Corporate and Other Laws · Registration of Charges

Consequences of Non-Registration of Charges and Penalties

Updated 4 October 2026 · Fact-checked

If a company does not register a charge under Section 77, the charge is not taken into account by the liquidator or any other creditor. The company also faces a penalty under Section 86. To solve questions, check the timeline, the effect on creditors, the penalty, and Sections 79 and 80.

Understand Consequences of Non-Registration and Penalties

A charge is security given by a company over its property or assets for money it owes. Section 77 makes the company responsible for registering the particulars of the charge with the Registrar within thirty days of creation. Registration makes the charge public, so other lenders and buyers can find out that the asset is already encumbered.

The main consequence of not registering is in Section 77(3). Despite any other law, a charge created by a company is not taken into account by the liquidator or any other creditor unless it is duly registered and the Registrar has issued a certificate of registration under Section 77(2). So the charge-holder loses the practical benefit of its security against other creditors.

Section 77(4) protects the lender's basic claim. Non-registration does not prejudice any contract or obligation for the repayment of the money secured by the charge. The lender can still sue for the debt. It loses priority as a secured creditor, but not the debt itself.

Section 86 is the penalty for contravention of the Chapter. It applies if the company is in default in complying with any provision of the Chapter. Failure to register a charge is one such default, but it is not the only one. The company is liable to a penalty of five lakh rupees and every officer in default is liable to a penalty of fifty thousand rupees. These are the standard amounts. Section 446B can reduce them for a One Person Company, small company, start-up company or Producer Company. If a person willfully furnishes false or incorrect information, or knowingly suppresses material information, required to be registered under Section 77, he is liable for action under Section 447.

Two more sections complete the topic. Section 80 says that once a charge is registered, anyone acquiring the property, assets, undertaking or part of it, or any share or interest in it, is deemed to have notice of the charge from the date of registration. Section 79 applies Section 77 to a company acquiring property subject to a charge, and to any modification in the terms, conditions, extent or operation of a registered charge.

Key rules to remember

Effect of non-registration: Charge not registered + no certificate of registration ⇒ not taken into account by liquidator or any other creditor (Section 77(3)); Both conditions matter: due registration and a certificate issued by the Registrar.
Debt not affected: Section 77(4): contract or obligation to repay the secured money is not prejudiced; The lender remains an unsecured creditor for the debt; it can still claim repayment.
Time limits for registration: Normal: within 30 days of creation. Charges created on or after commencement of the 2019 Amendment: Registrar may allow registration within 60 days of creation, on application and additional fees. If still not done, Registrar may, on a further application, allow registration within a further 60 days, on ad valorem fees. Charges created before that commencement: 300 days of creation.; Each extension needs an application to the Registrar and payment of the prescribed fees. The 300-day period applies only to older charges, not to charges created on or after the 2019 Amendment.
Penalty for default (Section 86(1)): Default in complying with any provision of the Chapter (including non-registration of a charge). Company: ₹5,00,000. Every officer in default: ₹50,000; These are the standard amounts. Section 446B can reduce them for One Person Companies, small companies, start-up companies and Producer Companies.
False information (Section 86(2)): Willful false or incorrect information, or knowing suppression of material information ⇒ action under Section 447; This applies to information required to be registered under Section 77.
Notice of charge (Section 80): Deemed notice from the date of registration; Applies to anyone acquiring the property, assets, undertaking, part of it, or a share or interest in it.
Subsequent registration (third proviso to Section 77(1)): Subsequent registration does not prejudice rights acquired in the property before the charge is actually registered; Rights of persons who acquired interest before registration are protected.
Section 79: Section 77 applies to (a) a company acquiring property subject to a charge and (b) any modification of a registered charge; The wording is 'so far as may be'.
Reduced penalty (Section 446B): Not more than one-half of the specified penalty, subject to a maximum of ₹2,00,000 for the company and ₹1,00,000 for an officer in default or other person; For One Person Company, small company, start-up company or Producer Company.

How to solve Consequences of Non-Registration and Penalties questions

Use this order for any case study or theory question on non-registration of charges.

1Identify the facts: which company, what property, when the charge was created, and whether it was registered with a certificate.
2Check the timeline against Section 77(1): thirty days, then the extended periods on application and fees (60 days, then a further 60 days on a separate application for charges created on or after the 2019 Amendment).
3State the effect: if not duly registered with a certificate, the liquidator or any other creditor will not take the charge into account (Section 77(3)).
4Add the saving rule: the obligation to repay the secured money remains (Section 77(4)).
5State the penalty under Section 86 for default under the Chapter: ₹5,00,000 on the company and ₹50,000 on each officer in default. Check if the company is an OPC, small company, start-up or Producer Company for Section 446B.
6Check for willful false or suppressed information; if present, mention Section 447 action.
7Apply Section 80 for notice to buyers after registration, and Section 79 for property acquired subject to a charge or modification of a charge.
8Write a clear conclusion in one sentence.

Quickest way: Four-line answer frame

When to use it: Use this for MCQs and for 4-5 mark written answers when time is short.

MCQ trick: if the option says the debt itself is cancelled by non-registration, reject it. Only the charge is ignored (Section 77(3) and (4)).
MCQ trick: match amounts exactly. ₹5,00,000 is for the company and ₹50,000 is for each officer in default, unless Section 446B applies.
MCQ trick: 'deemed notice from the date of registration' is Section 80. Notice does not arise before registration.
Written format: Provision (Section 77), Facts (dates and registration status), Conclusion (effect on creditors, penalty, and debt still payable). Each part earns step marks.

