Question

A company creates a charge on plant and machinery on Day 1 but files particulars with the Registrar on Day 60. Meanwhile, the company defaults and the chargeholder seeks to enforce the security. Under the Companies Act, 2013, which is most likely?

• A. The charge is valid and enforceable despite late registration
• B. The charge is void ab initio and unenforceable because registration was not made within 30 days
• C. The charge is valid as between parties but the unregistered status affects priority against a liquidator or subsequent purchasers
• D. The charge automatically crystallises on Day 31 and is enforceable

Hint:

Unregistered charge = valid inter se, weak against liquidator/creditors.

Answer 1

The Correct Option is C

Step 1: Registration of charges.
Section 77 of the Companies Act, 2013 requires registration of charges, with provision for delayed registration subject to consequences.
Step 2: Effect of non-registration.
An unregistered charge remains valid between the company and the chargeholder but is void against the liquidator and creditors.
Step 3: Conclusion.
Therefore, option (C) correctly states the legal position.