Charge Creation in form CHG-1 after borrowing secured Loan from Bank or Financial Institution

Charge Creation in form CHG-1 after borrowing secured Loan from Bank or Financial Institution. “Charge” Under the Companies Act, 2013
When a company raises funds from a bank or a financial institution, the transaction almost invariably involves the creation of a charge over the assets of the company as security for repayment. Although this requirement is well understood from a commercial standpoint, many companies continue to underestimate the statutory significance of charge creation under the Companies Act, 2013.
Recently some MCA adjudication orders issued by the Registrars of Companies (ROC) clearly establish that non-registration of charges or delay in filing MCA Form CHG-1 is treated as a statutory default or non compliance under companies act 2013, attracting monetary penalties not only on the company but also on the officers in default. TheseMCA adjudication  orders reinforce that charge registration is not a procedural formality but a mandatory legal obligation with direct compliance consequences.
Through this article, Compliance Calendar LLP explains the complete legal requirements governing charge creation (CHG-1), including the relevant statutory sections, applicable rules, prescribed timelines, and the consequences of non-compliance, in a consolidated and compliance to be done before hand..
Importantly, before availing any loan or approaching a bank or financial institution, companies must first ensure that their Articles of Association (Form INC-34) contain an appropriate borrowing clause authorising the company to raise loans. In addition, compliance with Section 180 of the Companies Act, 2013, where applicable, must be carefully examined, along with the scope of Board powers and shareholder approvals required for borrowing and creation of security. Failure at this preliminary stage can itself render the borrowing process non-compliant, irrespective of subsequent charge registration.
A charge is a legal right or interest created by a company on its property or assets, whether tangible or intangible, present or future, situated in or outside India, in favour of a lender to secure repayment of money or performance of an obligation.
In practical terms, when a company:

takes a term loan, working capital facility, or non-fund based facility, and

executes security documents such as a mortgage deed, deed of hypothecation, pledge agreement, or loan agreement,

Note: A charge is deemed to be created on the date of execution of such instrument, irrespective of the date of disbursement of loan value.
What is Charge Registration (CHG-1) ?
Section 77 – Duty to Register Charges
Section 77(1) of the Companies Act, 2013 imposes a mandatory duty on every company creating a charge to register the particulars of such charge with the Registrar of Companies in following manner:

Registration must be completed within 30 days of creation of charge

Registration applies to charges created within or outside India

Both company and charge holder must sign the particulars/pre certification including professional certification like CA/CS etc.

Registration is done in the prescribed form CHG-1 filing at MCA and manner given in Companies Act 2013

Section 77(2) provides that upon registration, the ROC shall issue a certificate of registration of charge, which is conclusive evidence of registration.
Section 77(3) carries severe implications: An unregistered charge shall not be taken into account by a liquidator or any other creditor, meaning the lender’s security may lose priority during insolvency or winding up.
Section 77(4) clarifies that non-registration does not invalidate the underlying loan obligation, but it does affect enforceability of security.
Section 78 – Right of Charge Holder to Register
Where a company fails to register a charge within the prescribed period, Section 78 empowers the charge holder (bank or financial institution) to apply to the Registrar for registration:

Charge holder can file registration after expiry of company’s filing period

Registrar must give notice to the company before registering

Fees paid by the charge holder can be recovered from the company

Section 79 – Application to Acquisition and Modification of Charge
Section 79 extends the applicability of Section 77 to:

A company acquiring property subject to an existing charge

Any modification in terms, conditions, extent, or operation of a registered charge

Thus, enhancement of loan limits, extension of security, or restructuring of terms also trigger mandatory filing obligations for modification of Charge in CHG-1
Section 384 – Applicability to Foreign Companies
Section 384 applies Chapter VI of the Companies Act (which includes charge provisions) mutatis mutandis to foreign companies.
Accordingly:

Charges created or acquired by foreign companies having business in India

Must also be registered with the Registrar of Companies

MCA Filing of Charge (CHG-1)
Form CHG-1 is the prescribed e-form for:

Registration of creation of charge

Registration of modification of charge

Registration of charge transferred to Asset Reconstruction Company (ARC) or assignee under SARFAESI

The form captures comprehensive information including:

Date of creation or modification

Nature and type of charge (fixed, floating, mortgage, hypothecation, etc.)

