Satisfaction of Charge (CHG-4): The 30-Day Rule That Cost One Company Rs 19.50 Lakh

In 2019 the loan was repaid. The bank issued its no-objection letter, the account was closed, and everyone moved on. Six years later the Registrar of Companies, Gujarat, fined Pratapraisons Textiles Private Limited and its directors a total of Rs 19.50 lakh, not for defaulting on anything but for never telling the MCA that the loan was gone. The charge was still showing as open on the public record. This is the quiet trap in satisfaction of charge filing: the money problem ends, the paperwork obligation does not. Form CHG-4 under Section 82 of the Companies Act, 2013 has a 30-day clock that almost nobody watches.

The problem: a repaid loan that still looks like debt

When a company borrows against its assets, the lender registers a charge with the Registrar of Companies using Form CHG-1. That charge sits on the company's public Master Data and in the index of charges. When the loan is repaid, the charge has to be removed from that record, and the only way to remove it is for the company to file Form CHG-4, the intimation of satisfaction of charge, under Section 82 read with Rule 8 of the Companies (Registration of Charges) Rules, 2014.

Here is the part founders and finance teams miss. Repaying the bank does not clear the MCA record on its own. Until CHG-4 is filed and the ROC updates the register, the charge keeps showing as open, so a company that owes nothing still appears encumbered to anyone who checks. The clock is tight: the law gives you 30 days from the date of satisfaction.

The Pratapraisons Textiles order is a clean illustration of the cost. The company had discharged the loan. Its only lapse was not filing the form that says so. The adjudicating officer, acting under Section 454, imposed Rs 19.50 lakh across the company and its directors and gave them 60 days to appeal to the Regional Director in Ahmedabad. A form that costs a few hundred rupees in government fee turned into a seven-figure penalty.

The 30-day clock, the 300-day window, and the point of no return

Section 82 sets out a three-stage timeline. Knowing which stage you are in decides whether you file a routine form or fight a penalty.

Most companies that get penalised are not in Stage 3 deliberately. They simply never noticed that a repaid loan left a live obligation behind. By the time a buyer's lawyer or a bank's credit team flags the open charge, years have passed and the only road back is condonation.

What non-compliance actually costs

The penalty for default under the charge provisions sits in Section 86. It is a flat, per-person exposure that stacks up fast when a company has several directors on the board.

There is no "the loan is repaid, so no harm done" defence here. The penalty attaches to the failure to intimate, not to any financial loss. That is exactly why these orders feel so unfair to the companies that receive them, and exactly why the form deserves a place on your closing checklist.

What you must do now

If you have closed any secured facility — a term loan, a working-capital limit, a vehicle or equipment loan, or an inter-corporate deposit secured by a charge — treat the filing as part of the loan-closure process, not a separate chore for later.

1. Pull your current charge position first. Open the company's Master Data on the MCA portal and the index of charges. Every charge marked "open" that corresponds to a repaid loan is a pending CHG-4. Do this before anyone else does it for you.
2. Get the lender's documents in writing. You need a no-objection certificate or satisfaction letter from the bank or financial institution confirming the dues are fully cleared, plus a loan closure certificate. Without the charge holder's confirmation, the ROC will not accept the satisfaction.
3. File Form CHG-4 within 30 days of the satisfaction date. The date of satisfaction is the date the loan was actually discharged, not the date you got around to it. Attach the NOC/satisfaction letter and pay the normal fee based on your share capital.
4. If you are between 31 and 300 days late, file with additional fees. The ROC can still take the form on record in this window. The additional fee rises with the delay, so file the moment you spot the gap.
5. If you are past 300 days, go for condonation. Apply to the Regional Director for condonation of delay under Section 87 using Form CHG-8, obtain the order, and then file CHG-4 giving effect to it. Build in time, because this is a formal application, not a same-day form.
6. Watch the common rejections. A mismatch between the satisfaction date in the form and the lender's letter, a missing authorised-signatory digital signature, or a charge ID that does not match the original CHG-1 will all bounce the filing. Reconcile the form against the original charge registration before you submit.
7. Record it on the board file. Note the satisfaction and the CHG-4 filing in the statutory register of charges (Form CHG-7) and in the board's records. A clean internal trail saves you during any later audit or due diligence.

