1974 (1) TMI 59 - HC - Companies Law

Summary

Issues Involved:
1. Competence of G. P. Raju Mudaliar to execute the mortgage.
2. Validity and enforceability of the mortgage deed.
3. Role and powers of the provisional liquidator.
4. Legal status of the company's properties during the provisional liquidation.

Issue-wise Detailed Analysis:

1. Competence of G. P. Raju Mudaliar to Execute the Mortgage:
The defendant-company contended that G. P. Raju Mudaliar lacked the competence to execute the mortgage deed on January 10, 1959, as the company was under the control of a provisional liquidator appointed by the High Court. The court examined the orders dated November 27, 1958, and January 2, 1959, which directed the provisional liquidator to hand over charge of the company to G. P. Raju Mudaliar and another partner. It was concluded that the provisional liquidator should have handed over the properties by January 2, 1959, making Raju Mudaliar competent to execute the mortgage.

2. Validity and Enforceability of the Mortgage Deed:
The court found that the mortgage executed by G. P. Raju Mudaliar was valid and supported by consideration. The mortgage was intended to avert the execution of money decrees obtained by the plaintiff against the company. The court also noted exhibit A-7, where the defendant did not dispute the mortgage, reinforcing its validity. The mortgage was executed following a resolution passed in a general body meeting, complying with legal requirements.

3. Role and Powers of the Provisional Liquidator:
The provisional liquidator, appointed under section 450(3) of the Companies Act, had powers limited by the court's orders. Initially, the provisional liquidator was to take possession and protect the company's properties. However, the court's subsequent orders on November 27, 1958, and January 2, 1959, directed the provisional liquidator to hand over charge to the managing agents. Thus, the provisional liquidator's control ceased by January 2, 1959, and the managing agents were in lawful custody of the properties.

4. Legal Status of the Company's Properties During Provisional Liquidation:
The court clarified that the appointment of a provisional liquidator does not equate to the automatic vesting of the company's properties in the liquidator, unlike in insolvency cases. The properties remained with the company, and the managing agents retained their right to deal with them. The provisional liquidator's role was restricted to managing the properties under court directions. Therefore, the mortgage executed by Raju Mudaliar was valid and enforceable, as the properties were not vested in the provisional liquidator.

Conclusion:
The court upheld the judgment of the learned subordinate judge, confirming that the mortgage was true, valid, and supported by consideration. The appeal was dismissed, and the decree in favor of the plaintiff was maintained. The court emphasized that the provisional liquidator's powers were limited by specific court orders, and the managing agents were in lawful control of the company's properties at the time of executing the mortgage.