Charge registration requirement prevents post-winding-up extensions; bank's mortgage unenforceable and sale allowed free of encumbrance.

A charge unregistered within the prescribed period is void against the Liquidator and creditors, and a court will not grant an extension after winding-up if it would prejudice existing creditors; accordingly an ex parte extension was reviewable and recallable by the District Judge under civil procedural and inherent powers, but the application for extension under section 120 is dismissed as ineffective once liquidation has commenced. The bank remains a creditor for the loan amount but its claim to preferential status is premature and must be determined upon proof and admission; the Liquidator may sell the property free of the bank's encumbrance.

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Issues: (i) Whether the District Judge could review and recall his ex parte order extending time for registration under section 120 of the Companies Act; (ii) Whether the Court can grant an extension of time for registration under section 120 of the Companies Act after the company has gone into liquidation; (iii) Whether the Chartered Bank can be treated as a preferential creditor in the liquidation proceedings.

Issue (i): Whether the District Judge had power to recall his order dated November 29, 1935, extending time for registration under section 120 of the Companies Act.

Analysis: The District Judge exercised jurisdiction as a Court of Civil Jurisdiction and proceedings were governed, as far as applicable, by the Code of Civil Procedure. Section 141 of the Code of Civil Procedure makes the procedural provisions of the Code applicable to proceedings in Courts of Civil Jurisdiction. The order was obtained ex parte without disclosure of the company having gone into liquidation; the District Judge, having regard to procedural applicability and inherent powers, was competent to review and recall his earlier order.

Conclusion: The District Judge was competent to review and recall his earlier order and his recall of the November 29, 1935 order is valid.

Issue (ii): Whether an extension of time under section 120 of the Companies Act can be granted after the company has gone into liquidation so as to validate the mortgage against the Liquidator and creditors.

Analysis: Section 109 provides that a charge not registered within the prescribed time is void against the Liquidator and any creditor. Authorities applying analogous provisions show that granting extension after winding-up would prejudice the general body of creditors because, on winding-up, creditors obtain rights to a rateable share of the company's assets as at the date of winding-up. Precedents establish that extensions granted post-winding-up cannot validly prejudice existing creditors and that orders extending time should protect rights acquired prior to registration; where winding-up intervenes the usual proviso is ineffective to protect creditors.

Conclusion: No extension of time under section 120 can be granted after the company has gone into liquidation; the Chartered Bank's application for extension is dismissed.

Issue (iii): Whether the Chartered Bank is entitled to be treated as a preferential creditor despite its mortgage being unenforceable in liquidation proceedings.

Analysis: Although the mortgage is unenforceable against the Liquidator and general creditors because of failure to register within the prescribed time, the bank remains a creditor to the extent of the loan advanced. The question of preferential status requires proof and admission of the claim in the schedule of creditors and cannot be finally determined at the present interlocutory stage.

Conclusion: The Chartered Bank is to be treated as a creditor to the extent of its loan but the claim for preferential status is premature and must be determined when its claim is proved and admitted.

Final Conclusion: The Liquidator's application for permission to sell the property free of the Chartered Bank's encumbrance is allowed; the Chartered Bank's application for extension of time is dismissed; issues regarding preferential status are deferred for determination on proof of the claim.

Ratio Decidendi: A charge not registered within the statutory period specified by section 109 is void against the Liquidator and creditors, and a Court will not grant an extension under section 120 after winding-up in a manner that would prejudice the rights of existing creditors.

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