1946 (2) TMI 7 - HC - Companies Law

Issues Involved:
1. Validity of the sub-mortgage due to non-registration under the Registration Act.
2. Validity of the sub-mortgage due to non-registration under the Indian Companies Act.
3. Entitlement of the Bihar Bank to the sum in court.
4. Abandonment of the claim by the plaintiffs.
5. Proper form of the decree.

Issue-wise Detailed Analysis:

1. Validity of the Sub-Mortgage Due to Non-Registration Under the Registration Act:
The sub-mortgage executed on 24th April 1939 was not registered under the Registration Act. The Benares Bank argued that this lack of registration invalidated the sub-mortgage as a security over the immovable property. The court agreed, stating, "We entirely agree with the view of the liquidator that as a security over the land comprised in the deposited title deeds this objection is fatal to the sub-mortgage of the 24th April, 1939." However, the court also noted that the sub-mortgage constituted an assignment of the debt, which did not require registration. The debt was considered an actionable claim that could be transferred independently of the security.

2. Validity of the Sub-Mortgage Due to Non-Registration Under the Indian Companies Act:
The Benares Bank contended that the sub-mortgage was void against the liquidator and creditors due to non-registration under Section 109 of the Indian Companies Act. The court found that particulars of the charge were sent to the Registrar within the prescribed period, though the registration was delayed due to disputes over fees. The court stated, "It is not lack of registration but the neglect to send in the particulars" that voids the charge. The court concluded that the Benares Bank had complied with the section's conditions by sending in the particulars. Additionally, a certificate of registration was later issued, reinforcing the validity of the charge.

3. Entitlement of the Bihar Bank to the Sum in Court:
As a result of a compromise, a sum of Rs. 50,000 was deposited in court to answer the claim of either the Bihar Bank or the Benares Bank. The court held that the Bihar Bank's security over the debt was valid and subsisting. The court declared, "There will be a declaration that the plaintiffs, the Bank of Bihar Limited, are entitled to a valid and subsisting charge by virtue of the instrument of the 24th April, 1939, over the debt of Rs. 47,112-0-0." The decree ordered the payment of Rs. 41,559-11-9 with interest to the Bihar Bank out of the sum in court.

4. Abandonment of the Claim by the Plaintiffs:
The trial court's judgment suggested that the plaintiffs had abandoned their claim under the security and sought a simple money decree. However, the appellate court found this to be a misunderstanding. The court noted, "It is clear from this that they were still relying on their security." The plaintiffs' intention was to claim under the security, and the confusion likely arose from the compromise and the payment into court.

5. Proper Form of the Decree:
The trial court's decree was confusing and did not accurately reflect the plaintiffs' claims or the court's findings. The appellate court set aside the trial court's decree and issued a new decree. The new decree included a declaration of the Bihar Bank's entitlement to the debt and proceeds, and an order for the payment out of court to the Bihar Bank. The court also addressed the issue of costs, noting that the plaintiffs' pleadings contributed to the confusion.

Conclusion:
The appellate court upheld the validity of the Bihar Bank's security over the debt despite the non-registration issues. The court clarified the plaintiffs' entitlement to the sum in court and issued a new decree to reflect this. The court also highlighted the procedural shortcomings in the registration process and the trial court's handling of the case.

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