Court-created security need not be registered under company or registration law when it arises from judicial directions, not company action.
A security conferred by a court order is not a charge created by a company for the purpose of registration under the Companies Act, 1956, because the right arises from judicial direction rather than the company's own act. A court order is also not a non-testamentary instrument requiring registration under section 17(1)(b) of the Registration Act, 1908. The compromise-based exception in section 17(2)(vi) did not apply on these facts, as no written compromise under Order XXIII Rule 3 was shown. The security was therefore treated as available for satisfaction of the decree.
Issues: (i) whether security created in favour of the applicant by a court order required registration under section 125 of the Companies Act, 1956; (ii) whether the court order creating the security was a non-testamentary instrument requiring registration under section 17(1)(b) of the Indian Registration Act, 1908; (iii) whether the order, being by consent, attracted section 17(2)(vi) of the Indian Registration Act, 1908 and Order XXIII, Rule 3 of the Code of Civil Procedure, 1908.
Issue (i): whether security created in favour of the applicant by a court order required registration under section 125 of the Companies Act, 1956.
Analysis: Section 125 applies to charges created by a company. The security available to the applicant after the later consent order was not a charge created by any volitional act of the company, but a benefit conferred by the court's order. The original security furnished pursuant to an earlier order might have attracted section 125 if independently enforced, but the applicant's present right to proceed against it arose only from the subsequent order settling the claim and preserving the security for execution of that decree.
Conclusion: The security did not require registration under section 125 of the Companies Act, 1956, and the objection based on non-registration failed.
Issue (ii): whether the court order creating the security was a non-testamentary instrument requiring registration under section 17(1)(b) of the Indian Registration Act, 1908.
Analysis: A court order is not a non-testamentary instrument within the meaning of section 17(1)(b). The statutory language is directed to instruments that themselves create or purport to create rights in immovable property, whereas the present security arose from judicial directions and not from an instrument executed by the parties as such.
Conclusion: The order did not require registration under section 17(1)(b) of the Indian Registration Act, 1908.
Issue (iii): whether the order, being by consent, attracted section 17(2)(vi) of the Indian Registration Act, 1908 and Order XXIII, Rule 3 of the Code of Civil Procedure, 1908.
Analysis: The exception in section 17(2)(vi) applies to decrees or orders made on compromise that comprise immovable property other than the subject-matter of the suit. On the facts, the security related to the property already brought within the earlier proceedings, and no written compromise satisfying Order XXIII, Rule 3 was shown. The court therefore rejected the contention that the order was unenforceable for want of registration under that provision.
Conclusion: Section 17(2)(vi) of the Indian Registration Act, 1908 and Order XXIII, Rule 3 of the Code of Civil Procedure, 1908 did not render the security unenforceable.
Final Conclusion: The applicant was entitled to treat the security as available for satisfaction of the decree, and the official liquidator was directed to pay Rs. 50,000 to the applicant from the liquidation funds.
Ratio Decidendi: A security conferred by a court order, and enforceable only by virtue of that order, is not a charge created by a company for the purpose of company registration provisions, nor is a court order itself a registrable non-testamentary instrument merely because it affects immovable property.
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