Amount secured and currency details

Detailed description of assets charged

Particulars of charge holder

Consortium or joint charge details, if applicable

Note: Execution and filing of CHG-1 is a compliance event at MCA, not a clerical formality.
Timelines, Delays, and Condonation

CHG-1 must be filed within 30 days from date of creation or modification of charge.

The registrar may allow filing up to 300 days on payment of additional fees.

Filing beyond 300 days requires condonation of delay from the Central Government

Application is made through Form CHG-8, followed by filing of ROC order

Delayed filing without condonation exposes the company and officers to MCA adjudication proceedings with MCA-RD/ROC.
Consequences of Non-Registration of Charge

Charge becomes unenforceable against liquidator and other creditors

Loss of priority during insolvency or restructuring

Adverse impact on future funding and due diligence outcomes

MCA Adjudication and Penalties
Some recent MCA adjudication orders clearly show that:

Non-filing or delayed filing of CHG-1 is treated as a continuing default

Penalties are imposed on:

The company

Directors or officers in default

Pleas of ignorance, banker dependency, or internal oversight are rejected

ROC authorities have consistently applied Sections 77 and 454 to impose monetary penalties for such lapses.Hence we at Compliances Calendar Helps in filing of Charge creation or modification on time with the help of your Bank formalities.
Therefore,Companies borrowing from banks or financial institutions should adopt a right approach:

Treat execution of security documents as a trigger date for ROC compliance

Align loan documentation, board approvals, and CHG-1 filing timelines

Allows consistency between security documents and CHG-1 asset descriptions

Maintain updated internal Register of Charges (Records)

Periodically verify charge status on MCA master data

CHG-1 Filing or Charge creation after taking a loan is not merely a contractual step and it is a statutorily regulated corporate action governed by Sections 77, 78, 79, 384 and Rule 3 of the Companies (Registration of Charges) Rules, 2014. MCA Form CHG-1 is the legal instrument through which this obligation is fulfilled. With increasing MCA adjudication actions by ROCs, companies must recognise that delay or failure in charge registration invites penalties, weakens lender security, and creates governance risk. 
Frequently Asked Questions (FAQs)
Q1. Is creation of charge mandatory every time a company takes a loan from a bank or financial institution?
Ans. Yes. If a loan is secured by any asset of the company, movable or immovable, creation of charge becomes a statutory need, and registration of such charge with the Registrar of Companies is mandatory under the Companies Act, 2013.
Q2. Does execution of a loan agreement alone trigger charge registration?
Ans. Not always. Charge registration is triggered when security is created, such as through a mortgage deed, deed of hypothecation, pledge, or any instrument creating a security interest. The existence of collateral, not merely the loan, determines charge creation.
Q3. What is the relevant date for calculating the CHG-1 filing timeline?
Ans. The date of execution of the security instrument creating the charge is considered the date of charge creation. The date of loan disbursement is not relevant for calculating the statutory filing period.
Q4. Is charge registration required if assets are located outside India?
Ans. Yes. Charges created on assets situated inside or outside India must be registered with the Registrar of Companies. The territorial location of the asset does not exempt the company from compliance.
Q5. Can a charge be created without filing Form CHG-1?
Ans. A charge may be contractually created between the company and lender, but it has no statutory recognition unless Form CHG-1 is filed and the charge is registered with the ROC.
Q6. What happens if Form CHG-1 is not filed within 30 days?
Ans. Failure to file within 30 days constitutes a default under the Companies Act. While delayed filing may be permitted within an extended period on payment of additional fees, continued non-filing exposes the company and officers to adjudication and penalties.
Q7. Is delayed filing treated as a one-time lapse or a continuing default?
Ans. ROC adjudication orders have consistently held that non-registration of charge is a continuing default until the charge is duly registered or regularised as per law.
Q8. Who is responsible for filing Form CHG-1—the company or the bank?
Ans. The primary responsibility lies with the company. If the company fails to file, the charge holder (bank or financial institution) may file the charge, but this does not absolve the company or its officers from liability.
Q9. Can reliance on bankers or internal teams be used as a defence in adjudication?
Ans. No, MCA Adjudicating authorities have repeatedly rejected defences such as reliance on bankers, internal miscommunication, or ignorance of law. Charge registration is treated as a non-delegable statutory duty of the company.
Q10. Who are treated as “officers in default” for non-registration of charge?
Ans. Typically, the following are held liable:

The company

Managing Director or Directors

Company Secretary (where applicable) Liability depends on role, period of default, and responsibility for compliance.

