Thursday, May 25, 2017

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

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