Unregistered company charge remains void against liquidator despite pre-winding-up sale decree, and leave proceedings do not bar later objection.

A company charge created by equitable mortgage and not registered remains void against the official liquidator on winding up, even where a decree for sale was passed before the winding-up order. The earlier leave proceedings under section 446 did not decide the validity of the charge, so constructive res judicata could not bar a later objection in execution. A decree enforcing the mortgage did not extinguish the underlying unregistered security or create a new charge immune from section 125. The mortgagees were therefore restrained from proceeding with sale in execution.

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Issues: (i) Whether the failure of the official liquidator to object at the stage of seeking leave under section 446 barred a later objection to execution on the ground of an unregistered charge. (ii) Whether an unregistered charge created by an equitable mortgage remains void against the official liquidator notwithstanding a decree for sale passed before the winding-up order.

Issue (i): Whether the failure of the official liquidator to object at the stage of seeking leave under section 446 barred a later objection to execution on the ground of an unregistered charge.

Analysis: An order under section 446 only grants leave to proceed against the company in liquidation and does not adjudicate the applicant's substantive rights or claims. The rights are determined in the subsequent proceeding, and even if leave is refused, the claim remains provable in liquidation. Since the earlier leave application did not decide the validity of the charge, the basis for constructive res judicata was absent.

Conclusion: The objection based on constructive res judicata failed.

Issue (ii): Whether an unregistered charge created by an equitable mortgage remains void against the official liquidator notwithstanding a decree for sale passed before the winding-up order.

Analysis: Section 125 makes every charge created by a company and not registered in the prescribed manner void against the liquidator. The decree for sale did not extinguish the underlying unregistered charge; on its construction, the charge was kept alive until redemption or sale. A decree enforcing the mortgage did not create a new charge immune from section 125, and the unregistered security therefore continued to be hit by the statutory invalidity against the liquidator.

Conclusion: The unregistered charge was void against the official liquidator, and the mortgagees could not proceed with sale in execution.

Final Conclusion: The appeal succeeded, the order refusing relief was set aside, and further steps for sale of the mortgaged property in execution of the decree were restrained.

Ratio Decidendi: A charge created by a company that is unregistered under section 125 remains void against the liquidator on winding up, and a pre-winding-up decree for sale does not by itself displace that statutory invalidity where the charge is kept alive by the decree.

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