Modification, Satisfaction and Rectification of Charges

Four kinds of change are caught: terms, conditions, extent, operation. So an increase in the secured amount, a change in the rate of interest, the addition or release of property, and a change in the ranking of the charge all require the section 77 machinery all over again, including the thirty days, the extensions and the certificate.

And the consequence of not registering a modification is the same as for the original charge. Section 77(3) applies through section 79, so the unregistered modification is not taken into account by the liquidator or other creditors.

Satisfaction reported by the company: section 82

Section 82(1). A company shall give intimation to the Registrar in the prescribed form, of the payment or satisfaction in full of any charge registered under this Chapter, within thirty days from the date of such payment or satisfaction.

The proviso: the Registrar may, on an application by the company or the charge holder, allow such intimation to be made within three hundred days of the payment or satisfaction, on payment of such additional fees as may be prescribed.

Read that proviso against section 77 and notice the asymmetry, because it is examined. When the Companies (Amendment) Act 2019 cut the extension for creating a charge from three hundred days to sixty, it did not touch section 82. So the outer period for reporting satisfaction is still three hundred days, while the outer period for registering a new charge created today is sixty plus a further sixty. Two different numbers in adjoining sections, and the reason is legislative history rather than logic.

Note also who may apply for the extension: the company or the charge holder. Section 77's first proviso allows only the company to apply.

Section 82(2): the chargeholder is heard. On receipt of the intimation the Registrar shall cause a notice to be sent to the holder of the charge calling on him to show cause within such time not exceeding fourteen days as the notice specifies why payment or satisfaction in full should not be recorded as intimated. If no cause is shown, the Registrar shall order that a memorandum of satisfaction be entered in the register of charges kept under section 81, and shall inform the company that he has done so.

The proviso saves a step where there is no dispute: the notice is not required where the intimation to the Registrar is in the specified form and signed by the holder of the charge. If the lender has signed, there is nobody to warn.

Section 82(3): if cause is shown. The Registrar shall record a note to that effect in the register of charges and shall inform the company. He does not adjudicate the dispute; he records that it exists.

Section 82(4). Nothing in the section affects the Registrar's powers to make an entry under section 83 or otherwise than on receipt of an intimation from the company.

Satisfaction and release without the company: section 83

Section 83(1). The Registrar may, on evidence being given to his satisfaction with respect to any registered charge:

• (a) that the debt for which the charge was given has been paid or satisfied in whole or in part; or
• (b) that part of the property or undertaking charged has been released from the charge, or has ceased to form part of the company's property or undertaking,

enter in the register of charges a memorandum of satisfaction in whole or in part, or of the fact of release or cessation, notwithstanding that no intimation has been received from the company.

Two things section 83 does that section 82 cannot. It works on evidence rather than on the company's intimation, so an obstructive or defunct company is no obstacle. And it covers partial satisfaction and release of part of the property, whereas section 82 speaks only of satisfaction in full.

Section 83(2). The Registrar shall inform the affected parties within thirty days of making the entry.

Receivers and managers: section 84

Section 84(1). If any person obtains an order for the appointment of a receiver of, or of a person to manage, the property subject to a charge of a company, or appoints such a receiver or person under any power contained in any instrument, he shall, within thirty days from the date of the order or of the appointment, give notice to the company and the Registrar with a copy of the order or instrument, and the Registrar shall, on the prescribed fees, register the particulars of the receiver, person or instrument in the register of charges.

Note that the duty is on the person appointing or obtaining the order, not on the company. And it covers both routes: an order of the court and a power in the instrument, which is how most debenture receivers are appointed.

Section 84(2). Any person so appointed shall, on ceasing to hold the appointment, give notice to that effect to the company and the Registrar, and the Registrar shall register the notice.

So the register shows when a receiver arrives and when he leaves. This connects directly to crystallisation: the appointment of a receiver crystallises a floating charge, and section 84 is how the world finds out.

The company's own register: section 85

Section 85(1). Every company shall keep at its registered office a register of charges in the prescribed form and manner, which shall include therein all charges and floating charges affecting any property or assets of the company or any of its undertakings, indicating the prescribed particulars in each case.

The proviso: a copy of the instrument creating the charge shall also be kept at the registered office along with the register.

So there are two registers: the Registrar's, under section 81, and the company's own, under section 85. The company's is the one that also holds the instruments.

