9911796707
TMI Blog1991 (10) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioners, the properties mentioned in the deed of indenture of mortgage in consideration of an advance in a sum of Rs. 2,50,000 with interest thereon. The amounts were to be repaid by 17 half-yearly instalments. By a further deed of charge dated 4th June 1968, the first and second respondents mortgaged in favour of the petitioners, the properties mentioned in that deed, in consideration of a sum of Rs. 4,80,000 advanced by the petitioner to the first respondent. The said amount was also to be returned in 17 half-yearly instalments. By a second deed of further charge and additional security dated 16th December 1972, the first and second respondents mortgaged in favour of the petitioners, the properties mentioned in this deed, in consideration for a sum of Rs. 4 lakhs to be advanced by the petitioners to the first respondent. This amount was also to be repaid in 17 half-yearly instalments. It is an admitted position that under the aforementioned three deeds, which are hereinafter for the sake of convenience referred to as the said three deeds, the petitioners have lent and advanced to the first respondent sums of Rs. 2,50,000, Rs. 4,80,000 and Rs. 4,00,000, respectively. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitled to call back the entire loan and also to take action under section 31 of the State Financial Corporations Act. The first respondent had filed a written statement dated 19th April, 1975. In the written statement the first respondent contended that the petition was not maintainable because ( a ) no cause of action was shown in the petition, and ( b ) for non-joinder of parties such as the Bank of Maharashtra and the Maharashtra State Small Scale Industries Development Corporation. The first respondent also contended that the petition was liable to be dismissed as no resolution had been passed by the board of directors of the petitioners till the date of the filing of the petition. The first respondent also contended that the district court at Pune had no jurisdiction to entertain this petition as the mortgage deeds were executed at Bombay and the registered office of the first respondent was at Bombay. It was also contended that all the amounts due under the deeds were payable at Bombay and that, on that ground also, the district court at Pune had no jurisdiction. The first respondent also contended that the petition had not been properly verified and that, for that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd trustees of the respondents and were entirely responsible. The first respondent, therefore, denied that, under these circumstances, the first respondent has failed and neglected to pay any installments and/or that they have failed and neglected to comply with the terms and conditions of the three deeds. The first respondent avers that the petitioners have caused great harm and damage to the first respondent and the action of the petitioner has resulted in huge loss and/ or damages to the first respondent. The second respondent also filed a written statement dated 12th April, 1975. In the written statement the second respondent avers that he was a highly qualified foreign engineer and that, by his skill, he had invented several designs of aircraft ground support equipment. The second respondent avers that there was a scheme of reconstruction of the first respondent-company between the petitioner, the Bank of Maharashtra and the Maharashtra State Small Scale Industries Development Corporation and that the entire management and control and administration of first respondent-company had been taken over by them. The second respondent avers that after the scheme of reconstruction wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financial institutions respectively. Under the order dated 17th April, 1978, those petitions were also transferred to this court. Thereafter, the application for filing the petitions forma pauperis was rejected by this court. Against the order rejecting forma pauperis in Petition No. 16 of 1979 an appeal was filed. That appeal was also dismissed. In both the petitions the petitioners therein were called upon to pay court fees. It is an admitted position that the court fees were not paid and these two petitions no longer survive. The second respondent has also filed a writ petition bearing No. 3048 of 1987 for a direction that the three financial institutions continue to pay amounts to the first respondent-company as per the scheme of reconstruction and also for a prayer that the proceedings in this petition be stayed. I am informed that, in this petition, the court called for a viability report from the Maharashtra State Small Scale Industries Development Corporation. The Maharashtra State Small Scale Industries Development Corporation submitted a report. The Maharashtra State Small Scale Industries Development Corporation after looking into all aspects reported that it was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rashtra and the Maharashtra State Small Scale Industries Development Corporation had caused loss and damage to the respondent, no issue was allowed to be raised on that aspect. There were other