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Section 85: Company?s register of charges

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Act 2013
Section 84 All 470 Sections of Companies Act Section 86
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Company Sec 2(20) Director Sec 2(34) Tribunal Sec 2(90)

Legal Commentary & Landmark Judgments: Section 85

Section 85 mandates every company to maintain an internal register of charges at its registered office in Form CHG-7, preserving copies of all charge-creating instruments and opening them for free inspection by members and creditors.

  • Mandatory Company Register of Charges: Requires every company to maintain an updated internal register in Form CHG-7 at its registered office, recording all charges created, modified, or satisfied on its undertaking.
  • Retention of Charge Instruments: The company must preserve copies of every instrument creating or modifying a charge at its registered office throughout the life of the encumbrance.
  • Member and Creditor Inspection Rights: Guarantees free inspection of the register and charge instruments during business hours to any member or creditor of the company without payment of fee, and to any other person upon payment of prescribed fees.
  • Internal Corporate Accountability: Differentiates internal corporate governance from the public RoC register, ensuring company-level transparency for internal stakeholders and forensic auditors.
Key Landmark Precedents:
  • Somayajulu v. Andhra Bank Ltd., AIR 1968 AP 318: Held that the failure of a company to make entries in its internal register of charges under Section 85 does not invalidate or impair the legal enforceability of a charge duly registered with the RoC.
  • Wright v. Horton, (1887) 12 App Cas 371: The House of Lords established that statutory provisions requiring a company to keep an internal register of mortgages are directory as to the security's validity; omissions expose default directors to penalties but do not vitiate the debenture holder's property rights.
  • Re: Native Iron Ore Co., (1876) 2 Ch D 345: Affirmed that internal register maintenance is a strict fiduciary duty of corporate officers, ensuring that members and prospective lenders can ascertain company encumbrances on-site.
Courtroom Practice & Strategic Litigation Guidance:

During statutory due diligence or oppression and mismanagement investigations under Section 241, issue a formal demand under Section 85(2) to inspect Form CHG-7 and inspect original charge deeds at the registered office. Any managerial obstruction or omission in the register constitutes an immediate statutory default under Section 86 and serves as evidentiary proof of corporate non-transparency.

Section 84 All 470 Sections of Companies Act Section 86