Modification, Satisfaction and Rectification of Charges

In one line

A charge that changes must be re-registered, a charge that is paid off must be reported so the register stops showing it, and where somebody has missed a deadline the Central Government can put the register right.

In exam wording: section 79(b) applies the registration machinery to any modification of a registered charge; section 82 requires a company to intimate satisfaction in full within thirty days, extendable to three hundred days on additional fees; section 83 lets the Registrar enter satisfaction or release without any intimation from the company; section 85 requires the company to keep its own register of charges; section 86 punishes contravention of the Chapter; and section 87 lets the Central Government order rectification of the register.

Why the law has this at all

A register is only useful if it is current. A register that records charges but never records their discharge tells a lender that a company's factory is mortgaged when in truth the loan was repaid four years ago, and the company cannot borrow again against it.

So the Act makes discharge reportable, and it does so with two safeguards pulling in opposite directions.

The chargeholder must be protected against a false satisfaction. A company that simply told the Registrar the debt was paid could wipe out a genuine security by a form. Hence section 82(2): the Registrar gives the chargeholder notice to show cause before recording it.

But the company must be protected against an obstructive chargeholder who has been paid and will not confirm it. Hence section 83, which lets the Registrar act on evidence without any intimation from the company at all.

And section 87 is the safety valve. Deadlines get missed, forms get filled in wrongly, and the consequence under section 77(3) is severe. The Central Government can extend time or correct an error where the failure was accidental or where it is just and equitable to relieve.

Some words this chapter uses

Modification means a change in the terms, conditions, extent or operation of a charge. Satisfaction means the charge has been discharged because the debt has been paid. Release means particular property has been freed from a charge that continues over the rest. A memorandum of satisfaction is the entry the Registrar makes to record discharge. To show cause is to give reasons why something should not be done. Rectification is correcting the register.

Modification: section 79(b)

Section 79 applies the provisions of section 77 relating to registration, so far as may be, to:

• (a) a company acquiring any property subject to a charge; and
• (b) any modification in the terms or conditions or the extent or operation of any charge registered under that section.