MNO Infrastructure Ltd., engaged in real estate development, avails a secured term loan of ₹50 crores from XYZ Bank Ltd. The loan is secured by a charge on the company's land assets. The loan agreement is signed on 1st J

As per Section 77 of the Companies Act, 2013, the particulars of the charge together with a copy of the instrument, if any, creating or modifying the charge shall be filed with the Registrar within a period of 30 days of the date of creation or modification of charge or the extended period up-to 120 days. After amendments in Section 77 of the Companies Act, the provisions restrict the ability of the company to register charge after expiry of 120 days. Consequences of Non-Registration of Charges According to Section 77 of the Companies Act, 2013, all types of charges created by a company are to be registered by the ROC, where they are non-compliant and are not filed with the Registrar of Companies for registration, it shall be void as against the liquidator and any other creditor of the company. This does not, however, mean that the charge is altogether void and the debt is not recoverable. So long as the company does not go into liquidation, the charge is good and may be enforced. Void against the liquidator means that the liquidator on winding up of the company can ignore the charge and can treat the concerned creditor as unsecured creditor. The property will be treated as free of charge i.e. the creditor cannot sell the property to recover its dues. Void against any creditor of the company means that if any subsequent charge is created on the same property and the earlier charge is not registered, the earlier charge would have no consequence and the latter charge if registered would enjoy priority, in other words, the latter charge holder can have the property sold in order to recover its money. Thus, non-filing of particulars of a charge does not invalidate the charge against the company as a going concern. It is void only against the liquidator and the creditors at the time of liquidation. The company itself cannot have a cause of action arising out of non- registration [Independent Automatic Sales Ltd. v. Knowles & Foster (1962) 32 Comp Cas]. Conclusion: Accordingly, the refusal of the ROC to register the charge on expiry of 120 days is valid as he is not empowered under the statute to register such delayed charge. Further, considering the consequences of non-registration of charge XYZ Bank Ltd. shall not have priority over the subsequent charge of third-party lender.