Court order can override non-registration of charge where security merges into enforceable decree, requiring reconsideration of liquidation claims.

An unregistered contractual charge is ordinarily void against the liquidator and creditors under section 125 of the Companies Act, 1956, but that rule does not apply where the security is created by, or merges into, a court order or decree. Here, the tribunal's order gave the claimant an enforceable right to recover and proceed against specified properties, so the earlier unregistered charge was treated as having merged into the order after the payment period expired. The claim could not therefore be rejected solely for non-registration, and the official liquidator was directed to reconsider the claims and distribution ratio under sections 529 and 529A.

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Issues: Whether the applicant's claim could be treated as that of a secured creditor despite non-registration of charge, and whether the tribunal's order displaced the requirement of registration under section 125 of the Companies Act, 1956 for purposes of distribution under sections 529 and 529A.

Analysis: Section 125 renders an unregistered charge void against the liquidator and creditors where the security remains a contractual charge. However, where the charge is created by, or merges into, an order or decree of court, section 125 has no application. The tribunal's order did not merely preserve the earlier unregistered security as such; it conferred an enforceable right to recover and to proceed against the specified properties, and the unregistered charge was held to have merged into the court's order after the period fixed for payment. On that footing, the claim could not be rejected merely because the charge had not been registered with the Registrar of Companies. The official liquidator was therefore required to re-examine the claims and determine the distribution ratio in the light of the legal position.

Conclusion: The applicant's objection was accepted in part, and the claim could not be denied solely on the ground of non-registration of charge; the official liquidator was directed to reconsider the claims and distribution ratio accordingly.

Ratio Decidendi: Where a court decree or order creates or absorbs the security, the statutory requirement of registration of charge under section 125 does not apply, and the resulting claim cannot be treated as void against the liquidator merely for want of registration.

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