor at SHAYVIDZ Academy) (3756 Points)
Replied 09 December 2009

Preety,

Show them the legal provisions regarding registraton of modification of charge.. if they r not convinced after that, then just ur company can file the form8 by itself by asking the bank to just put DSC on that form.. The form8 shud be filed otherwise it will b default on part of the company only..

CS MOHIT SALUJA (PRACTICING CS Jalandhar 9914558709) (5155 Points)
Replied 31 March 2012

I am also agree with Mr. Ankur Srivastava athat charge should be registered as per Sec 125 (4) of the CA, 1956 AS Sec. 125(4) says

As per section 125(4), the following kinds of charges are mandatory and these charges needs to be
registered with the Registrar of Companies:—
(a) A charge for the purpose of securing issue of debentures;
(b) A charge on uncalled share capital;
www.bharatlaws.com
(c) A charge on the immovable property, wherever situated, or any interest therein. This includes
mortgage by deposit of title deeds. [Wallis v Simmonds (Builders) Ltd (1974) 1 All ER 561];
(d) A charge on any book debts. Assignment of book-debts as security is covered. [Paul and Frank
Ltd v Discount Bank Overseas Ltd (1966) 2 All ER 9221 (Ch D)] A lien on sub-freight is a charge
on book-debt of the company. [Welsh Irish Ferries Ltd. (1985) ECLC 327 (Ch D); Ladenberg &
Co. v Goodwin (1912) 3 KB 275]. Bank-balances are not treated as book-debts in commercial
practice. [Bright Life Ltd., in re 1986 BCLC 418: (1986) 3 All ER 673: (1987) 3 Comp LJ 102 (Ch
D)];
(e) A charge, not being a pledge, on any movable property;
(f) A floating charge on the undertaking or any property of the company including stock-in-trade;
(g) A charge on calls made but not paid. Section 14 of the Banking Regulation Act, 1949 debars a
bank from creating a charge on any unpaid capital;
(h) A charge on a ship or any share in a ship;
(i) A charge on a goodwill, patent or on a license under a patent or on a trademark or on a copyright
or license under a copyright.

Dear Ankur Garg Sir, can you please elaborate why the charge should not be created as one of my client company is also not registering the charge.

Radhika (Associate Chartered Accountant) (22 Points)
Replied 10 April 2012

The Public Limited Company has taken a Bank guarantee and Cash Credit from Bank. without creating any charge on any asset. do i need to file any document to notify ROC about such Loan?

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 11 April 2012

Originally posted by : Radhika
	The Public Limited Company has taken a Bank guarantee and Cash Credit from Bank. without creating any charge on any asset. do i need to file any document to notify ROC about such Loan?

Dear Radhika

In my view, for the above case charge is not required.

As far as there is no charge on assets of the company, form 8 need not be filed.

Bank guarantee / Cash Credit facility is normally availed by company from banks for meeting business requirements in due course of business. So Filing Charge for that is not required as far as charges are not created on assets of the company.

Other views welcome.

regards

Santosh Shah

1 Like

Upgrade to CAclubindia Pro. Subscribe Now!

Sanjay Patare (Article) (21 Points)
Replied 18 October 2012

Dear Sir,

Could you please help me in the following fact:

Director has purchased Vehicle for the use of Company in his own name with borrowed fund from bank by mortgaging the same vehicle. The Company is paying EMI of the loan. Further Company is taking benifit of Depriciation and Interest also u/s 32 of the Income Tax Act. The Balancesheet of the Company shows assets of the Company and same time shows loan on libility side.

In this case whether charge has to be created or not under the provision of Companies Act ?

Smriti Dhawan (Company Secretary ) (347 Points)
Replied 19 October 2012

Mr. Sanjay, I did't get how come its possible that Vehicle is in name of Director and company is paying EMI and taking advantage of depreciation alongwith showing that particular Vehicle in the Balance Sheet of Company as asset and loan as liabilty.

If Vehicle is not in name of Company hw can you show it balance sheet as asset and Loan as Liabilty. Its in name of Director and Directors asset and liabilty are distict that from the Company , Its not possible as per my opinion.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 19 October 2012

Originally posted by : Sanjay Patare
	Dear Sir, Could you please help me in the following fact: Director has purchased Vehicle for the use of Company in his own name with borrowed fund from bank by mortgaging the same vehicle. The Company is paying EMI of the loan. Further Company is taking benifit of Depriciation and Interest also u/s 32 of the Income Tax Act. The Balancesheet of the Company shows assets of the Company and same time shows loan on libility side. In this case whether charge has to be created or not under the provision of Companies Act ?

For purchase of vehicle, the vehicle is kept under security as hypothecation. And no charge is to be created on such hypo because hypo is covered under pledge.

Furthemore, as such the security is already provided by creating hypothecation on the vehicle.

CA B S Swamy (M com., FCA.,ICWA.) (21 Points)
Replied 11 December 2013

kindly any one clarify whether, filing of form 8 is required for financial guaranttee given by the company to bank, on that basis the bank is giving loan to the formers. thank you