Where open charges quietly pile up

Satisfaction defaults rarely come from one dramatic oversight. They build up through routine banking that nobody connects back to a filing obligation. A few places they hide:

• Working-capital renewals. Cash-credit and overdraft limits get renewed, enhanced or shifted to another bank every year. Each time a facility is actually closed and replaced, the old charge needs a CHG-4, even though the company still has borrowing from the new lender.
• Vehicle and equipment loans. These are small, they close on their own schedule, and they almost never make it onto the company secretary's radar. A fleet of closed vehicle loans can leave a trail of open charges that surfaces only years later.
• Promoter-backed and group facilities. Loans guaranteed by promoters or secured across group companies are repaid quietly during restructuring, and the satisfaction filing slips through the gap between entities.
• Legacy 1956-era charges. Older companies carry charges created under the Companies Act, 1956 that were never formally satisfied on the register. These are the ones most likely to need condonation today.

Run the penalty math on a typical board and the exposure becomes obvious. Take a private company with three directors sitting on a satisfaction default. The company faces up to Rs 5,00,000, and each of the three officers in default can be penalised Rs 50,000, which is another Rs 1,50,000. That is Rs 6,50,000 of exposure on a single open charge before counting any additional filing fee. Multiply that by three or four forgotten facilities and the number starts to look like the Pratapraisons order. The fix in every case is the same low-cost form, filed on time.

The deeper implication: an open charge is a diligence red flag

The penalty is the obvious risk. The expensive one is quieter. An open charge on MCA records tells the outside world that your assets are still pledged. New lenders see it and hesitate to lend against the same security. An acquirer's legal team lists it as an unresolved item. During a funding round or an IPO readiness review, every open charge becomes a question the company has to answer, and answering it mid-transaction means chasing a bank for a six-year-old NOC while the deal clock runs.

According to CS Sapna Malpani, the companies that get caught are rarely careless about money. They are careful about repaying loans and casual about closing the record. The repayment feels like the end of the matter, so the form never gets filed. In a due diligence exercise, that single open charge can do more damage to deal confidence than a far larger disclosed liability, because it signals that the company's statutory housekeeping is not reliable.

The direction of travel at the MCA is towards more adjudication, not less. With the V3 portal making charge data cleaner and the Registrar actively passing penalty orders on satisfaction defaults, companies should expect open charges to be picked up faster through the next few filing cycles. The sensible move is to clear the backlog now, on your own timetable, rather than under a buyer's or a lender's deadline later.

CHG-4 against the charges it is confused with

The charge-registration forms look similar and get mixed up constantly. Here is how they line up.

If you have read our guide on CHG-1 charge registration under Section 77, CHG-4 is the bookend. One opens the charge when the loan comes in; the other closes it when the loan goes out. Treating them as a pair, create and satisfy, is the habit that keeps your charge register clean.

Sources and references

• Section 82, Companies Act, 2013, Company to report satisfaction of charge (India Code).
• Section 86 and Section 87, Companies Act, 2013, Penalty and condonation of delay (India Code).
• Companies (Registration of Charges) Rules, 2014, Rule 8, Form CHG-4 (Ministry of Corporate Affairs).
• MCA adjudication order, Registrar of Companies, Gujarat, Pratapraisons Textiles Private Limited (reported via TaxGuru).
• Section 454, Companies Act, 2013, Adjudication of penalties and appeal to the Regional Director (India Code).

Last updated: 1 October 2026. This article is for general information and is not a substitute for professional advice on your company's specific facts.

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