Q11.What are the consequences of an unregistered charge during insolvency or liquidation?
Ans. An unregistered charge  (CHG-1) may not be recognised by the liquidator or other creditors, which can result in loss of priority or enforceability of the lender’s security interest.
Q12. Is modification of charge also required to be registered?
Ans. Yes. Any change  in terms, amount secured, extent of security, or operation of a registered charge constitutes modification and requires filing of Form CHG-1.
Q13. Are working capital facilities and cash credit limits also subject to charge registration?
Ans. Yes. Charges (CHG-1) created for working capital facilities, cash credit, overdrafts, or non-fund based limits are equally subject to registration if secured by company assets.
Q14. What are common reasons for resubmission or scrutiny of CHG-1?
Ans. Common issues where form CHG-1 gets rejected/objected:-

Vague or incorrect asset description

Mismatch between security documents and form particulars

Incorrect charge holder details

Missing or improperly executed attachments

Q15. Can charge registration be regularised after adjudication notice?
Ans. In many cases, adjudication is initiated because registration was not done. While filing may still be required to regularise records, penalties may still be imposed for the period of default.
Q16. Is charge registration required for joint or consortium financing?
Ans. Yes. In consortium or joint charge arrangements, charge registration is mandatory, and the form must clearly disclose the nature of joint or pari-passu charge/CHG-1
Q17. Does non-registration of charge invalidate the loan itself?
Ans. No. The loan obligation remains valid. However, the security interest may lose statutory enforceability, especially against third parties or during insolvency.
Q18. Can a foreign company be penalised for non-registration of charge?
Ans. Yes. Foreign companies having a place of business in India are also subject to charge registration provisions, and non-compliance may attract adjudication.
Q19. Is internal Register of Charges sufficient compliance?
Ans. No. Maintaining an internal register is a supplementary requirement. It does not replace statutory filing with the Registrar of Companies.
Q20. Why has ROC scrutiny on charge registration increased in recent years?
Ans. Because unregistered charges:

Distort public records

Impact creditor hierarchy

Create transparency risks during insolvency As a result, ROCs increasingly initiate adjudication to enforce compliance discipline.

“Charge” Under the Companies Act, 2013

When a company raises funds from a bank or a financial institution, the transaction almost invariably involves the creation of a charge over the assets of the company as security for repayment. Although this requirement is well understood from a commercial standpoint, many companies continue to underestimate the statutory significance of charge creation under the Companies Act, 2013.

Recently some MCA adjudication orders issued by the Registrars of Companies (ROC) clearly establish that non-registration of charges or delay in filing MCA Form CHG-1 is treated as a statutory default or non compliance under companies act 2013, attracting monetary penalties not only on the company but also on the officers in default. TheseMCA adjudication orders reinforce that charge registration is not a procedural formality but a mandatory legal obligation with direct compliance consequences.

Through this article, Compliance Calendar LLP explains the complete legal requirements governing charge creation (CHG-1), including the relevant statutory sections, applicable rules, prescribed timelines, and the consequences of non-compliance, in a consolidated and compliance to be done before hand..

Importantly, before availing any loan or approaching a bank or financial institution, companies must first ensure that their Articles of Association (Form INC-34) contain an appropriate borrowing clause authorising the company to raise loans. In addition, compliance with Section 180 of the Companies Act, 2013, where applicable, must be carefully examined, along with the scope of Board powers and shareholder approvals required for borrowing and creation of security. Failure at this preliminary stage can itself render the borrowing process non-compliant, irrespective of subsequent charge registration.

A charge is a legal right or interest created by a company on its property or assets, whether tangible or intangible, present or future, situated in or outside India, in favour of a lender to secure repayment of money or performance of an obligation.

