Query on Charge Creation as per new companies Act 2013

[Sumeet]

A Company has taken overdraft from bank against fixed deposit. Company is regularly making fixed deposit and taking bank guarantee and overdraft facility from the bank. Do the company need to file form related to creation of charge with ROC

[Avik Basak]

Dear Sir,

Normally in case of granting of Overdraft facility against Fixed
Deposits and issuance of Bank Guarantee against 100% margin (by way of
FD /any other liquid security) the charge filing is not required. It
depends on the sanction letter issued by the concerned Bank. If the
terms of sanction provides that the Bank has 1st charge over the
entire current assets of the Company then the filing of charge is
required which is rare.



Avik Kumar Basak.

[always4...@gmail.com]

Hi Sir,

Did you get any answer for your query?

Regards,

Deepak

[Akhil Maangal]

Hi Deepak,

Company need to file form CHG-1 with RoC to create charge in favour of Bank.

Thanks,
Akhil Maangal

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[Ns Rajan]

Dear Sir

If the credit facilities granted by the Bank in the form of BG & OD

are fully secured by pledge of fixed deposit then the question

of charge creation does not arise.

regards

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C.A.  N.Sundara Rajan

[Deepak Jain]

Hi Sir, 
Even though I agree with your answer,  but I did not find any basis to justify.  Can you please help me with any reference to law or rules. 

Thanks and Regards,
Deepak Jain

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[Ns Rajan]

Dear Sir,

In case of pledge of Fixed deposits which are lien marked

in favour of Bank as security no charge needs to be created

as the Bank will have immediate title to the Fixed deposits.

(as the possession of the security remains with pledgee 

 i.e. the Bank)

Charge is normally created for Hypothecation of goods & receivables

& in the case of mortgage where the possession of the security

remains with the Borrower

regards

CA N SUNDARA RAJAN

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C.A.  N.Sundara Rajan

[Ecotech]

The purpose of charge creation is that any lender may not be duped to finance further on the same set of securities. In the case of FD, the original documents are in the possession of the lender and for creation of further security, original documents would not be available. I think, this may be the justification.

 

JNGupta

9331022920

[sandip gupta]

Dear Mr.Gupta,

Not necessarily so. For loans against properties original documents are kept with the lender.

The basic purpose of charge creation under law is that if the borrower fails to repay the loan, the lender has a legal recourse to recover the same.

Regards,

Sandip Gupta

[Satyendra Nath Khan]

To All
Section 125(4)(e) of Cos Act 1956 exempted pledge from creation of
charge. Section 77(1) of Cos Act 2013 provides no such exemption &
states that " it shall be the duty of every company creating a charge
on its property or assets....to register th particulars of charge .'.
As the fixed deposit is an asset of the company & a charge by pledge
has been created on it, it is the duty of the Company to file charge
otherwise there will be violation of Chapter VI of Cos Act 2013.
Section 86 provides for fine between Rs. 1 to 10 lacs for the company
& imprisonment upto six months and or fine between 0.25 lacs to 1 lac
for every defaulting officer of the company.
So friends in doubt file the charge.
Regards
CA S N KHAN

[Ecotech]

Properties can be sold exclusive of the mother original documents, but Fixed Deposits cannot be so encashed.

 

JNGupta

9331022920

[tax...@gmail.com]

You are correct. Ask the members to atleast create charge on the fixed deposit.