Section 85(2): who may inspect. The register of charges and the instruments shall be open for inspection during business hours:

• (a) by any member or creditor without any payment of fees; or
• (b) by any other person on payment of such fees as may be prescribed,

subject to such reasonable restrictions as the company may, by its articles, impose.

Compare section 81(2), where the Registrar's register is open to any person on payment of fees. At the company's own office, members and creditors pay nothing, and everybody else pays, and the articles may impose reasonable restrictions on the manner of inspection.

Punishment: section 86

Section 86(1). If any company is in default in complying with any of the provisions of this Chapter, the company shall be liable to a penalty of five lakh rupees and every officer of the company who is in default shall be liable to a penalty of fifty thousand rupees.

Note that these are penalties, imposed by an adjudicating officer under section 454, not fines imposed by a court, and they are flat amounts rather than ranges.

Section 86(2). If any person wilfully furnishes any false or incorrect information, or knowingly suppresses any material information, required to be registered in accordance with section 77, he shall be liable for action under section 447.

So a careless default is a penalty; a wilful falsehood or knowing suppression about a charge is fraud.

Rectification by the Central Government: section 87

The Central Government, on being satisfied that:

• (a) the omission to give intimation to the Registrar of the payment or satisfaction of a charge within the time required under this Chapter; or
• (b) the omission or misstatement of any particular in any filing made under this Chapter with respect to any such charge or modification or satisfaction,

was accidental or due to inadvertence or some other sufficient cause, or does not prejudice the position of creditors or shareholders, may on the application of the company or any person interested, on such terms and conditions as it deems just and expedient, direct that the time for the intimation of payment or satisfaction be extended, or that the omission or misstatement be rectified.

Three things to take from it.

The grounds are alternatives: accident, inadvertence, some other sufficient cause, or no prejudice to creditors or shareholders.

The applicant may be the company or any person interested, so a chargeholder or a purchaser may apply.

And note what section 87 does not cover. It speaks of the omission to intimate satisfaction and of omissions or misstatements of particulars. It is the relief for getting the paperwork wrong, not a general power to register a charge long out of time; the outer limits for that are in the provisos to section 77(1).

A worked example

Kalyan Chemicals Limited registered a charge over its plant in favour of a bank in 2026.

A modification. In 2027 the bank increases the facility and the charge is extended to cover a second plant. That is a modification in the extent of the charge, so section 79(b) applies section 77 to it: particulars within thirty days, the same extensions, and a fresh certificate. If it is not registered, the modification is not taken into account by a liquidator or other creditors.

A release. The bank later releases the second plant. That too is a modification of the extent, and it can also be recorded by the Registrar under section 83(1)(b) on evidence that part of the property has been released.

Full repayment. The company repays the loan on 1 June 2028. Under section 82(1) it must intimate satisfaction in full to the Registrar within thirty days, by 1 July 2028. If it misses that, the Registrar may, on the application of the company or the bank, allow the intimation within three hundred days on additional fees.

The Registrar's check. On receiving the intimation the Registrar sends notice to the bank to show cause within a period not exceeding fourteen days why satisfaction should not be recorded. The bank says nothing, so the Registrar orders a memorandum of satisfaction to be entered in the section 81 register and informs the company.

Had the bank objected, the Registrar would simply have recorded a note to that effect and informed the company: section 82(3). He does not decide who is right.

Had the intimation been in the specified form and signed by the bank, no notice would have been needed at all: proviso to section 82(2).

An uncooperative lender. Suppose the bank had been paid but refused to sign anything and the company could not file. The company gives the Registrar evidence of payment, and under section 83(1)(a) the Registrar may enter a memorandum of satisfaction notwithstanding that no intimation has been received from the company, informing the affected parties within thirty days.

A receiver. In a different year the bank appoints a receiver under a power in its debenture. The bank, being the person making the appointment, must within thirty days give notice to the company and the Registrar with a copy of the instrument: section 84(1). When the receiver finishes, he must give notice of ceasing to hold the appointment: section 84(2).

The company's own register. Throughout, the company must keep at its registered office a register of charges including all charges and floating charges, with a copy of each instrument. A member or creditor may inspect free; anybody else pays the prescribed fee; and the articles may impose reasonable restrictions: section 85.

