Pledge and Charge

Section 125(4)(e) this section applies to a charge not being a pledge, on any movable property of the Company.

Not being a pledge

Pledge on any movable property is excluded from this section. The object of the legislature was to provide that the registration of charge is not necessary when the person entitled to the security has in possession of the moveable property that is secured to him. This has been followed in various case laws.

Pledge:- To constitute a pledge, delivery of possession, actual or constructive, to the pledge is necessary. If the person entitled to the security is in possession of the movable property it is a pledge, carrying with it a power of sale on default of payment on the due date or if no date is fixed after notice.

No particular formality is required to be done regarding creating charge on pledged movable property. But the intention to create a charge

Hypothecation is also a kind of pledge and is exempt from registration. Where movable property is hypothecated to a bank, whether delivery has been made or not, it will be an effective pledge whether registered or not. [Ideal Bank Ltd. V. Pride of India Pictures Ltd.]

Departmental Circular:- A Charge being a pledge on the movable property of a company, is not required to be registered with the ROC but charge may be created on it on the desire of parties. But if the charge has been created periodic modification and satisfaction is required to be made.