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TMI Blog1987 (7) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... ant's claim under Order XXI, rule 58, Civil Procedure Code against the attachment of properties of the defendant before judgment. The suit is by an unsecured creditor of the defendent company for recovery of money due to the plaintiff. Pending the suit, some of the items of immovable properties belonging to the defendant company were attached on 7th July, 1982, under Order 38, rule 3 Criminal Procedure Code. The appellant-State Bank of India filed a claim against the attachment contending that the properties attached are subject to an equitable mortgage in favour of the bank and no attachment can be effected ignoring the mortgage. The suit was decreed on 4th August, 1984, and in EP 227 of 1984, the decreeholder brought items 1 and 2 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n E.P. No. 227 of 1984. The court below has found that the letter exhibit A-2 does not disclose an intention to create a mortgage by deposit of title deeds and it cannot therefore be said that the claimant-bank has a charge on the properties sold. We are unable to agree with this finding of the lower court. The defendant company admits that the claimant bank had granted credit accommodation up to a limit of Rs. 100 lakhs. This is also clear from exhibits A-4 and A-5 referred to above. Exhibit A-3, certified extract of the accounts of the bank, shows that the defendant's liability to the bank exceeds Rs. 11 lakhs. Exhibit A-2 evidences the deposit of title deeds by the defendant company with the claimant-bank in compliance with the condition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thereof verified in the prescribed manner, are, filed with the Registrar for registration in the manner required by this Act within thirty days after the date of its creation". The proviso to sub-section (1) authorises the Registrar to extend the time by seven days in the circumstances mentioned therein. Sub-section (2) enacts that nothing in sub-section (1) shall prejudice any contract or obligation for the repayment of the money secured by the charge. When a charge becomes void under section 125(1), the money secured thereby shall immediately become payable (vide sub-section (3)). Section 130 provides for registration of charges and section 132 empowers the Registrar to issue certificates of registration. Exhibits A-4 and A-5 certifica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it says, namely, that it is void against any creditor who has a registered charge on the company's property. I cannot myself see any reason to doubt that, as a matter of construction of this section. It is void also against the liquidator in the event of winding up, but that is a contingency which we need not consider here, and which might give rise to certain questions which have been stated and discussed in argument, but as to which I deliberately refrain from expressing an opinion." The Master of the Rolls further stated at page 667 : "Of course the deed is not void to all intents and purposes. 'It is a perfectly good deed against the company so long as it is a going concern'." To the same effect is the following observation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nders the mortgage invalid and a nullity. The effect of the section is that if the mortgage is not registered, the liquidator is not to take notice of it as a mortgage. The debt will survive and it will be treated on par with other debts. The property which is the subject-matter of the security will be available as the assets of the company to the liquidator for payment to the creditors. The creditors in liquidation will not be affected by the mortgage. This section does not take away the right of the company to deal with its property. If the company can validly deal with its property, any transfer made by the company will be binding on the company. If the company mortgages certain property, any person who subsequently purchases the propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased by him are not subject to the rights of the mortgage. In this view, this contention also has to be rejected." What the decree-holder has purchased in execution of the decree is only the rights of the company in the properties sold. The equitable mortgage created by deposit of title deeds is binding on the company as a going concern. Section 125 of the Companies Act does not in any way invalidate the mortgage and the charge on the company's properties subsists subject to the restriction that, in the event of winding up of the company, the holder of an unregistered charge cannot stand outside the winding up and claim a preferential right to the security. In the event of winding up, he can rank only as an ordinary creditor entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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