reasons also why such an issue was not raised, i.e., that while allegations as to loss and damages have been made, no particulars of any such loss or damage are given and no counter-claim was filed nor any set-off claimed and also as set out hereinabove, the pauper petition for damages was not pursued. It must also be mentioned that this petition initially reached hearing before her Lordship Justice Sujata Manohar, on 2nd and 5th July, 1982. On those dates pleadings were read and certain documents were tendered across the Bar. The petition was then adjourned and was directed not to be treated as part-heard. The petition did not reach hearing for a number of years. It thereafter appeared on my board on 17th June, 1988. On that date, Mr. Satyanarayan had stated that he was not agreeable to proceed from the stage at which the matter had been left and that he was not agreeable to documents taken on record before another judge being used in these proceedings. At that stage Mr. Bharucha had st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by the Registrar of Companies would show that the provisions of section 125 of the Companies Act had not been complied with. Very fairly at this stage, the parties agreed that evidence as to compliance with the provisions of section 125 may be led by the parties. The parties were, therefore, allowed to reopen their cases. The petitioners led evidence of one Subrao Gopal Pakkhare. The official liquidator also led the evidence of the same person. The official liquidator also led the evidence of one Mr. C.H. Venkatachalam, Assistant Registrar of Companies. Between the petitioners and the first respondent, the following issues were raised and settled : Issues : 1.Whether the petitioners' notice is invalid in law and if so whether the petition is maintainable as alleged in para 6 of the reply ? 2.Whether the petition is not maintainable as the same has not been properly verified and filed by an officer authorized by the board as per the resolution as alleged in para 5 of the reply ? 3.Whether the petition is not maintainable by reason of there being no valid resolution as alleged in para 3 of the reply ? 4.Whether the petition is not maintainable for non-joinder of nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 : In the affirmative. Issue No. 6 : In the negative. Issue No. 7 : In the affirmative. Issue No. 8 : As per order set out hereafter. Reasons Issue No. 1 as between the petitioner and both the respondents is the same. The contention of the first respondents is that the notice dated 5th January, 1975, has not been served upon the first respondent company at all. It has been contended that service of the notice has been made upon the second respondent only. The petitioners admit that the notice has not been served at the registered office of the company at Bombay. They however, contend that the notice was served upon the second respondent as the managing director of the first respondent and that the same has been accepted by the second respondent not only on his own behalf, but also on behalf of the first respondent. The respondents submitted that on the date the notice was served the second respondent was no longer the managing director of the first respondent company and that he could not have accepted the notice on behalf of the first respondent. It was also submitted that under section 30 of the State Financial Corporations Act, the notice must be served at the regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act still remains that by 20th December, 1974, the amounts due under the deed of mortgage dated 20th June, 1964, had not been paid. Also even the first installment under the deed of charge dated 4th June, 1968, which fell due on 20th December, 1974, had not been paid. Even after the petition was filed no payments have been made and by the time this petition reached hearing, amounts even as per the reschedule had not been paid. Thus, there was clearly a failure to comply with the terms of the three deeds. That is the main ground on which this petition has been filed. There was, therefore, no necessity to give any notice under section 30. The contention that a notice must be given under section 30 cannot be accepted. In my view, the words of section 30 itself indicate that it is the option of the Financial Corporation whether or not to give such a notice. In my view, there is no compulsion that such a notice must be given in all cases. Even otherwise, it is an admitted position that such a notice has been served on the second respondent. It is also an admitted position that the second respondent has accepted that notice on his own behalf as well as on behalf of the first respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 30. Thus, issue No. 1 between the petitioners and both the respondents has been answered against the respondents. Issues Nos. 2 and 3 between the petitioners and the first respondent: This issue has two aspects. The first on the point that the petition has not been properly verified. It is settled law that on this ground the petition cannot be dismissed. At the highest the petitioners can only be called upon to have the petition properly verified. As the same was not done