2002 (3) TMI 878 - HC - Companies Law

Issues Involved:
1. Maintainability of the application under Section 446 of the Companies Act by a guarantor.
2. Liability of the guarantor in the context of the winding-up proceedings.
3. Impact of non-registration of charge under Section 125 of the Companies Act.
4. Applicability of the "quia-timet" principle for the surety.
5. Jurisdiction of the company court in adjudicating the liability of the guarantor.

Detailed Analysis:

1. Maintainability of the application under Section 446 of the Companies Act by a guarantor:
The court examined whether an application under Section 446 of the Companies Act, 1956, can be maintained by a guarantor. The court noted that Section 446(2)(d) provides jurisdiction to entertain or dispose of any question of priorities or any other question whatsoever, whether of law or fact, which may relate to or arise in the course of the winding-up of the company. However, the court concluded that the determination of the liability of a guarantor does not arise out of the winding-up proceedings and is not necessary for the effective winding-up of the company. Therefore, the application by the guarantor under Section 446 was found to be not maintainable.

2. Liability of the guarantor in the context of the winding-up proceedings:
The court discussed the bond of guarantee executed by the guarantor, which stated that the guarantor's liability is co-extensive with that of the principal debtor. The bond of guarantee also included clauses that made the guarantor liable to pay the principal sum, interest, and other moneys due to the corporation upon the security of the mortgage. The court noted that the guarantor's liability is not diminished by the winding-up order of the company and that the guarantor can be called upon to discharge the liability.

3. Impact of non-registration of charge under Section 125 of the Companies Act:
The court acknowledged that the charge created by the mortgage in favor of PICUP was not registered with the Registrar of Companies, making it void against the liquidator. However, the court held that the failure to register the charge does not restrict PICUP's right to realize the amount from the guarantor. The guarantor's liability remains intact despite the non-registration of the charge.

4. Applicability of the "quia-timet" principle for the surety:
The court examined the "quia-timet" principle, which allows a surety to exercise his right before payment. The principle entitles the surety to compel the principal to relieve him from his obligations even before the surety has discharged them. However, the court found that the relief sought by the guarantor does not fall within the scope of the winding-up proceedings and is not incidental to the winding-up process.

5. Jurisdiction of the company court in adjudicating the liability of the guarantor:
The court referred to various precedents, including the Supreme Court's decision in Sudarsan Chits (India) Ltd. v. G. Sukumaran Pillai, which emphasized the purpose of Section 446(2) to facilitate the disposal of winding-up proceedings by keeping all incidental proceedings before the company court. However, the court concluded that the determination of the guarantor's liability is not incidental to the winding-up proceedings and does not concern the effective winding-up of the company. Therefore, the company court refused to exercise its discretion to adjudicate the matter.

Conclusion:
The court dismissed the application under Section 446 of the Companies Act, 1956, on the ground that the relief claimed does not amount to proceedings relating to or arising in the course of the winding-up of the company. The court also refused to exercise its discretion to adjudicate the matter as it does not concern the winding-up of the company. The application was dismissed with no order as to costs.

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