Pledge by endorsement of promissory notes was valid security and fell outside the companies law registration requirement.

Promissory notes endorsed and delivered as security for repayment were treated as a pledge because the arrangement provided for transfer by endorsement, the holder's right to realise the notes, and re-transfer on payment of the balance due. The court treated the notes as movable property capable of bailment for security, and held that endorsement alone did not convert the transaction into a mortgage. As a pledge, it fell outside the registration requirement applicable to mortgages other than pledges under the Companies Act, 1913, so the transaction was valid without registration.

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Issues: Whether the transaction by which promissory notes were endorsed and delivered as security for a debt constituted a pledge so as to fall outside the registration requirement of section 109(1)(e) of the Indian Companies Act, 1913.

Analysis: The agreement showed that the notes were transferred by endorsement to secure repayment, that the appellant was entitled to realise them, and that the notes were to be re-transferred on payment of the balance due. Promissory notes were treated as goods, and the transaction satisfied the essentials of bailment for security within the meaning of the Contract Act. The mere fact of endorsement did not necessarily convert the transaction into a mortgage, because section 109(1)(e) itself contemplates a mortgage that is also a pledge and excludes pledges from the registration requirement.

Conclusion: The transaction was a valid pledge and did not require registration under section 109(1)(e); the appellant succeeded.

Ratio Decidendi: Where movable property is delivered and held as security with the essential incidents of bailment and possession-based security, the transaction is a pledge notwithstanding endorsement, and it is not void for want of registration under the companies law provision governing mortgages other than pledges.

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