Attachment Does Not Create Charge Over Company Assets in Liquidation Without Company Court Leave

An attachment in revenue recovery proceedings does not by itself create an enforceable charge over a company's property in liquidation. Unregistered charges under the Companies Act, 1956 remain void against the liquidator and creditors, and the scheme of the Companies Act prevails unless a special statute clearly overrides it. The Kerala Revenue Recovery Act, 1968 did not convert the dues into Government dues, so section 537(2) did not apply. In the absence of a clear overriding provision, the creditor was required to proceed under section 446 and obtain the company court's leave before sale of the attached properties.

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Issues: Whether an attachment made in revenue recovery proceedings created a charge enforceable against a company in liquidation so as to avoid the requirements of registration under the Companies Act and to permit sale of the attached properties without leave of the company court.

Analysis: An attachment does not by itself create a charge in the property. Section 125 of the Companies Act, 1956 applies to charges created by the company and, if unregistered, renders them void against the liquidator and creditors. The Court distinguished attachment from a decree-based security and held that proceedings to realise assets of a company in liquidation must yield to the scheme of the Companies Act unless a special statute clearly provides otherwise. The Kerala Revenue Recovery Act, 1968 did not convert the appellant's dues into Government dues, and section 537(2) was therefore inapplicable. In the absence of a clear overriding provision, the creditor had to proceed consistently with section 446 of the Companies Act, 1956 and obtain the company court's leave.

Conclusion: The attachment did not create an enforceable charge against the company in liquidation, and leave of the company court was required; the appellant's challenge failed.

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