---
title: "Buying a machine or a vehicle from a company? Check the charges first"
description: "A used machine or truck can already be pledged to a bank. You take it subject to that claim, and the law treats you as knowing. What to check, and what to demand."
author: "Pradeep Vanga"
published: 2026-09-18
updated: 2026-09-18
category: "Guide"
tags: ["charges", "due-diligence", "equipment"]
canonical: https://entiva.in/blog/buying-equipment-from-a-company-check-the-charges/
publisher: "Entiva"
---

# Buying a machine or a vehicle from a company? Check the charges first

The press is ten years old and half the price of new. The seller is a company,
the machine is sitting in their shed, and they are happy for you to take it
away on Friday.

Possession is what misleads people here. A company that has pledged a machine
to a bank still keeps it and still uses it: that is the whole point of
hypothecation, which the SARFAESI Act defines as a charge on movable property
created "without delivery of possession" to the lender. The machine sitting in
the seller's shed tells you nothing about whether somebody else has a claim.

And if they do, the claim can follow the machine to your shed.

## You take it subject to the claim

This is the risk the whole exercise is about. Section 26C(2) of the
[SARFAESI Act 2002](https://www.indiacode.nic.in/bitstream/123456789/2006/1/A2002-54.pdf) says it directly:
where a security interest has been registered,

> the claim of such secured creditor or other creditor holding attachment order
> shall have priority over any subsequent security interest created upon such
> property and any transfer by way of sale, lease or assignment or licence of
> such property or attachment order subsequent to such registration, shall be
> subject to such claim

with a proviso for transactions "carried on by the borrower in the ordinary
course of business". For a machine-tools dealer that plainly covers a sale. For
a factory selling a surplus press it is arguable, and we found no decision
settling it, so do not rely on it.

Then there is the provision that removes your best instinctive defence.
Section 80 of the [Companies Act 2013](https://www.indiacode.nic.in/bitstream/123456789/2114/5/A2013-18.pdf):

> Where any charge on any property or assets of a company or any of its
> undertakings is registered under section 77, any person acquiring such
> property, assets, undertakings or part thereof or any share or interest
> therein shall be deemed to have notice of the charge from the date of such
> registration.

**Deemed to have notice.** Once the charge is registered, "nobody told me" is
not available to you. Registration is what converts your ignorance into legal
knowledge.

One thing you may be told is wrong, and it matters. The well-known protection
for a buyer who paid in good faith without notice sits in section 100 of the
Transfer of Property Act, which is confined to **immoveable** property. A lathe,
a generator and a truck are not immoveable, so it does not reach your purchase
at all unless you are buying land. And even where it applies, deemed notice
takes it away: a
High Court decision of August 2014, on a tax charge over land, held that a
transferee with constructive notice of a charge "cannot then be said not to have
notice of the charge".

The Sale of Goods Act gives you something instead: section 14(c) implies a
warranty that goods are free from any encumbrance "not declared or known to the
buyer". Read next to section 80, which deems you to know, the two point opposite
ways, and no decision we found reconciles them. Reason enough not to be the case
that does.

## Three registers, and the ROC index is only the first

The Index of Charges on the MCA portal is where to start, because it is free and
it is about the seller as a company. It is not the register that decides the
question for the asset you are buying.

| What you are buying | Which register decides | Why |
| --- | --- | --- |
| A motor vehicle, including a tractor or construction equipment vehicle | The registering authority's own registration record, Form 24, reflected in the certificate of registration | Section 51(4) of the Motor Vehicles Act blocks the transfer entry without the financier's written consent |
| Plant, machinery, a generator, a lathe | The Central Registry, alongside the ROC index | SARFAESI section 26C(2) makes a later sale subject to a registered claim, and section 26D bars the bank from enforcing at all unless it registered there |
| Either, where the seller is a company | The ROC Index of Charges, as the free first screen | Section 80 fixes you with deemed notice of what it shows |

The Central Registry is the one almost nobody checks, and section 26D says why
it matters: no secured creditor may enforce under Chapter III "unless the
security interest created in its favour by the borrower has been registered with
the Central Registry". Section 26(2) gives any person a right of electronic
inspection on payment of the prescribed fee. These provisions came into force on
24 January 2020. The Act also lets tax-recovery authorities and holders of court
attachment orders file there, so a search can in principle surface a revenue
claim too, though we cannot establish how completely that happens.

For how to read the ROC side, and what a charge is in the first place,
[what a charge on a company means](https://entiva.in/blog/what-a-charge-on-a-company-means/)
covers the index, the registration clock and the three ways a charge comes off.

