Suraj Ltd. has a subscribed capital of ₹200 crore out of which ₹100 crore has been paid-up. The Articles of Association of the company has a provision that the company shall have a Reserve Capital of ₹50 crore which shal

Provisions of Company Law regarding Charges on Capital: A company does not have implied power of charging its uncalled share capital. It may charge its uncalled capital only if its articles or memorandum authorize it to do so. The memorandum may give an express power to charge uncalled capital, or the power may be so wide that it can be inferred by implication. For instance, in Newton vs. Debenture-holders of Anglo-Australian Investment Co. , the memorandum authorized the company to borrow "upon any security of the company". It was held that the power was wide enough to include a charge on uncalled capital. However, a company **cannot mortgage or charge any part of its "reserve capital"** i.e., such portion (if any) of its uncalled share capital as is incapable of being called up except in the event of winding up of the company. Reserve capital is specifically created to be called up only during winding up and cannot be used as security for borrowings during the company's going concern. Application to the given case: Suraj Ltd. has subscribed capital of ₹200 crore, with ₹100 crore paid-up, meaning ₹100 crore is uncalled capital. Out of this uncalled capital, ₹50 crore is designated as Reserve Capital, callable only at winding up. Suraj Ltd. desires to create a charge on both the uncalled capital and the Reserve Capital. Advice to Suraj Ltd.: Suraj Ltd. **can create a charge on its uncalled capital** (the portion not designated as Reserve Capital) if its Articles of Association or Memorandum of Association specifically authorize it to do so. However, Suraj Ltd. **cannot create a charge on the Reserve Capital** of ₹50 crore, as this portion is legally reserved to be called up only at the time of winding up and cannot be used as security for current borrowings.