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Issues: (i) whether the District Judge had power to review or vacate the ex parte order extending time for registration of the mortgage under the Companies Act; (ii) whether extension of time for registration could be granted after the company had gone into liquidation and the mortgage could still be enforced in the winding-up; and (iii) whether the mortgagee bank could claim to be treated as a preferential creditor at that stage.
Issue (i): whether the District Judge had power to review or vacate the ex parte order extending time for registration of the mortgage under the Companies Act.
Analysis: The order under section 120 was made by the District Judge acting as a court of civil jurisdiction. The procedure in the Code of Civil Procedure applied by virtue of section 141, and the court also possessed inherent power to set aside an order obtained without full disclosure. The earlier ex parte order had been procured without notice to the liquidator and material facts had been withheld.
Conclusion: The District Judge had jurisdiction to recall the ex parte order.
Issue (ii): whether extension of time for registration could be granted after the company had gone into liquidation and the mortgage could still be enforced in the winding-up.
Analysis: Under section 109, an unregistered mortgage was void against the liquidator and creditors unless registered within time. Once winding-up intervened, the rights of creditors had accrued and the assets became available for rateable distribution. An unconditional extension after liquidation would prejudice those accrued rights. The cancellation of the registration certificate followed from the recall of the extension order, and no valid registration within the prescribed time survived.
Conclusion: No further extension of time could be granted, and the mortgage could not be enforced against the liquidator in the winding-up.
Issue (iii): whether the mortgagee bank could claim to be treated as a preferential creditor at that stage.
Analysis: The bank's claim as creditor had first to be proved and admitted when the schedule of creditors was prepared. Only thereafter could any question of preferential status be considered. The request at that stage was premature.
Conclusion: The bank was not entitled to be treated as a preferential creditor at that stage.
Final Conclusion: The liquidator was entitled to sell the property free from the bank's encumbrance, the bank's request for extension of time failed, and its alternative claim to preferential status was left to be pursued, if at all, in the course of proof of debts.
Ratio Decidendi: A charge or mortgage not registered within the statutory time cannot be validated by an extension granted after winding-up where such extension would prejudice accrued creditor rights, and an order obtained ex parte without full disclosure may be recalled by the civil court that made it.
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