2002 (10) TMI 684 - HC - Companies Law

Summary

Issues Involved:
1. Validity and priority of charges created by the second respondent in favor of the applicant and the third respondent.
2. Compliance with statutory requirements under the Companies Act, 1956.
3. Impact of winding-up proceedings on the charges.
4. Bona fide nature of the transactions.

Issue-Wise Detailed Analysis:

1. Validity and Priority of Charges:
The applicant, First Leasing Company of India Ltd., sought a declaration that the charge created by the second respondent (Fidelity Industries Ltd. in liquidation) in favor of the applicant and registered with the Registrar of Companies on August 16, 2000, is the only valid and exclusive charge over the immovable properties of the second respondent. The applicant argued that this charge should prevail over an unregistered charge in favor of the third respondent (IDBI). The court found that the charge in favor of the applicant was valid and exclusive since it was registered in compliance with statutory requirements, whereas the charge in favor of IDBI was not registered, making it void against the liquidator and creditors.

2. Compliance with Statutory Requirements:
The applicant's charge was registered with the Registrar of Companies on August 16, 2000, in accordance with section 125 of the Companies Act, 1956. The court emphasized that under section 125(1), a charge must be registered within 30 days of its creation to be valid against the liquidator and creditors. The third respondent's charge, although created earlier, was not registered, and thus did not meet the statutory requirements. The court referenced several legal principles and precedents, including the necessity for charges to be registered to maintain their validity.

3. Impact of Winding-Up Proceedings:
The court noted that the winding-up petition was filed on June 27, 2000, and the winding-up order was passed in April 2001. According to section 441(2) of the Companies Act, 1956, the winding-up dates back to the filing of the petition. The applicant's charge was created and registered after the filing of the winding-up petition but was still considered valid due to compliance with statutory requirements. The court cited section 536(2), which allows the court to validate transactions made after the commencement of winding-up proceedings if they are bona fide and in the company's best interest.

4. Bona Fide Nature of Transactions:
The court found that the applicant's transactions with the second respondent were bona fide, fair, just, and reasonable. The applicant had complied with all statutory requirements, and there was no evidence of mala fide intention. The court referenced several cases, including *In re Park Ward and Company Ltd.* and *In re Steane's (Bournemouth) Ltd.*, which supported the validation of bona fide transactions made in the best interest of the company during winding-up proceedings.

Conclusion:
The court concluded that the charge created by the second respondent in favor of the applicant and registered on August 16, 2000, is valid and exclusive. It has priority over the unregistered charge in favor of the third respondent (IDBI). The court ordered the third respondent to hand over the title deeds of the immovable properties to the applicant. Consequently, the court also granted leave to the applicant to institute an appropriate suit against the official liquidator.