1983 (7) TMI 337 - HC - Companies Law

Court affirms validity of mortgage decree against company despite winding-up order.

Suryakant Natvarlal Surati and Ors. Versus Kamani Bros. P. Ltd. and Ors.

The court upheld the validity of a mortgage decree obtained by trustees of a Gratuity Fund against a company, entitling them to the mortgage on the ... - Issues:1. Validity of a mortgage decree against a company in a winding-up scenario.2. Applicability of Section 125 of the Companies Act to a mortgage decree obtained prior to winding up.3. Interpretation of the rights of a decree holder in a mortgage suit against a company.Analysis:Issue 1: Validity of Mortgage DecreeThe plaintiffs, trustees of a Gratuity Fund, filed a suit against a company for realization of amounts due under a mortgage created by deposit of title deeds. A decree was passed in favor of the plaintiffs, entitling them to the mortgage on the property and declaring the sums due. The decree allowed for the sale of the mortgaged property if the defendants defaulted in payment.Issue 2: Applicability of Section 125 of the Companies ActFollowing a winding-up order against the defendant company, the applicants contended that the unregistered mortgage would be void against the official liquidator and creditors under Section 125 of the Companies Act. Section 125 requires registration of certain charges to be valid against the liquidator and creditors. The key question was whether a mortgage decree obtained before winding up could be affected by Section 125.Issue 3: Interpretation of Decree Holder's RightsThe court analyzed whether the mortgage decree, being distinct from the mortgage itself, would be void under Section 125. The court held that a decree enforcing a charge, passed prior to winding up, was not governed by Section 125. The rights under the mortgage were crystallized in the decree, which was validly obtained before the winding-up petition, making it enforceable against the company.The court referenced a Kerala High Court judgment to support the view that a decree for sale of a company's property cannot be equated to a charge created by the company. Additionally, the court highlighted the mortgagor's right to redeem the mortgage until extinguished by the act of parties or a court decree. The court dismissed the chamber summons, emphasizing that the decree was not collusive or unconscionable, and there were no grounds to challenge its validity.In conclusion, the court held that the mortgage decree remained valid and enforceable against the company, rejecting the application to set aside the decree. The judgment clarified the distinction between a mortgage decree and a charge under the Companies Act, affirming the rights of the decree holder in a pre-winding-up scenario.