In practical terms, when a company:

takes a term loan, working capital facility, or non-fund based facility, and
executes security documents such as a mortgage deed, deed of hypothecation, pledge agreement, or loan agreement,

Note: A charge is deemed to be created on the date of execution of such instrument, irrespective of the date of disbursement of loan value.

What is Charge Registration (CHG-1) ?

Section 77 – Duty to Register Charges

Section 77(1) of the Companies Act, 2013 imposes a mandatory duty on every company creating a charge to register the particulars of such charge with the Registrar of Companies in following manner:

Registration must be completed within 30 days of creation of charge
Registration applies to charges created within or outside India
Both company and charge holder must sign the particulars/pre certification including professional certification like CA/CS etc.
Registration is done in the prescribed form CHG-1 filing at MCA and manner given in Companies Act 2013

Section 77(2) provides that upon registration, the ROC shall issue a certificate of registration of charge, which is conclusive evidence of registration.

Section 77(3) carries severe implications: An unregistered charge shall not be taken into account by a liquidator or any other creditor, meaning the lender’s security may lose priority during insolvency or winding up.

Section 77(4) clarifies that non-registration does not invalidate the underlying loan obligation, but it does affect enforceability of security.

Section 78 – Right of Charge Holder to Register

Where a company fails to register a charge within the prescribed period, Section 78 empowers the charge holder (bank or financial institution) to apply to the Registrar for registration:

Charge holder can file registration after expiry of company’s filing period
Registrar must give notice to the company before registering
Fees paid by the charge holder can be recovered from the company

Section 79 – Application to Acquisition and Modification of Charge

Section 79 extends the applicability of Section 77 to:

A company acquiring property subject to an existing charge
Any modification in terms, conditions, extent, or operation of a registered charge

Thus, enhancement of loan limits, extension of security, or restructuring of terms also trigger mandatory filing obligations for modification of Charge in CHG-1

Section 384 – Applicability to Foreign Companies

Section 384 applies Chapter VI of the Companies Act (which includes charge provisions) mutatis mutandis to foreign companies.

Accordingly:

Charges created or acquired by foreign companies having business in India
Must also be registered with the Registrar of Companies

MCA Filing of Charge (CHG-1)

Form CHG-1 is the prescribed e-form for:

Registration of creation of charge
Registration of modification of charge
Registration of charge transferred to Asset Reconstruction Company (ARC) or assignee under SARFAESI

The form captures comprehensive information including:

Date of creation or modification
Nature and type of charge (fixed, floating, mortgage, hypothecation, etc.)
Amount secured and currency details
Detailed description of assets charged
Particulars of charge holder
Consortium or joint charge details, if applicable

Note: Execution and filing of CHG-1 is a compliance event at MCA, not a clerical formality.

Timelines, Delays, and Condonation

CHG-1 must be filed within 30 days from date of creation or modification of charge.

The registrar may allow filing up to 300 days on payment of additional fees.

Filing beyond 300 days requires condonation of delay from the Central Government
Application is made through Form CHG-8, followed by filing of ROC order

Delayed filing without condonation exposes the company and officers to MCA adjudication proceedings with MCA-RD/ROC.

Consequences of Non-Registration of Charge

Charge becomes unenforceable against liquidator and other creditors
Loss of priority during insolvency or restructuring
Adverse impact on future funding and due diligence outcomes

MCA Adjudication and Penalties

Some recent MCA adjudication orders clearly show that:

Non-filing or delayed filing of CHG-1 is treated as a continuing default
Penalties are imposed on:

The company
Directors or officers in default

Pleas of ignorance, banker dependency, or internal oversight are rejected

Therefore,Companies borrowing from banks or financial institutions should adopt a right approach:

Treat execution of security documents as a trigger date for ROC compliance
Align loan documentation, board approvals, and CHG-1 filing timelines
Allows consistency between security documents and CHG-1 asset descriptions
Maintain updated internal Register of Charges (Records)
Periodically verify charge status on MCA master data

Frequently Asked Questions (FAQs)

Q1. Is creation of charge mandatory every time a company takes a loan from a bank or financial institution?

Ans. Yes. If a loan is secured by any asset of the company, movable or immovable, creation of charge becomes a statutory need, and registration of such charge with the Registrar of Companies is mandatory under the Companies Act, 2013.

