DELAY IN FILING CHG - 4 FORM DUE TO DEATH OF FOUNDER DIRECTOR

[Mr. M. GOVINDARAJAN]

Charge

Section 2(16) of the Companies Act, 2013 (‘Act’ for short) defines the term ‘charge’ as an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage. 

Satisfaction of charges

Section 82(1) of the Act provides that 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 Act within a period of 30 days from the date of such payment or satisfaction.  The proviso to the said section provides that the Registrar may, on an application by the company or the charge holder, allow such intimation of payment or satisfaction to be made within a period of three hundred days of such payment or satisfaction on payment of such additional fees as may be prescribed.

Rule 8 of the Companies (Registration of Charges) Rules, 2014 provides that a company or charge holder shall within a period of 300 days from the date of the payment or satisfaction in full of any charge registered under Chapter VI, give intimation of the same to the Registrar in Form No.CHG-4 along with the fee.  Where the Registrar enters a memorandum of satisfaction of charge in full in pursuance of section 82 or 83, he shall issue a certificate of registration of satisfaction of charge in Form No.CHG-5.

Punishment

Section 83(1) of the Act provides that 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 Rs.5 lakhs  and every officer of the company who is in default shall be liable to a penalty of Rs.50,000/-. If any person willfully furnishes any false or incorrect information or knowingly suppresses any material information, required to be registered in accordance with the provisions of section 77, he shall be liable for action under section 447.

Extension of time limit

As per Section 87 of the Act, the Central Government has the power to extend the time for filing of memorandum of satisfaction.  The said section 87 provides that the Central Government on being satisfied that-

• the omission to give intimation to the Registrar of the payment or satisfaction of a charge, within the time required under this chapter; or
•  the omission or misstatement of any particulars, in any filing previously made to the Registrar with respect to any charge or modification thereof or with respect to any memorandum of satisfaction or other entry made in pursuance of section 82 or section 83, was accidental or due to inadvertence or some other sufficient cause or it is not of a nature to prejudice the position of creditors or shareholders of the company, it may, on the application of the company or any person interested and on such terms and conditions as it deems just and expedient, direct that the time for the giving of intimation of payment or satisfaction shall be extended or, as the case may require, that the omission or misstatement shall be rectified.

Delay in filing CHG - 4

If Form CHG - 4 is filed within a period of 300 days (30+270) then for such satisfaction normal fees additional fees shall be levied.  The levy of normal fees is as detailed in the following table-

Nominal Share capital	Company other than OPC or small company	OPC or small company
Less than Rs.1 lakh	Rs.200/-	Rs.100/-
1,00,000 to Rs.4,99,999	Rs.400/-	Rs.200/-
5,00,000 to 24,99,999	Rs.600/-	Rs.300/-
25,00,000 and more	Rs.1000/-	Rs.500/-

The additional fees will be levied as detailed in the following table-

Period of delays	Additional fees leviable
Up to 30 days	3 times of normal fees
More than 30 days and up to 60 days	6 times of normal fees
More than 60 days and up to 120 days	9 times of normal fees
More than 120 days and  up to 180 days	12 times of normal fees
More than 180 days but equal 270 days	20 times of normal fees
More than 270 days	30 times of normal fees

In URMIL PROPERTIES AND INVESTMENT PVT. LTD. VERSUS REGISTRAR OF COMPANIES & ORS. - 2023 (4) TMI 82 - DELHI HIGH COURT the petitioner-Company had obtained two loans from the ICICI Bank.   Charges in respect of the same were created and filed with the Registrar of Companies.   The petitioner settled the two loans and obtained ‘no dues certificate’ from the bank for the said two loans on 10.06.2021.  On 01.02.2022 the founder Director passed away by means of COVID.   His son took over the charge of the company and  started managing day to day affairs.  Once the loan is settled satisfaction of charge in the form CHG - 4 is to be filed within 30 days from the date of settlement.  Due to the death of Founder Director the said form was filed only on 28.11.2022. 

The Registrar of Companies took up this matter.  The Registrar of Companies imposed the costs Rs. 2 lakhs on the petitioner vide his order dated 31.01.2023.  The cost is @ Rs.1 lakh for each loan taken in filing form CHG -4 after a delay of 505 days.  The Registrar of Companies allowed allowing Petitioner’s application filed under Section 77(1) read with Section 87 of the Companies Act, 2013 allowed the petitioner’s application filed under Section 77(1) read with Section 87 of the Companies Act, 2013.  The petitioner challenged the above said orders before the High Court, Delhi by means of writ petition.

The petitioner submitted the following before the High Court-

•  the loans have been paid in full.
•  it was only the filing of the Form which was inadvertently delayed.
• The delay in filing the form is due to is  the death of the Founder-Director by means of COVID.
• there was no deliberate intention to delay. 

The petitioner relied upon the judgment  of Supreme Court in IN RE: COGNIZANCE FOR EXTENSION OF LIMITATION - 2022 (1) TMI 385 - SC ORDER and the order of the High Court of the Madhya Pradesh in M/S. SHALINI PLASTIC PRIVATE LIMITED THROUGH SHRI KAPIL ATLASIYA VERSUS UNION OF INDIA, REGISTRAR OF COMPANIES MADHYA PRADESH - 2018 (7) TMI 2301 - MADHYA PRADESH HIGH COURT.  The petitioner prayed the Court for the reduction of costs with reference to the above said case laws.

The Registrar of Companies submitted that on both the charges, the delay is admitted and hence the cost is valid.

‘The High Court analyzed the provisions of Section 82 and 87 of the Act and Rule 8(1).  The High Court also analyzed the case laws relied on by the petitioner.  The Supreme Court in In Re ‘Suo Motu’ (supra) clearly shows that the entire period between 15.03.2020 till 28.02.2022 was excluded from computation of limitation.   In the present case, the usual period of limitation is thirty days. Thus, a period of thirty days would be added from 28.02.2022, meaning thereby that the limitation would have expired only on 28.03.2022.  The filing of the Form in the present case has been made on 28.11.2022 which would be a total delay of 8 months.

The Madhya Pradesh High Court in ‘Shalini Plastic Private Limited’ held that the petitioner has disclosed that delay had taken place because there was change in entire management of the company, therefore, the default had taken place for the bonafide reason.

Considering the Supreme Court order and the judgment of Madhya Pradesh High Court, the High Court considered the delay cannot be held to be deliberate.  The demise of the Founder-Director due to COVID-19 is a genuine cause for the delay. The costs are accordingly reduced to 25,000/- qua each of the charges and in total Rs.50,000/-  The High Court modified the impugned order to this extent.