# Modification of Charge (Section 79)

## When is Section 79 Applicable?

Section 79 applies in two situations:

### (a) Acquisition of Property Already Subject to Charge [Section 79(a)]

Where a company acquires a property over which a charge is already registered, and that property is sold to the company with the permission of the charge-holder.
It is the duty of the acquiring company to get the charge registered in accordance with Section 77.
The earlier charge must be vacated and a new charge must be registered in the name of the acquiring company.

### (b) Modification in Terms / Conditions / Extent of Existing Charge [Section 79(b)]

Any modification in terms, conditions, or extent of any charge already registered must be registered by the company in accordance with Section 77.

## What is treated as a 'Modification'?

Modification includes:

Variation in any of the terms and conditions of the agreement;
Variation in rate of interest (by mutual agreement or by operation of law);
Variation in the extent or operation of the charge;
Assignment of rights of the charge-holder to a third party.

## Other Specific Examples of Modification

Modification by varying terms and conditions of the existing charge through an agreement;
Modification in pursuance of an agreement for enhancing or decreasing the limits;
Ceding of a pari passu charge;
Change in rate of interest (other than bank rate);
Change in repayment schedule of loan (not applicable to working capital loans repayable on demand);
Partial release of charge on a particular asset or property.

## Issue of Certificate of Modification

On registration of modification, the Registrar shall issue a Certificate of Modification of Charge in Form CHG-3.
The certificate is conclusive evidence that the requirements of Chapter VI and the rules thereunder relating to registration of modification have been complied with.

## Procedural Framework

The procedural requirements (time limits, fees, ad valorem charges for delay) under Section 77 apply mutatis mutandis to modification under Section 79.

Worked example

### Example 1

Example (Section 79(a)): Alpha Ltd. acquires a factory building from Beta Ltd. The building is subject to a registered charge in favour of State Bank. The sale is with the permission of State Bank. Alpha Ltd. must register the charge afresh under Section 77 — the earlier charge in Beta's books is vacated, and a new charge is registered in Alpha's books.

### Example 2

Example (Section 79(b)): Gamma Ltd. has an existing registered charge of ₹50 lakhs in favour of HDFC. The parties agree to increase the limit to ₹75 lakhs. This enhancement is a 'modification' and must be filed in Form CHG-1, on which the Registrar issues Form CHG-3.

### Example 3

Example (Modification by assignment): Delta Ltd.'s lender ABC Bank assigns its rights as charge-holder to XYZ Asset Reconstruction Co. This assignment counts as a modification and must be registered.

⚠️ Common exam mistakes

Treating a change in repayment schedule of a working capital demand loan as a modification — it is not required to be registered.
Forgetting that the Registrar issues Form CHG-3 (not CHG-2) for modification.
Believing every change in interest rate is a modification — change linked to bank rate variations is generally not.
Failing to register the new charge afresh when a company acquires property subject to an existing charge.

Bare-Act text Section 79 · The Companies Act, 2013 read with Rule 6 of the Companies (Registration of Charges) Rules, 2014 · click to expand

The provisions of section 77 relating to registration of charges shall, so far as may be, apply to— (a) a company acquiring any property subject to a charge within the meaning of that section; or (b) any modification in the terms or conditions or the extent or operation of any charge registered under that section.

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