Security assignment of book-debts treated as a mortgage, and unregistered documents were ineffective against the liquidator.

An assignment of book-debts made as security for an overdraft was treated as a transfer of an actionable claim under Section 130 of the Transfer of Property Act, but its governing character was a security transaction. Because Section 134 contemplates a debt transferred to secure another debt and leaves any residue with the transferor, the arrangement was in substance a mortgage of the debt. It therefore fell within the class of mortgage or charge on book-debts requiring registration under Section 109(d) of the Companies Act. As the documents were unregistered, the security was ineffective against the liquidator.

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Issues: Whether an assignment of book-debts by way of security for an overdraft constituted a mortgage or charge requiring registration, and if unregistered, whether it was void against the liquidator.

Analysis: The transfer was treated as an assignment of an actionable claim under Section 130 of the Transfer of Property Act, but the governing character of the transaction was its use as security for an existing debt. Section 134 of that Act contemplates a debt transferred for securing another debt and leaves the residue, if any, to the transferor, showing that such a transaction is in substance a mortgage of the debt. Once the assignment was found to be by way of security, it fell within the class of mortgage or charge on book-debts dealt with by Section 109(d) of the Companies Act. The documents were therefore required to be registered, and the absence of registration rendered the security ineffective against the liquidator.

Conclusion: The assignment was a mortgage by way of security and, being unregistered, was void against the liquidator.

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