1982 (4) TMI 249 - HC - Companies Law

Summary

Issues Involved:
1. Execution of the decree against the monies held by the official liquidator.
2. Claim of the applicant as a secured creditor.
3. Requirement of registration under the Companies Act, 1956.
4. Requirement of registration under the Indian Registration Act, 1908.
5. Validity of the security created by the court order.

Detailed Analysis:

1. Execution of the Decree:
The applicant, Praga Tools Ltd., sought an order to execute the decree dated August 1, 1978, against the monies held by the official liquidator from the sale of Bengal Engineering Co. (P) Ltd. The decree was originally obtained on July 7, 1972, for Rs. 90,343.37 with 6% interest per annum and assessed costs of Rs. 6,838. The applicant's winding-up petition led to various proceedings, culminating in an order on February 11, 1975, requiring the company to deposit Rs. 25,000 and furnish security for Rs. 50,000.

2. Claim as a Secured Creditor:
The applicant claimed to be a secured creditor to the extent of Rs. 50,000, based on the security furnished pursuant to the court's order. The official liquidator opposed this claim, arguing that the charge was not registered under the Companies Act, 1956, and thus the applicant stood as an unsecured creditor.

3. Registration under the Companies Act, 1956:
The applicant's counsel argued that the charge created by the court order did not require registration under Section 125 of the Companies Act, 1956, as it was not a volitional act by the company but a result of a court order. Supporting this, references were made to legal commentaries and cases, including *Brunton v. Electrical Engineering Corporation* and *T. V. Sundaram Iyengar & Sons P. Ltd. v. Official Liquidator*. The court agreed, stating that the charge created by the order of August 1, 1978, was not within the purview of Section 125.

4. Registration under the Indian Registration Act, 1908:
The official liquidator also argued that the security required registration under the Indian Registration Act, 1908. However, it was noted that the security was indeed registered. Further, the court held that an order of the court is not a "non-testamentary instrument" requiring registration under Section 17(1)(b) of the Indian Registration Act, 1908. Additionally, Section 17(2)(vi) was discussed, which exempts court orders from registration unless they are compromise decrees involving immovable property not subject to the suit. The court found that the security was the subject matter of the suit, thus not requiring registration.

5. Validity of Security Created by Court Order:
The court concluded that the security created by the order of August 1, 1978, was enforceable and did not require registration under the Companies Act, 1956, or the Indian Registration Act, 1908. The court emphasized that the security's validity was a result of the court's order, not an act by the company.

Conclusion:
The application succeeded, and the court ordered the official liquidator to pay Rs. 50,000 to the applicant in partial satisfaction of the decretal dues. The applicant was allowed to prove for the balance in the liquidation proceedings. No order as to costs was made, and the official liquidator was entitled to retain Rs. 2,000 as costs from the assets. All parties were directed to act on a signed copy of the order's operative portion.