1955 (10) TMI 13 - HC - Companies Law

Summary

Issues Involved:
1. Validity of Narayana Rao's claim to the newsprint reels.
2. Validity of the pledges made to the Indian Bank Ltd. and Indo-Commercial Bank Ltd.
3. Requirement of registration of pledges under Section 109(1) of the Indian Companies Act.

Issue-wise Detailed Analysis:

1. Validity of Narayana Rao's claim to the newsprint reels:
Narayana Rao claimed that he purchased various quantities of newsprint from Dinasari Ltd. and paid Rs. 81,000. He argued that the newsprint reels sold by the Indian Bank Ltd. included those he had bought. However, the court found no evidence to support his claim. Narayana Rao did not provide proof of actual possession of the goods, and the goods sold by the Indian Bank Ltd. were stored in different locations than those claimed by Narayana Rao. Additionally, the goods could not have been delivered to him on the date he specified. Therefore, his claim was dismissed with costs.

2. Validity of the pledges made to the Indian Bank Ltd. and Indo-Commercial Bank Ltd.:
The Official Liquidator argued that the pledges made to the banks were invalid because the goods were not actually pledged and, even if they were, the pledges were void for not being registered under Section 109(1) of the Indian Companies Act. The court found that the goods were indeed pledged to the banks, with possession constructively delivered through relevant shipping and other documents of title. The banks were allowed to retain the goods as security under the terms of the pledge agreements. Therefore, the pledges were valid.

3. Requirement of registration of pledges under Section 109(1) of the Indian Companies Act:
The court examined whether the pledges required registration under Section 109(1) of the Indian Companies Act. Section 109(1)(e) states that a mortgage or charge on any moveable property, except stock-in-trade, must be registered. The court concluded that a pledge does not require registration, aligning with the decision in Radhakrishnan Chettiar v. Madras Peoples Bank (in liquidation) and the interpretation by Tendolkar J. in In re East Africa Hardware Co. The court also noted that the banks had the right to retain the goods as security for a general balance of account under Section 171 of the Indian Contract Act. Therefore, the pledges were valid without registration, and the Official Liquidator's claim was dismissed with costs payable out of the estate.

Conclusion:
Both applications, No. 4436 of 1954 by Narayana Rao and No. 3617 of 1954 by the Official Liquidator, were dismissed with costs. The pledges made to the Indian Bank Ltd. and Indo-Commercial Bank Ltd. were deemed valid and did not require registration under Section 109(1) of the Indian Companies Act.