## If it is a vehicle, one subsection decides everything

Section 51(4) of the [Motor Vehicles Act 1988](https://indiacode.gov.in/server/api/core/bitstreams/1d30ea4a-1331-4791-89bf-b820172bf790/content):

> No entry regarding the transfer of ownership of any motor vehicle which is
> held under the said agreement shall be made in the certificate of
> registration except with the written consent of the person whose name has
> been specified in the certificate of registration as the person with whom the
> registered owner has entered into the said agreement.

You will not get the registration transferred. You will have paid for a vehicle
that stays in someone else's name, which is the difference between owning it and
merely holding it.

Two related traps. Repaying the loan does not clear the endorsement by itself:
under section 51(3) the entry *may* be cancelled by the last registering
authority, on proof of termination of the agreement, on an application. That
application is [**Form 35**](https://parivahan.gov.in/sites/default/files/DownloadForm/cmvr/FORM-35.pdf), the notice of termination, signed by the
registered owner *and* the financier with the financier's seal and address, and
rule 61(1) requires it to carry the registration certificate itself. Form 35 is not the financier's
no-objection certificate, which is a separate instrument under section 51(6)
for a different list of acts. People use the two names interchangeably and it
costs them.

So for a vehicle, what you want handed to you is a Form 35 carrying the
financier's signature and seal, and the cancellation endorsed on the
registration certificate. Not a photocopy of the certificate. The endorsement.

## Why an open charge is a question, not an answer

The index tells you less than it appears to, in both directions.

**An open charge does not prove a live loan.** Nothing removes a charge by the
passage of time. Repayment discharges the debt and leaves the register
untouched. The duty to report satisfaction within thirty days sits on the
company under section 82, and a company with its money back has little reason
to file. A loan cleared in 2014 can still read open today.

**And a repaid charge nobody filed for looks exactly like a live one.** Until
someone files Form CHG-4, nothing on the register distinguishes "still owed"
from "settled two years ago". So the open flag is where your enquiry starts,
not where it finishes.

## The thing you cannot find out, and what follows from it

Here is the asymmetry that should decide how you handle the purchase. Section
13(13) of SARFAESI:

> No borrower shall, after receipt of notice referred to in sub-section (2),
> transfer by way of sale, lease or otherwise (other than in the ordinary
> course of his business) any of his secured assets referred to in the notice,
> without prior written consent of the secured creditor.

Once the bank has issued its demand notice, the seller cannot lawfully sell the
asset without the bank's written consent. **And you have no way of discovering
that the notice was issued**, because it is a private communication between the
bank and its borrower. It appears on no register you can search.

A High Court decision of February 2018 shows how badly that can end. A
transferee was held to have no title **as against the bank**, because where
section 13(13) bars the transfer, "the very initiation of the transaction by the
borrower is barred and there is no question of such transfer or transaction
being operative between the parties thereto or vesting any title in the
transferee thereunder, at the cost of the secured creditor". Two caveats: the
transfer was a gift rather than a sale, and the asset was a house.

The same order points at the cure. The bar exists "only for the benefit of the
secured creditor and none else", so once the dues are cleared, by either side,
the creditor has no cause to object.

One more provision names you directly. Under section 13(4)(d), once the demand
notice period has run unpaid, a bank may require in writing any person who has
acquired a secured asset and owes money to the borrower to pay the bank instead,
and section 13(5) makes that a good discharge. So if you are buying in
instalments, your remaining payments can be redirected to the lender. Not a
double payment, but a reason to know who the lender is first.

If a seizure does happen, section 17 lets "any person" aggrieved apply to the
Debts Recovery Tribunal, within forty-five days of the measure being taken. With
a catch from that same February 2018 order, which read "any person aggrieved" as
requiring a prima facie legally founded grievance and "not a person whose claim
is mired in illegality at the very roots". On that reading the buyer most
exposed to the hidden demand notice is the one the Tribunal will not hear.

