Geotagging: A New Way to Track Charged Assets

[Post
by Rohit Sharma, who is an Executive
at Vinod Kothari & Co. He can be reached at rohit@vinodkothari.com
.]
Notification
The Ministry of Corporate Affairs (MCA)
issued a notification
dated 7 April 2017 introducing a new way to track down tangible assets on which
charge has been created and registered with the Registrar of Companies (RoC).  This is to be accomplished by geotagging the charged
tangible assets. It is pertinent to note that while this process of tagging
assets is novel for the MCA, the Ministry of Rural Development been using the
same since 2016 for tagging rural assets created under flagship rural
employment program MGNREGA.
What
is geotagging?
Geotagging is a process of tagging an
asset by mentioning its specific geographical identification, including its
latitude and longitude, on the portal where it is registered. The intent of
such geotagging is to bring in transparency in the system by providing an
ocular portrayal of assets on top of the map or satellite visual. In doing so,
the assets are better monitored, and leakages can be plugged. Additionally,
this helps in creating an online database for the government, which may in turn
help the public obtain relevant information online.
Changes
by MCA
The MCA has, by way of the aforesaid
notification, made changes to several forms as follows:
Sl.
No.
Charge
Form
Prior
to such notification
Post
such notification
1.
CHG
1
– Application for registration of
creation, modification of charge, including particulars of modification of
charge by Asset Reconstruction Company in terms of SARFAESI, 2002
a.
There was no column to fill in the detail regarding the authorisation of the charge
holder assigning the charge as per the charge agreement.
b. There was no
separate column for the pari passu charge
holders.
c. Specific
geographical indication of latitude and longitude was not required to be
mentioned in the Form.
a. Details with respect
to authority of the charge holder assigning the charge as per the charge
agreement is required.
b. Details whether the
charge ranks pari passu are
required.
c. Particulars of the
property being charged with respect to its location including the details of
latitude and longitude of the asset
d. A declaration, as
was required in CHG-9 has been added.
2.
CHG
9
– Application for registration of
creation or modification of charge for debentures or rectification of
particulars filed in respect of creation or modification of charge for
debentures
a. Details of latitude
and longitude of the property were not required.
b. The principal terms
and conditions, extent and operation of charge were to be inserted without
entering specific details of the terms and conditions.
c. No description of
the document through which the title of the property has been obtained must
be entered, as there was no such column.
a. The of the property charged now includes details of
the latitude and longitude of the asset being charged as a mandatory field.
b. The purview of the
principal terms and conditions, extent and operation of charge has been made elaborate.
The holder will have to additionally add more details about the principal
terms and conditions of the extent and operation of charge.
c. Description of the
document by which the company acquired the title has been inserted.
3.
CHG
4
– Particulars of satisfaction of charge
thereof
a. ‘Declaration’ that
was required from the authorised person signing the form related to the
genuineness of the documents attached that is available with the charge
holder.
a. The only change in
this Form due to this notification is in the ‘Declaration’ part whereby new declarations
have been added post this notification.
Analysis
Essentially, the genesis of the MCA notification
can be attributed to the failure of the RoC to track down the assets registered
with it as charge. This is also consistent with the government’s push towards a
digital economy, as it moves in the direction of digitising the data of assets over
which a charge has been registered.
One of the benefits of this
notification is that the creditors, RoC and other statutory authority will be
able to track down the charged assets virtually, which was not possible previously
as there was no requirement to provide details regarding the specific
geographical location of the asset. Monitoring of charged assets is important to
the creditors and the government to bring in transparency and authenticity of the
charged asset.
In all, while the intent on record with which such
additional requirements have been set out in relation to charged assets seems
to be bringing in more transparency and ease of monitoring the charged assets, it
seems that the same will mostly lead to online data collection. Creditors will
need to wait and watch to consider the extent to which the new process will aid
them against falling prey to notorious debtors who may charge incorrect or
non-existent assets.
– Rohit Sharma

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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