Registration of charge produces constructive notice to later acquirers, so subsequent transfers cannot defeat the prior mortgage; remedies lie against sale proceeds.

Registration of a charge under the Companies Act operates as constructive notice to subsequent acquirers, so transfers after registration cannot defeat the prior registered mortgage; such transfers at best convey the equity of redemption. Purchasers must make reasonable inquiries into the vendor's title and power to sell where title has vested in a company, and failure to seek statutory validation leaves acquisitions subject to the prior charge. Remedies for subsequent purchasers are limited to claims against sale proceeds or by redeeming the mortgage. The Chamber Summons seeking to set aside the court order was dismissed.

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Issues: (i) Whether the applicants' purchase and possession of the disputed property and the subsequent actions of the court receiver/sale affect or defeat the prior mortgage/charge claimed by the plaintiff; and whether the Chamber Summons seeking to set aside the court's order of 13-4-2006 should be allowed.

Analysis: The Court examined the documentary record showing that an indenture of trust and mortgage dated 11-6-1999 had been registered and that the charge was registered under section 125 of the Companies Act prior to the alleged sale by the company. The Court considered the effect of registration of a charge under section 125 together with section 126 which deems persons acquiring the property to have notice of the charge from the date of registration. The Court analysed the aspects of actual and constructive notice under section 3 of the Transfer of Property Act and the obligations of a purchaser to make reasonable inquiries as to title, including inquiries as to the vendor's power to sell when title had vested in a company. The Court also considered the applicants' failure to seek validation under section 538 of the Companies Act and their inability to show that the plaintiff's mortgage was invalid. On the facts, even if the transfers to the first purchasers and then to the applicants were assumed valid, those transfers were subject to the plaintiff's prior registered mortgage and could at best convey only the equity of redemption to the applicants. The Court observed that the applicants, by reason of the registration of the charge and the conveyance chain, could not be treated as bona fide purchasers without notice and that their remedy, if any, lay against sale proceeds or by redeeming the mortgage.

Conclusion: The Chamber Summons is dismissed. The Court held that the applicants' rights, if any, are subject to the plaintiff's prior mortgage; the applicants at best acquired the equity of redemption and remain entitled to seek enforcement of any rights against sale proceeds or by redemption. The sale in favour of the auction purchaser is confirmed but the operative effect and stay timings are as ordered by the Court.

Ratio Decidendi: Registration of a charge under section 125 of the Companies Act renders subsequent acquirers deemed to have notice of that charge under section 126, and therefore subsequent transfers (even if otherwise valid) cannot defeat the prior registered mortgage except insofar as may be permitted by law (including validation under section 538) or by enforcement against sale proceeds; prudent purchasers must investigate the title of the vendor and the vendor's vendor when title has vested in a company.

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