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CA Intermediate · Corporate and Other Laws · Registration of Charges

Sundaram Textiles Ltd. created a charge on its factory building in favour of Canara Bank on 1 April. The company did not file the particulars of the charge with the Registrar within the 30-day period, and no extension was sought. Which statement best describes the legal position of the charge?

An unregistered charge that requires registration is void against the liquidator and any creditor of the company. Registration gives public notice and priority, so without it the secured lender cannot enforce the charge against other creditors, though the underlying debt remains payable by the company.

  1. AThe charge is void against the liquidator and any creditor of the company until it is registeredCorrect
  2. BThe charge is fully valid because registration is only a matter of record-keeping
  3. CThe charge is valid against the company but not against the Registrar
  4. DThe charge is automatically registered after 60 days

Explanation

Under the Companies Act, 2013, a charge that requires registration but is not registered does not bind the liquidator or other creditors; it is ineffective against them. Registration is not a mere formality. The charge is not automatically registered after any period, so the other options misstate the law.

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