and as no objection in this behalf has been raised at an earlier stage, in my view, it would be most inequitable at this stage to ask the petitioners to reverify the petition. The parties having gone to trial the facts stated in the petition being more or less admitted, I see no reasons to dismiss the petition on this technical ground. The second point urged is that this petition has not been verified by an officer authorised by the board. This is based upon section 31 of the State Financial Corporations Act. Under section 31 of the Act, a petition should be filed by an officer who is generally or specially authorised by the board in this behalf. Exhibit M is a circular resolution authorising the managi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petition under sections 31 and 32 of the State Financial Corporations Act . It is a special provision. In such a petition, neither the Bank of Maharashtra nor the Maharashtra State Small Scale Industries Development Corporation could be a party. In my view, they are neither necessary nor proper parties. This issue is, therefore, answered in the negative. It may only be mentioned that the Bank of Maharashtra had already filed a suit. In that suit, consent terms were filed between the Bank of Maharashtra, the official liquidator and the second respondent. The Maharashtra State Small Scale Industries Development Corporation have not filed any suit for recovery of its claim. Issues Nos. 5 and 6 between the petitioners and the first respondent: It is submitted that time had been given to the first respondent company to repay the amounts due. The only evidence of this moratorium is the letter dated 20th March, 1973 (exhibit 9). By this letter as already stated above, the amounts due under the mortgage dated 29th June, 1964, were to be repaid by 20th December, 1974, and the payments under the charge dated 4th June, 1968, were to be paid by installments. The first installment was payab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no other evidence of any such scheme of reconstruction. The petitioners' witness has denied that there was any scheme for reconstruction. The second respondent has not led any evidence. The first respondent's witness, Vasant Karkhanis, had submitted a letter (exhibit 8) and had stated that this letter was received by the first respondent company in the normal course of business. Such a letter must have been sent by the Bank of Maharashtra and received by the second respondent as the managing director of the first respondent company. However, this is merely a proposal. This would fructify into an arrangement only if it was accepted by the first respondent company. Even otherwise all that this letter states is that the possibility of salvaging the first respondent company would be examined by a competent and independent authority and that the long range working of the company would depend on the result of that study. The letter states that during the period that it will take for this study to be undertaken, the board would be reconstituted. The letter provided that all other directors except the second respondent would resign. By this letter, a managing director was to be appointe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not even an application in the nature of a plaint as contemplated by article 7 of Schedule II to the said Court Fees Act. The Supreme Court has held that an application under section 31(1) is covered by the residuary article 1( c ) of Schedule II to the Bombay Court Fees Act and that it should, therefore, bear a fixed court fee only. In any case the petitioners have paid court fees in a sum of Rs. 15,000 which is the maximum provided under the Bombay Court Fees Act. This issue is, therefore, answered in the negative. Issues Nos. 5, 6 and 7 between the petitioners and the second respondent: It is submitted that the Second respondent has been absolved and released from all liability and that his personal properties have also been released. The second respondent has led no evidence at all. There is no document on record to support such a case. On the contrary, exhibit 8, being the proposal given by the Bank of Maharashtra to the respondents, categorically states that the directors who have guaranteed the advances will not be absolved from their liability and that even the assets held by the family members were not to be disposed of without prior consent from the financial institu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the copy verified in a prescribed manner were not filed with the Registrar within 30 days after the creation of the charge. He has also submitted that these were not done even within the period of further 30 days provided under the proviso to section 125. Before the submission of either side on this point are considered, the evidence in this behalf may be set out. The petitioners as well as the first respondent have led the evidence of one Mr. Subrao G. Pakkhare, who is the company prosecutor working with the Registrar of Companies. This witness admitted that he had no personal knowledge, but that he was deposing from the files and material available with the Registrar of Companies. This witness produced "Form No. 8" in respect