A missed intimation, years later. The company discovers in 2031 that the 2028 satisfaction was never recorded because the form was filled in with the wrong charge identification number. It applies to the Central Government under section 87, showing the misstatement was due to inadvertence and does not prejudice creditors or shareholders. The Government may direct that the omission or misstatement be rectified, on such terms as it thinks just and expedient.

And the default itself. The failure to comply with the Chapter exposes the company to a penalty of five lakh rupees and every officer in default to fifty thousand rupees under section 86(1). Had someone wilfully filed false particulars, section 86(2) would send him to section 447.

Distinctions that carry marks

What this does NOT mean

It does not mean satisfaction can be recorded on the company's word alone. Section 82(2) requires notice to the chargeholder to show cause, unless he has signed the form himself.

It does not mean the Registrar decides disputes. If cause is shown he records a note and informs the company: section 82(3).

It does not mean section 87 can rescue a charge never registered in time. It addresses the omission to intimate satisfaction and omissions or misstatements of particulars.

It does not mean the two registers are duplicates. Only the company's register under section 85 holds copies of the instruments, and only it is free to members and creditors.

Quick revision

• 79(b): any modification in the terms, conditions, extent or operation of a registered charge goes through section 77 again.
• 82(1): intimate satisfaction in full within thirty days; proviso, extendable to three hundred days on additional fees, on the application of the company or the chargeholder.
• 82(2): Registrar gives the chargeholder notice to show cause within not more than fourteen days; if none is shown, a memorandum of satisfaction is entered and the company informed. Proviso: no notice needed if the intimation is in the specified form and signed by the chargeholder.
• 82(3): if cause is shown, the Registrar records a note and informs the company. 82(4): section 83 powers are unaffected.
• 83(1): on evidence, the Registrar may enter satisfaction in whole or in part, or release of part of the property, without any intimation from the company. 83(2): inform affected parties within thirty days.
• 84: the person obtaining the order or making the appointment gives notice of a receiver or manager to the company and the Registrar within thirty days with the order or instrument; and notice again on ceasing to hold it.
• 85: the company keeps its own register at the registered office, including all charges and floating charges, with copies of the instruments; inspection free for members and creditors, on fees for others, subject to reasonable restrictions in the articles.
• 86(1): default under the Chapter, company five lakh rupees, officer in default fifty thousand rupees. 86(2): wilfully false or incorrect information, or knowing suppression, under section 77, attracts section 447.
• 87: the Central Government may extend the time for intimating satisfaction, or direct rectification of an omission or misstatement, where it was accidental, due to inadvertence or other sufficient cause, or does not prejudice creditors or shareholders, on the application of the company or any person interested.

Test yourself

1. Within what time must satisfaction of a charge be reported, and what extension is available? Within thirty days of the payment or satisfaction: section 82(1). The Registrar may, on an application by the company or the chargeholder, allow the intimation within three hundred days on payment of additional fees.

2. Why is the outer period for reporting satisfaction longer than for registering a new charge? Because the Companies (Amendment) Act 2019 cut section 77's extension from three hundred days to sixty for charges created on or after its commencement, but left section 82's proviso untouched. The two figures differ for reasons of legislative history.

3. What must the Registrar do before recording satisfaction? Send the holder of the charge a notice to show cause within a time not exceeding fourteen days why satisfaction should not be recorded. If no cause is shown he orders a memorandum of satisfaction and informs the company. No notice is needed where the intimation is in the specified form and signed by the chargeholder.

4. Can the Registrar record satisfaction if the company files nothing? Yes. Under section 83, on evidence given to his satisfaction that the debt has been paid or satisfied in whole or in part, or that part of the property has been released or has ceased to form part of the company's property, he may enter a memorandum notwithstanding that no intimation has been received from the company, and must inform the affected parties within thirty days.

5. Who may inspect the company's own register of charges, and on what terms? Any member or creditor without payment of fees, and any other person on payment of the prescribed fees, during business hours, subject to such reasonable restrictions as the company may impose by its articles: section 85(2).

6. On what grounds may the Central Government order rectification under section 87? That the omission to intimate satisfaction within time, or an omission or misstatement of any particular in a filing about a charge, its modification or its satisfaction, was accidental or due to inadvertence or some other sufficient cause, or does not prejudice the position of creditors or shareholders. It may act on the application of the company or any person interested.