Common mistakes in Consequences of Non-Registration and Penalties

Saying the loan becomes invalid or need not be repaid when the charge is not registered.
Students read 'not taken into account' as 'void'.
Fix: Quote Section 77(4): the contract or obligation to repay the secured money is not prejudiced. Only the security is affected.
Mixing up the company's penalty and the officer's penalty.
Both numbers look similar and are memorised without labels.
Fix: Write it as: company ₹5,00,000; officer in default ₹50,000 each.
Forgetting that the liquidator or creditors ignore the charge only if there is no registration certificate.
Students remember only 'registration' and forget Section 77(2) certificate.
Fix: State both: duly registered under Section 77(1) and certificate given by the Registrar.
Applying deemed notice from the date of creation of the charge.
Students link notice to the date the charge was made.
Fix: Under Section 80, deemed notice runs from the date of registration.
Ignoring Section 446B when the company is a small company, OPC, start-up or Producer Company.
Students treat the Section 86 amounts as fixed and apply them without reading the type of company.
Fix: Check the company type. The Section 86 amounts are the standard penalty. Under Section 446B the penalty is not more than one-half, subject to ₹2,00,000 for the company and ₹1,00,000 for the officer or other person.
Quoting a late-registration period without the Registrar's permission.
Students treat 60 days as automatic.
Fix: The extended periods apply only on application by the company and on payment of additional fees. The further 60 days needs a separate application.
Treating Section 86 as a penalty only for non-registration of a charge.
The topic is taught with non-registration, so the section gets linked only to it.
Fix: Section 86(1) applies to default in complying with any provision of the Chapter. Non-registration is one example.

Worked examples

Example 1

Alpha Ltd. borrowed ₹50,00,000 from a bank and created a charge on its factory on 1 June. The charge was never registered with the Registrar. Alpha Ltd. is later wound up. The bank claims priority as a secured creditor. Advise the bank. Will Alpha Ltd. face any penalty?

Show the solution

Provision: Section 77(1) requires the company to register particulars of the charge with the Registrar within thirty days of creation.
Facts: the charge was created on 1 June and was never registered, so there is no certificate of registration.
Effect: under Section 77(3), the liquidator or any other creditor will not take the charge into account unless it is duly registered and a certificate is issued. The bank cannot claim priority as a secured creditor.
Saving rule: under Section 77(4), the obligation to repay the money is not prejudiced, so the bank can still claim the ₹50,00,000 as a debt.
Penalty: failure to register is a default under the Chapter. Under Section 86(1), Alpha Ltd. is liable to a penalty of ₹5,00,000 and every officer in default to ₹50,000, unless Section 446B reduces it for a specified company.

Answer: The bank cannot rely on the charge against the liquidator or other creditors, but it can still claim repayment of the ₹50,00,000. Alpha Ltd. is liable to the standard Section 86(1) penalty of ₹5,00,000 and each officer in default to ₹50,000, subject to reduction under Section 446B if Alpha Ltd. is a small company, OPC, start-up company or Producer Company.

Example 2

Beta Ltd. has a registered charge on its warehouse. Gamma Ltd. buys the warehouse from Beta Ltd. after the date of registration, saying it did not know of the charge. Also, Beta Ltd. acquires a plot from Delta Ltd. that is already subject to a charge. Explain the legal position.

Show the solution

Provision for the first part: Section 80 applies where a charge is registered under Section 77.
Application: Gamma Ltd. acquired the property after registration. It is deemed to have notice of the charge from the date of registration.
Conclusion for the first part: Gamma Ltd. cannot plead lack of knowledge.
Provision for the second part: Section 79(a) applies Section 77, so far as may be, to a company acquiring property subject to a charge.
Application: Beta Ltd. must follow the Section 77 registration requirements for the charge on the plot it acquired.
Conclusion for the second part: failure would expose it to the consequences in Section 77(3) and the penalty under Section 86.

Answer: Gamma Ltd. is deemed to have notice of the charge from the date of registration, so its plea fails. Beta Ltd., having acquired property subject to a charge, must comply with the registration provisions of Section 77 as applied by Section 79(a).

Exam tips

Write the section number with the rule: 77(3) for effect, 77(4) for debt saved, 86 for penalty, 80 for notice, 79 for acquisition and modification.
In case studies, always compare the dates of creation and registration before writing the effect.
State both the company's and officers' penalties with exact amounts, and add a line on Section 446B if the company type is given.
Always conclude on three points: effect on the charge, debt still payable, and penalty.

Practice questions from Registration of Charges

Consequences of Non-Registration and Penalties in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Consequences of Non-Registration and Penalties: frequently asked questions

What is the effect of not registering a charge?

The liquidator or any other creditor will not take the charge into account unless it is duly registered and a certificate is issued (Section 77(3)). The lender still has the right to repayment of the money (Section 77(4)).

What is the penalty under Section 86 and does it apply only to non-registration of a charge?

Section 86(1) applies to default in complying with any provision of the Chapter, and non-registration of a charge is one such default. The standard penalty is ₹5,00,000 on the company and ₹50,000 on every officer in default, which Section 446B can reduce for specified companies. Willful false information or suppression of material information leads to action under Section 447.

What does Section 80 say about notice of a charge?

Once a charge is registered, any person acquiring the property, assets, undertaking, part of it, or any share or interest in it is deemed to have notice of the charge from the date of registration.

Can a charge be registered after thirty days?

Yes, but only if the Registrar allows it on the company's application and on payment of additional fees. For charges created on or after the 2019 Amendment, the Registrar may allow registration within 60 days of creation. If still not done, the Registrar may, on a further application, allow a further 60 days on ad valorem fees. The 300-day period applies only to charges created before that Amendment.