Section 77 of Companies Act, 2013 —
When a company takes a loan, it’s rarely based on trust alone.
Banks and lenders usually ask for security—land, building, machinery, receivables, or some other asset.
Legally, this security is called a “charge.”
Now here’s the part many companies get wrong:
Creating a charge is not enough.
Registering that charge is mandatory.
That legal requirement comes from Section 77 of the Companies Act, 2013.
This section is not about paperwork for the sake of paperwork.
It’s about public transparency, creditor protection, and clean corporate records.
What Is Section 77 of the Companies Act, 2013?
In very simple terms, Section 77 of the Companies Act 2013 says:
👉 Every company creating a charge on its assets—whether in India or outside India—must register that charge with the Registrar of Companies (RoC).
This is not optional.
This is a statutory duty.
The law clearly states:
“It shall be the duty of every company creating a charge within or outside India to register the particulars of the charge.”
What Does “Charge” Mean in Practical Life?
A charge is created when:
- a company gives its assets as security for a loan, or
- A lender gets a legal right over company assets.
Common examples:
- mortgage on land or building
- hypothecation of machinery
- charge on receivables or stock
- pledge of shares
If an asset is given as security, a charge exists.
Why Section 77 Exists (The Real Reason)
Imagine this situation:
A company:
- takes loans from multiple lenders,
- creates charges quietly,
- but doesn’t disclose them publicly.
Future lenders and investors would have no idea that assets are already encumbered.
Section 77 prevents this by ensuring:
- transparency in MCA records,
- protection of lenders,
- clarity for investors, auditors, and liquidators.
Time Limit Under Section 77 (Very Important)
This is where most mistakes happen.
Normal Time Limit
👉 The charge must be registered within 30 days of its creation.
This applies to:
- charges created in India
- charges created outside India
Extended Time (With Additional Fees)
If the company misses the 30-day limit:
- registration may be allowed with additional fees,
- but only up to the extended period permitted by law.
Earlier laws allowed longer periods (even up to six months in some cases), but current compliance expects prompt registration.
Delays are costly and risky.
Who Is Responsible for Registering the Charge?
This is another common misconception.
👉 The responsibility lies on the company, not the bank.
Even though:
- lender signs the form,
- lender gives confirmation,
The legal duty to register charges is on:
- the company, and
- its officers.
Forms Used for Registration of Charges
In practice:
- the company files the prescribed form (commonly CHG-1)
- Details are signed by both:
- the company, and
- the charge holder (lender)
- the company, and
Without proper filing, the charge is treated as not registered in the eyes of the law.
What Happens After Registration?
Once the RoC is satisfied:
- the charge is entered in the Register of Charges.
- it becomes visible on MCA portal,
- A certificate of registration of charge is issued.
Only after this step is the charge legally perfected.
Charges Created Outside India—Still Covered
Many companies assume:
“This loan is from a foreign bank, so Indian law won’t apply.”
That assumption is wrong.
Section 77 clearly states:
👉 Every company creating a charge within or outside India must register it.
Foreign loans, overseas assets, and external commercial borrowings—all are covered.
What If the Company Is Under Liquidation?
The Companies Act, 2013 also:
- casts an obligation upon the Liquidator
- to ensure proper charge records during winding up.
If charges are not registered:
- lenders may lose priority,
- Disputes arise during liquidation.
Section 77 protects even at the exit stage.
Consequences of Not Registering a Charge
Failing to comply with Section 77 can lead to serious problems:
- the charge becomes void against the liquidator and other creditors
- lender may lose priority
- penalties on the company and officers
- issues during audits, funding, mergers, or insolvency
In simple words:
An unregistered charge is almost as bad as no security at all.
Section 77 in Real Life (Simple Example)
A company takes a term loan from a bank.
- Mortgage created on factory land
- Loan disbursed
- EMI starts
But the company does not register the charge.
Later:
- company goes into liquidation
- another lender challenges the bank’s priority
The bank’s strongest defense would have been:
“The charge is registered under Section 77.”
Without that, things get messy.
Section 77 vs Section 82 (Quick Context)
To understand the lifecycle:
- Section 77: registration of charge (when loan is taken)
- Section 82 → satisfaction of charge (when loan is repaid)
Ignoring either means incomplete compliance.
Common Mistakes Companies Make
From real practice, these errors are very common:
- assuming bank will handle registration
- missing the 30-day timeline
- ignoring foreign charges
- not tracking multiple loans properly
- discovering unregistered charges during due diligence
Most of these issues surface years later, when damage is already done.
One-Line Meaning (For Quick Recall)
Section 77 of the Companies Act, 2013, mandates that every company must register any charge created on its assets, within or outside India, with the Registrar of Companies within the prescribed time.
Final Thoughts (Human Perspective)
Section 77 is not about forms or fees.
It’s about honesty in disclosure.
If a company enjoys the benefit of borrowing money against its assets, it must also accept the responsibility of publicly recording that fact.
Clean charge records:
- build lender confidence,
- speed up future funding,
- Avoid legal surprises.
In corporate law, what’s not recorded doesn’t exist.
Section 77 makes sure nothing important stays hidden.