of the mortgage dated 29th June, 1964, and the entry pertaining to the registration of the mortgage dated 29th June, 1964. These are exhibits at "O" and "P". The witness also produced "Form No. 8" in respect of the deed of charge dated 4th June, 1968, and the entry pertaining to the registration of the charge dated 4th June, 1968. These are at exhibits "Q" and "R" respectively. The witness then produced "Form No. 8" in respect of the second deed of charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gistrar considers the initial date of submission for the purposes of registration. Thus, on this evidence, the following facts emerge : 1.Form No. 8 in respect of indenture of mortgage dated 29th June, 1964, was filed on 1st July, 1964. Form No. 8 in respect of the second deed of charge dated 4th June, 1968, was filed on 28th June, 1968. They were returned and resubmitted on 6th August, 1968. They were again returned and resubmitted on 15th October, 1968. Form No. 8 in respect of the second deed of charge dated 16th December, 1972, was filed on 3rd January, 1973. 2.Before the court, there is no evidence as to whether the instruments creating the charge or copies verified in the prescribed manner were filed along with Form No. 8. 3.That in respect of the deed of charge dated 4th June, 1968, there were some objections. What the objections were is not known to the court. But all objections were ultimately removed only on 15th October, 1968. On these facts, the submission of Mr. Satyanarayan and Mr. Vaidya has been that in respect of the deed of charge dated 4th June, 1968, there has been non-compliance with the provisions of section 125 of the Companies Act inasmuch as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bond and that, therefore, the proper stamp duty had not been paid. It is submitted by Mr. Satyanarayan and Mr. Vaidya that on exhibit A, the petitioners had paid a stamp duty of Rs. 3,769 whereas in fact they should have paid a stamp duty of Rs. 15,000. It was submitted that in exhibit B, the petitioners had paid a stamp duty of Rs. 8,633 whereas in fact they should have paid stamp duty of Rs. 28,600. It was also submitted that on exhibit C the petitioners had paid stamp duty of Rs. 7,200 whereas in fact they should have paid stamp duty of Rs. 24,000. Mr. Satyanarayan relied upon the authority in the case of Haryana Financial Corporation, Chandigarh v. Depro Foods Ltd. [1982] Tax LR. 2537. In this case, it was held that the financial corporation can claim preference over other creditors only if the proceedings under section 31 had been commenced prior to the liquidation of the company. It was held that all secured creditors including the financial corporation must comply with section 125 of the Companies Act and that in case that they had not so complied, they could not be treated as secured creditors. It was also held that whilst filing a charge under section 125 of the Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars. To that extent, the submission of Mr. Satyanarayan and Mr. Vaidya to the contrary cannot be accepted. Even otherwise, it must be mentioned that under section 130 of the Companies Act at the time of filing of the charge the required particulars have to be given in Form No. 8 and after the registration of the charge the Registrar is to return the instrument to the party. Also the Assistant Registrar has given evidence that if the necessary instrument or a copy thereof had not been supplied, then the charges would not have been registered. There is no reason to disbelieve that evidence. In fact that is the natural course of conduct of that office. The court, however, has before it evidence as regards the stamp duty paid on the instruments and as regards the date of filing of the charges. Taking the question of stamp, I see no substance in the submission of Mr. Satyanarayan and Mr. Vaidya. Under article 40 of the Bombay Stamp Fees Act, a deed of mortgage is to be stamped as if on a bond unless possession is given or agreed to be given under the instrument. The provisions in the deed to which my attention has been drawn by Mr. Satyanarayan do not in any manner give to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of further three months under the proviso to section 125 of the Companies Act. Mr. Bharucha has taken me to a number of authorities on the construction of the term "conclusive evidence" under section 132 of the Companies Act and other identical provisions. Mr. Bharucha relied upon the case of Mechanisations ( Eaglesdiffe ) Ltd., In re [1965] 35 Comp Cas 478 . In this case by two deeds of charges dated 7th May, 1959, and 24th February, 1960, advances were made to a company Mechanisations (Eaglescliffe) Ltd. In the particulars which were submitted to the Registrar for registration only the principal amount was given. No mention was made about payment of interest or the other sums. On the basis of these particulars, the charge was registered and the Registrar issued his certificate again making no mention of the additional sum secured. In respect of the second deed, particulars of the principal amounts as well as the interest were forwarded, but somehow when it was registered, no mention was made of the