1938 (10) TMI 13 - HC - Indian Laws

Invalid debentures in liquidation case due to lack of registration under Section 59.

Tenneti Viswanadham Versus M.S. Menon, Official Liquidator of the Swarajya Printing And Publishing Company Limited And Anr.

The court held that the debentures issued by a company in liquidation were invalid due to lack of registration, as they created a mortgage requiring ... - Issues:1. Validity of debentures issued by a company in liquidation.2. Whether debenture holders are entitled to rank as secured creditors.3. Interpretation of Sections 59 and 100 of the Transfer of Property Act regarding registration requirements for debentures.Detailed Analysis:1. The case involved the issuance of debentures by a company in liquidation, where the debentures were issued without a debenture trust deed. The Official Liquidator contended that the wording of the debentures created a mortgage, requiring registration under Section 59 of the Transfer of Property Act. The court held that the debentures were invalid due to lack of registration, agreeing with the Official Liquidator's argument that a mortgage had been created, rendering the debentures invalid.2. The court acknowledged that the debentures were indeed invalid for want of registration. While the Official Liquidator's argument was accepted, the court based its decision on the provisions of Section 100 of the Transfer of Property Act in conjunction with Section 59. The court emphasized that registration was necessary even if only a charge was created, as per the mentioned sections.3. Section 59 of the Transfer of Property Act mandates registration for a simple mortgage, regardless of the amount secured. The court highlighted that a simple mortgage could only be effected by a registered instrument, as delivery of the property was not a valid method. Section 100 of the Act defines a charge on immovable property and extends the provisions of a simple mortgage to such charges. The court emphasized that registration was essential for a charge, as per the amended Section 100, which applies all relevant provisions unless incompatible.4. The court analyzed the impact of the 1929 amendment to Section 100, which made all provisions of the Transfer of Property Act applicable to charges unless incompatible. Registration was deemed necessary for charges, and Section 59 was to be read as supplemental to the Registration Act. The court rejected arguments attempting to exclude Section 59 from the purview of Section 100, emphasizing the compatibility of registration requirements with charges. The judgment cited a previous case but clarified its inapplicability to the current matter.In conclusion, the court held the debentures invalid due to non-registration, dismissing the appeal and awarding costs to the Official Liquidator.