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SUBSERVIENT CHARGE

SOURABH GUPTA (CS) (100 Points)

05 February 2011

Hi,

Can anyone pls tell me what is the meaning of a subservient charge?

Is it necessary to register it with ROC in form no. 8.

Please reply. It is very urgent.

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5 Replies

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 05 February 2011

Originally posted by : SOURABH GUPTA
	Hi, Can anyone pls tell me what is the meaning of a subservient charge? Is it necessary to register it with ROC in form no. 8. Please reply. It is very urgent.

Hi Sourabh,

I am not very much sure on this.

But to my knowledge, this term "subservient charge" is used in Banking space with reference to

Consortium Financing.

"Under consortium financing, several banks (or financial institutions) finance a single borrower with common appraisal, common documentation, joint supervision and follow-up exercises ."

The finance given to the borrower say your company for which assets of your company has to be under charge.

So the Charge on the Assets of the Company, will be by multiple banks.

Eg : Bank A, Bank B & Bank C

One of the Bank has to be the Lead Banker (Lender)

and other 2 Banks are Co-Lenders.

The Charge on Bank A will be the Main Charge.

The Charge on Bank B & C will be the Sub-servient Charge.

It should be just different terminology with reference to Consortium Financing used in Banking Space.

Experts ,

Pardon me if i am wrong. Your advice appreciated.

regards

Santosh Shah

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RAMESH KUMAR VERMA ( CS PURSUING ) (43853 Points)
Replied 05 February 2011

THANKYOU SHAH JI,

FORE MORE INFORMATION LINK IS :-

https://www.moneycontrol.com/annual-report/plethicopharmaceuticals/notes-to-account/PP30

SOURABH GUPTA (CS) (100 Points)
Replied 05 February 2011

But Sir, my query still stands.

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 05 February 2011

Originally posted by : SOURABH GUPTA
	But Sir, my query still stands.

Dear Saurabh

All Charges needs to be registered with ROC as per the Companies Act 1956.

Form 8 is for creation of charge

and Form 17 will be used while for filing as Satisfaction of charge when loan borrowed is cleared.

Hope your query is resolved.

Any other views are welcome.

Regards

Santosh Shah

Khusboo (Finance Consultant) (43 Points)
Replied 26 April 2016

Subservient charge means such charge holder will get only the left over amount (if any remains) after paying off the dues of first charge holder.

If a lender A has a first Charge on Property XYZ and Lender B has a Second charge on the same property , and the Company creates a subservient charge in respect of the same property then in case of nonpayment of the Loan the subservient holder will get which is left after paying First to A and then to B, in that case subservient holder may or may not get his amount.

Quality of loan becomes weak if banks have a subservient or subordinate charge on the asset.