2007 (8) TMI 450 - HC - Companies Law

Registration of Charges - Held that - As it was the duty of the appellant to get the charge registered. Though it has been strenuously contended by Sh. Ankush Sood appearing on behalf of the appellant that the registration of the charge could not take place due to the fact that the bank did not provide the necessary documents, no material in this regard has been placed on record except the letter dated 18-1-2007. The charge was created on 31-5-2005. No communication has been placed before us to show that the appellant-company ever requested the bank for any documents from 31-5-2005 till 18-1-2007. We also feel that in view of the fact that non-creation of a charge is an offence punishable under section 142, a party who is guilty of having committed an offence cannot be allowed to take advantage of having committed the said offence. As the charge now stands registered. It would be totally inequitable to set the clock back. Therefore, though we do not agree with the reasoning of the Company Law Board or the procedure followed by it, the appeal is rejected.

Issues:
1. Duty of company to register charge with Registrar of Companies under Companies Act, 1956.
2. Condonation of delay in registration of charge.
3. Lack of notice to appellant before deciding on condonation of delay application.
4. Factual errors in the Company Law Board's order.
5. Verification of bank's version before passing orders.
6. Inequity in granting relief due to non-registration of charge.

Analysis:

1. The case involved the duty of a company to register a charge with the Registrar of Companies under the Companies Act, 1956. Non-registration of a charge is considered an offence punishable under the Act. The appellant had raised a loan from the respondent bank and created a charge on properties as per the agreement, but failed to register the charge, leading the bank to approach the Company Law Board for registration.

2. The Company Law Board accepted the bank's application for condonation of delay in registering the charge, without issuing notice to the appellant. The Board's order, while condoning the delay, imposed a cost on the appellant. The appellant argued that notice should have been sent before deciding on the application, especially considering the costs imposed.

3. The High Court observed that the Company Law Board's order was passed in a lackadaisical manner, containing factual errors. The Board failed to notice that the delay condonation petition was filed by the bank, not the company. The order lacked reasoning for accepting the delay condonation application, merely stating inadvertence as the cause, contrary to the bank's claims of deliberate delay by the appellant.

4. Despite acknowledging the errors in the Board's order, the High Court found itself unable to grant relief to the appellant. It noted the appellant's failure to provide evidence that the bank did not provide necessary documents for registration, emphasizing that the onus was on the appellant to register the charge. The Court highlighted that allowing a party guilty of an offence under section 142 to benefit from the offence would be inequitable.

5. The Court ultimately rejected the appeal, noting that the charge was now registered, making it unfair to reverse the situation. While disagreeing with the Company Law Board's reasoning and procedure, the Court found no grounds to provide relief to the appellant, emphasizing the importance of complying with legal obligations despite procedural shortcomings.

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