2008 (1) TMI 622 - HC - Companies Law

Benefits of subrogation under section 92 of the Transfer of Property Act, 1882 - Held that - The Syndicate Bank advanced money to the company. Therefore, directors of the company wanted the approval by this declaration for persuading the Syndicate Bank to believe that property of the bank is free from all the liabilities and encumbrance. Therefore, company or a director of the company cannot be allowed to say that he or any of the directors of the company has got a prior and latter charge over the property mortgaged to Syndicate Bank. Therefore, on the principles made under section 115 of the Indian Evidence Act also, he cannot claim that he has got charge over the property. The appellant is estopped from taking such a stand and section 115 of the Indian Evidence Act is applicable to the appellant on the facts of this case. The rule of estoppel is based on equity and good conscience, viz., that it would be most inequitable and unjust to a person that if another by a representation made, or by conduct amounting to representation, has induced him to act as he would not otherwise have done, the person who made the representation should be allowed to deny or repudiate the effect of his former statement, to the loss and injury of the person who acted on it. The learned company judge has discussed the issue correctly and we see no ground to interfere in the impugned judgment of the company court. The appeal is dismissed.

Issues Involved:
1. Subrogation under Section 92 of the Transfer of Property Act, 1882.
2. Registration/Non-registration of charges under Sections 125 and 135 of the Companies Act, 1956.
3. Application of the principles of estoppel under Section 115 of the Indian Evidence Act, 1872.

Issue-Wise Detailed Analysis:

1. Subrogation under Section 92 of the Transfer of Property Act, 1882:
The appellant claimed benefits of subrogation under Section 92 of the Transfer of Property Act, 1882, arguing that he stepped into the shoes of Canara Bank, the prior mortgagee, after advancing funds to the company to clear its liabilities. The court examined whether the appellant was subrogated by operation of law or required a registered instrument. The judgment clarified that subrogation by operation of law under the first paragraph of Section 92 applies only to co-mortgagors or persons mentioned in Section 91 who directly redeem the mortgage. Since the appellant advanced money to the company, which then paid Canara Bank, the transaction fell under the third paragraph of Section 92, requiring a registered instrument for subrogation. The court concluded that the appellant did not redeem the mortgage directly and no registered deed was executed, thus he was not subrogated to the position of Canara Bank.

2. Registration/Non-registration of charges under Sections 125 and 135 of the Companies Act, 1956:
The court emphasized the importance of registering charges with the Registrar of Companies to ensure their validity against the liquidator and creditors. The appellant's alleged charge was not registered, unlike the charge created in favor of Syndicate Bank, which was duly registered. The court noted that the release of Canara Bank's charge and the creation of a new charge in favor of Syndicate Bank were registered, but no modification of charge was registered in favor of the appellant. The court held that unregistered charges are void against the liquidator and creditors, and since the appellant did not register any charge, his claim was invalid.

3. Application of the principles of estoppel under Section 115 of the Indian Evidence Act, 1872:
The court applied the principles of estoppel, noting that the appellant, as a director of the company, was involved in declaring to Syndicate Bank that the company's properties were free from encumbrances to secure a fresh loan. This declaration led Syndicate Bank to believe that the properties were unencumbered, and the bank advanced funds based on this representation. The court held that the appellant was estopped from claiming any prior charge over the properties due to his conduct and representations, which misled Syndicate Bank. The court concluded that the appellant could not assert a charge over the property against Syndicate Bank based on the principles of estoppel.

Conclusion:
The court dismissed the appellant's claim for subrogation and a first charge over the company's properties. It held that the appellant did not meet the requirements for subrogation under Section 92 of the Transfer of Property Act, failed to register any charge under the Companies Act, and was estopped from asserting any charge due to his representations to Syndicate Bank. The appeal was dismissed, affirming the decision of the company court.

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