## What to ask for, and every item exists

1. **The charge ID**, from the index. Quote it in every letter, because it is
   what makes a reply unambiguous.
2. **The charge holder's letter confirming the amount has been satisfied.**
   This was a mandatory attachment to the old eForm CHG-4 and is still what a
   lender issues in practice. On the current V3 webform it is not required, the
   charge holder's digital signature having replaced it, so a seller can be
   telling the truth without holding one. Ask anyway: it is the cheapest thing
   the lender can give you.
3. **Form CHG-5**, the Registrar's memorandum of satisfaction. This is the
   definitive proof and it carries the charge ID on its face. If satisfaction
   was filed recently and CHG-5 has not issued, ask for the CHG-4 SRN instead,
   which is checkable.
4. **A written no-objection from the charge holder to this particular sale.**
   This is the only item that addresses the section 13(13) problem, because the
   lender is the only party who knows whether a demand notice has gone out.
5. **For a vehicle, Form 35 with the financier's signature and seal**, plus the
   cancellation endorsed on the registration certificate.
6. **Search on the day you pay, and keep the dated result.** The third proviso
   to section 77 protects a right acquired before a charge is actually
   registered, so the date matters and it is the one piece of timing that runs
   in your favour. MCA's V3 master-data screens still carry a beta notice saying
   they are not to be used for statutory or legal purposes, so keep your own
   dated screenshot and treat the index as a pointer to the filing.

The charge documents themselves, rather than the index summary, sit in the
registry's paid categories, and
[how to download MCA documents](https://entiva.in/blog/how-to-download-mca-documents/) walks
that route including the ₹100 per-company fee.

## Two honest things about all of this

**Diligence works by stopping the purchase, not by winning the argument
later.** In the decisions we read, no purchaser was saved by proving they had
searched a register or obtained a no-dues letter. Those who kept the asset kept
it because they had no notice, and section 80 takes that away for a registered
charge. That is our reading rather than any court's holding, and it points one
way: the check is the only chance you get.

**If you are already stuck, one route gets missed.** Section 87 lets the
Central Government, in practice the Regional Director, act on the application of
the company "or any person interested", and Form CHG-8 carries a box for "any
other interested person". Be clear-eyed about it: MCA's instructions let only a
charge holder, an ARC or assignee, or a company officer sign that form, and a
rectification must attach the instrument creating the charge, an affidavit and a
confirmation from the charge holder. So it is a route the lender can take for
you, not one you can take alone. Still worth naming in your letter to them.

Most used machines are a fine purchase. The check is the difference between a
discount you understood and one you were given for a reason nobody mentioned,
and it starts with the
[two-minute check on whether a company is real](https://entiva.in/blog/how-to-check-if-a-company-is-real/).

*Entiva retrieves MCA filings and organises what comes back. We are not
affiliated with the Ministry of Corporate Affairs.*

## Frequently asked

### Can a bank take equipment I bought from a company?

It can, if the asset was pledged and the security interest was registered. Section 26C(2) of the SARFAESI Act 2002 provides that a transfer by way of sale after registration is subject to the secured creditor's claim, with a proviso for transactions in the borrower's ordinary course of business. Section 80 of the Companies Act 2013 separately treats anyone acquiring charged property as having notice of a registered charge, so not knowing is not a defence.

### Why can I not transfer the RC of a vehicle I paid for?

Because of section 51(4) of the Motor Vehicles Act 1988. Where a vehicle is held under a hire-purchase, lease or hypothecation agreement, no entry transferring ownership can be made in the certificate of registration except with the written consent of the financier named in it. If the seller has not cleared the finance, you have bought a vehicle you cannot register in your name.

### The charge shows as open. Does that mean the loan is still outstanding?

Not necessarily. Repayment discharges the debt but does not change the register. The duty to report satisfaction within thirty days sits on the company under section 82 of the Companies Act 2013, and a company that has its money back has little reason to file. A repaid charge nobody filed for looks identical to a live one, so treat an open charge as a question for the lender rather than a conclusion.

## Related reading

- [What a charge on a company means, and why an unreleased one costs you](https://entiva.in/blog/what-a-charge-on-a-company-means/): A charge is a lender's registered claim over a company's assets, and it decides who gets paid first. Free to check, and it stays on the register until someone files to remove it.
- [How to check if a company is real before you give them money](https://entiva.in/blog/how-to-check-if-a-company-is-real/): A quarter of the entities on India's companies register no longer legally exist. Here is how to check the one in front of you, free, in about two minutes.
- [How to download a company's documents from the MCA portal, and what it actually costs you](https://entiva.in/blog/how-to-download-mca-documents/): The MCA charges ₹100 to see a company's filings. Here is the full route through View Public Documents, the four limits nobody warns you about, and when it is worth it.

_Published by Entiva (https://entiva.in/), which retrieves documents from the Ministry of Corporate Affairs' View Public Documents service on a customer's behalf. Entiva is not affiliated with the Ministry of Corporate Affairs and does not resell another provider's database. Free lookups use MCA company master data._