Q2. Does execution of a loan agreement alone trigger charge registration?

Ans. Not always. Charge registration is triggered when security is created, such as through a mortgage deed, deed of hypothecation, pledge, or any instrument creating a security interest. The existence of collateral, not merely the loan, determines charge creation.

Q3. What is the relevant date for calculating the CHG-1 filing timeline?

Ans. The date of execution of the security instrument creating the charge is considered the date of charge creation. The date of loan disbursement is not relevant for calculating the statutory filing period.

Q4. Is charge registration required if assets are located outside India?

Ans. Yes. Charges created on assets situated inside or outside India must be registered with the Registrar of Companies. The territorial location of the asset does not exempt the company from compliance.

Q5. Can a charge be created without filing Form CHG-1?

Ans. A charge may be contractually created between the company and lender, but it has no statutory recognition unless Form CHG-1 is filed and the charge is registered with the ROC.

Q6. What happens if Form CHG-1 is not filed within 30 days?

Ans. Failure to file within 30 days constitutes a default under the Companies Act. While delayed filing may be permitted within an extended period on payment of additional fees, continued non-filing exposes the company and officers to adjudication and penalties.

Q7. Is delayed filing treated as a one-time lapse or a continuing default?

Ans. ROC adjudication orders have consistently held that non-registration of charge is a continuing default until the charge is duly registered or regularised as per law.

Q8. Who is responsible for filing Form CHG-1—the company or the bank?

Ans. The primary responsibility lies with the company. If the company fails to file, the charge holder (bank or financial institution) may file the charge, but this does not absolve the company or its officers from liability.

Q9. Can reliance on bankers or internal teams be used as a defence in adjudication?

Ans. No, MCA Adjudicating authorities have repeatedly rejected defences such as reliance on bankers, internal miscommunication, or ignorance of law. Charge registration is treated as a non-delegable statutory duty of the company.

Q10. Who are treated as “officers in default” for non-registration of charge?

Ans. Typically, the following are held liable:

The company
Managing Director or Directors
Company Secretary (where applicable)
Liability depends on role, period of default, and responsibility for compliance.

Q11.What are the consequences of an unregistered charge during insolvency or liquidation?

Ans. An unregistered charge (CHG-1) may not be recognised by the liquidator or other creditors, which can result in loss of priority or enforceability of the lender’s security interest.

Q12. Is modification of charge also required to be registered?

Ans. Yes. Any change in terms, amount secured, extent of security, or operation of a registered charge constitutes modification and requires filing of Form CHG-1.

Q13. Are working capital facilities and cash credit limits also subject to charge registration?

Ans. Yes. Charges (CHG-1) created for working capital facilities, cash credit, overdrafts, or non-fund based limits are equally subject to registration if secured by company assets.

Q14. What are common reasons for resubmission or scrutiny of CHG-1?

Ans. Common issues where form CHG-1 gets rejected/objected:-

Vague or incorrect asset description
Mismatch between security documents and form particulars
Incorrect charge holder details
Missing or improperly executed attachments

Q15. Can charge registration be regularised after adjudication notice?

Ans. In many cases, adjudication is initiated because registration was not done. While filing may still be required to regularise records, penalties may still be imposed for the period of default.

Q16. Is charge registration required for joint or consortium financing?

Ans. Yes. In consortium or joint charge arrangements, charge registration is mandatory, and the form must clearly disclose the nature of joint or pari-passu charge/CHG-1

Q17. Does non-registration of charge invalidate the loan itself?

Ans. No. The loan obligation remains valid. However, the security interest may lose statutory enforceability, especially against third parties or during insolvency.

Q18. Can a foreign company be penalised for non-registration of charge?

Ans. Yes. Foreign companies having a place of business in India are also subject to charge registration provisions, and non-compliance may attract adjudication.

Q19. Is internal Register of Charges sufficient compliance?

Ans. No. Maintaining an internal register is a supplementary requirement. It does not replace statutory filing with the Registrar of Companies.

Q20. Why has ROC scrutiny on charge registration increased in recent years?

Ans. Because unregistered charges:

Distort public records
Impact creditor hierarchy
Create transparency risks during insolvency
As a result, ROCs increasingly initiate adjudication to enforce compliance discipline.