1955 (5) TMI 12 - HC - Companies Law

Summary

Issues Involved:
1. Extension of time for registration of mortgages and collateral instruments.
2. Non-compliance with Section 109 of the Indian Companies Act.
3. Applicability of Section 120 of the Indian Companies Act for relief.
4. Impact of winding up order on the application for extension of time for registration.

Detailed Analysis:

1. Extension of Time for Registration of Mortgages and Collateral Instruments:
The Union of India sought an extension of time for the registration of mortgages and collateral instruments executed by a company on various dates in 1953. The mortgages and instruments were not registered within the prescribed time under Section 109 of the Indian Companies Act. The court noted that the failure to register was due to the ignorance and inexperience of the petitioner's officers, but there was no bad faith or fraudulent intent involved.

2. Non-compliance with Section 109 of the Indian Companies Act:
Section 109 mandates that every mortgage or charge created by a company must be registered within 21 days of its creation. Failure to comply renders the security void against the liquidator and any creditor of the company. The court cited precedents indicating that while the security remains valid against the company as a going concern, it is void against the liquidator and creditors once the company is in liquidation.

3. Applicability of Section 120 of the Indian Companies Act for Relief:
Section 120 allows the court to extend the time for registration if the omission was accidental, due to inadvertence, or other sufficient cause, and if it does not prejudice the creditors or shareholders. The court has wide discretion under this section and can impose terms and conditions as it deems just and expedient. The court recognized that negligence or carelessness without bad faith could qualify as "inadvertence" under Section 120.

4. Impact of Winding Up Order on the Application for Extension of Time for Registration:
The company was ordered to be wound up, and a liquidator was appointed. The court emphasized that an order for winding up creates a statutory trust in favor of the creditors, entitling them to a ratable distribution of the company's assets. The court cited several cases to illustrate that once a winding-up order is made, the liquidator's duty is to collect and distribute the assets among the creditors. The court concluded that granting an extension for registration after a winding up order would be futile, as the applicant could not enforce the unregistered charge against the liquidator or gain priority over other creditors.

The court dismissed the application for extension of time, stating that the omission to register was due to inadvertence but that an order for extension would be useless given the winding up order and the appointment of a liquidator. The court left open the question of whether the mortgages and instruments required registration under Section 109. No costs were awarded against the applicant, but the liquidator was allowed to retain his costs from the assets.