Proprietary charge does not arise from mere advance absent express trust or charge; claimant remains unsecured creditor.

Applicant's advance did not create a proprietary charge on the flour mill because the agreement contains no express trust or stipulation creating a charge; accordingly the proprietary claim is rejected. The agreement's promise of a "super-preferential claim" does not confer statutory preferential status beyond the statutory list, and subrogation is unavailable where the original movable security (grain) was consumed; accordingly preferential and subrogation claims are rejected and the applicant remains an ordinary unsecured creditor entitled to prove his debt before the Official Liquidator.

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Issues: (i) Whether the applicant (Dr. Tug) has a charge over the flour mill purchased with funds he advanced; (ii) Whether the applicant is entitled to a preferential claim (including by subrogation) in liquidation under Section 230 of the Indian Companies Act.

Issue (i): Whether the applicant has a charge over the flour mill.

Analysis: The agreement produced (an uncertified copy agreed to be correct) contains no provision that money advanced was to be kept in trust or that the applicant would have a charge on any immovable purchased with the funds; it instead provides for a "super-preferential claim over the assets of the Company" in the event of liquidation. No legal authority was shown establishing that a creditor who advances money thereby acquires a charge over property acquired with those funds in the absence of an express trust or charge.

Conclusion: The applicant does not have a charge over the flour mill; the claim to a proprietary charge is rejected.

Issue (ii): Whether the applicant is entitled to a preferential claim, including by subrogation, in respect of the sums advanced.

Analysis: It is common ground that the applicant is not among those entitled to preferential treatment under Section 230 of the Indian Companies Act. The agreement's language does not create statutory preferential status beyond what the Act provides. As to sums used to discharge a creditor secured by a mortgage of movable property (grain), subrogation into the position of that creditor is not available where the security (grain) has been consumed and is no longer extant.

Conclusion: The applicant is not entitled to preferential treatment under Section 230; claims based on subrogation are rejected. The applicant remains an ordinary unsecured creditor entitled to prove his debt before the Official Liquidator.

Final Conclusion: The Court dismissed the applicant's claims both as to a proprietary charge and as to any preferential entitlement; the applicant may prove his claim as an ordinary creditor before the Official Liquidator and seek the Court's intervention in the ordinary course if disputed.

Ratio Decidendi: In the absence of an express trust or stipulation creating a charge, an advance of money does not create a proprietary charge on property acquired with that money; preferential status in liquidation is determined by the statutory list (Section 230 of the Indian Companies Act) and cannot be founded on subrogation where the original security consisted of movable property that has been consumed.

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