1986 (6) TMI 232 - HC - Companies Law

Summary

Issues involved:
The issues involved in this case include the validity of a charge created by a company, the rights of secured creditors in a winding-up scenario, and the interpretation of relevant sections of the Companies Act.

Validity of Charge Created by the Company:
The case involved a loan advanced by State Industrial and Investment Corporation of Maharashtra (SICOM) to a company, secured by plant and machinery. Subsequently, Maharashtra State Financial Corporation (MSFC) also sanctioned a loan to the company. The company filed particulars of the charge with the Registrar of Companies as required by section 125 of the Companies Act within the stipulated time frame. The charge was challenged by the official liquidator, but the court held that the charge was not void due to timely filing of required documents.

Rights of Secured Creditors:
Following defaults by the company, SICOM took possession of the secured property and sold it to a buyer with the consent of MSFC. The official liquidator claimed that the charge of MSFC was void as it was not registered with the Registrar of Companies. However, the court determined that the charge was valid, and MSFC was entitled to the sum from the sale proceeds, thereby rejecting the official liquidator's claim.

Interpretation of Sections of the Companies Act:
The court examined sections 125 and 537 of the Companies Act in detail. Section 125 outlines the requirements for registering a charge created by a company, emphasizing the timely filing of particulars with the Registrar. Section 537 pertains to sales of company property during winding-up proceedings, requiring court intervention for validity. The court clarified that the sale by SICOM was valid as it was conducted outside the winding-up process and without court intervention.

Conclusion:
The court set aside the previous orders and granted leave to proceed with the judge's summons under section 440. The judge's summons was made absolute in favor of MSFC, affirming its status as a secured creditor entitled to the specified sum from the sale proceeds. The official liquidator's claim was rejected, and each party was directed to bear their own costs throughout the proceedings.