interest. The company thereafter went into winding up. The mortgagees, viz., N.B.C, claimed as secured creditors for the total sum advanced by them with interest and other p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered even if in fact it was not properly registered. Whilst holding so the court also stated that there appears to be a lacuna in the Act inasmuch as the Act gives protection even when the bases are incorrect and/or might be fraudulent. Mr. Bharucha next relied upon the case of Des Raj, Voluntary Liquidator v. Punjab Financial Corporation [1970] 40 Comp Cas 551 (Punj). In this case, the company had been advanced a sum of Rs. 1 lakh by the Punjab Financial Corporation on the security of a mortgage deed executed by the company on 14th November, 1963. The company went into liquidation and an application was made to the effect that the mortgage was without any legal effect and void because it was not registered within time as required by section 125 of the Companies Act. From the evidence on record in that case, it was ascertained that intimation had been received by the Registrar beyond the period prescribed by section 125 of the Companies Act. The court held that section 132 of the Companies Act provided that the issue of certificate was conclusive evidence that the requirements of this part had been duly complied with. The court held that the "requirement of registration" incl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that it was under those circumstances that it was held that a certificate under section 132 was conclusive evidence. Mr. Satyanarayan submitted that this principle cannot be applied where it has been categorically shown that the provisions of section 125 of the Companies Act as to filing within the period prescribed therein have not been complied with. In my view, this submission of Mr. Satyanarayan is not correct. All the authorities cited above fully support Mr. Bharucha. All of them lay down that a certificate under section 132 is conclusive evidence of the fact that the requirements as to registration have been complied with. In fact, in the cases of Eric Holmes ( Property ) Ltd., In re [1965] 35 Comp Cas 811 (Ch D) and Des Raj v. Punjab Financial Corporation [1970] 40 Comp Cas 551 (Punj), the particulars were not filed in time and the courts still held that it was not open to the courts to go into this question as the certificates were conclusive evidence. It must, however, be admitted that initially I was inclined to accept the submissions of Mr. Satyanarayan and Mr. Vaidya that a certificate could not be held to be conclusive evidence once the contrary is prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All the judgments cited by Mr. Bharucha and set out hereinabove show that it has been held by all courts that a certificate under section 132 of the Companies Act must be held to be conclusive evidence. Thus, even though initially I may have been inclined to take a different view, judicial discipline requires that this court follow the trend of judgments. For this reason also I hold that a certificate under section 32 is conclusive evidence. Under these circumstances it will have to be held that the requirements as to registration including requirements as to filing within time have been complied with and that it is now not open to the official liquidator to contend to the contrary. It must also be mentioned that Mr. Bharucha had also submitted that in any event the provisions of section 46 ( b ) read with sections 31 and 32 of the State Financial Corporations Act override the provisions of the Companies Act including section 125 of the Companies Act. In support of his contention Mr. Bharucha had relied upon the cases in Maharashtra State Financial Corporation v. Official Liquidator, Sidhu Tyres P. Ltd. [1988] 64 Comp Cas 641 (Bom), Kerala Financial Corporation v. C. K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nforce their claim against a surety in such a petition. The Act, therefore, now specifically provides that petitions under section 31 can be maintained even against the surety. There is, therefore, no substance in this contention of Mr. Vaidya. Mr. Vaidya next submitted that the second respondent is a 78 year old man who now has only a small house in Pune. He submits that the court should have sympathetic consideration and should direct the petitioners to proceed against the property of the second respondent only after first proceeding against the properties of the first respondent. Mr. Bharucha makes a statement that the petitioners shall proceed first only against the property of the first respondent and that they shall proceed against the property of the second respondent only in the event of their not being able to fully recover their dues out of the sale of the properties of the first respondent. In view of this statement, I am not passing any orders in this behalf. Under the circumstances, the petition is made absolute in terms of prayer ( a ). The petitioners to give to the official liquidator prior intimation of all steps taken for sale of the property and to appropriat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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