Failure to File CHG-1 after Creation/Modification of Charge attracts Penalty: MCA [Read Order]
A penalty of ₹5,00,000 was imposed on Magnum Sea Foods Limited, while four directors were each fined ₹50,000. No penalty was levied on the independent director
MCA, File CHG-1, Penalty, Failure to File CHG-1
MCA, File CHG-1, Penalty, Failure to File CHG-1
The Ministry of Corporate Affairs ( MCA ) has imposed penalties on Magnum Sea Foods Limited and its directors for failing to file e-Form CHG-1 after the creation or modification of charge, stating that companies are required to report all charges in compliance with Section 77 of the Companies Act, 2013.
The adjudication order, passed by the Registrar of Companies, followed the discovery during scrutiny of the company’s financial statements that secured vehicle loans had increased sharply from ₹2.11 lakh in FY 2017-18 to ₹87.94 lakh in FY 2018-19, yet no corresponding CHG-1 filing had been made with the Registrar.
The ROC found that the company had failed to register the charge despite a clearstatutory obligation under the Companies (Registration of Charges) Rules, 2014.
In response to the show-cause notice, the company submitted that filing CHG-1 required digital signatures from its director, a practising professional, and the authorised representative of the charge-holder bank, but the bankers refused to cooperate on the ground that vehicle hypothecation was already registered under the Motor Vehicles Act and therefore, they believed no separate filing under the Companies Act was necessary.
This refusal, the company claimed, prevented it from completing the filing process despite its intent to comply.
One of the directors, Brahmananda Mishra, also stated that he was serving as an independent director and therefore should not be held liable.
The ROC, however, rejected the company’s justification as unsatisfactory and said that registration of charge with the MCA is mandatory irrespective of any parallel registration under other laws.
It further accepted that Brahmananda Mishra, being an independent director during the relevant period, was not liable in view of the MCA’s Standard Operating Procedure issued under General Circular No. 1/2020.
The adjudicating officer concluded that the company and the remaining directors had violated Section 77 and were liable for penalty under Section 86, which prescribes a fine of up to ₹5 lakh for the company and ₹50,000 for each officer in default.
Accordingly, a penalty of ₹5,00,000 was imposed on Magnum Sea Foods Limited, while four directors were each fined ₹50,000. No penalty was levied on the independent director.
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