Assignment of Debt upheld despite non registration; secured creditor entitled to funds representing proceeds of the debt.

An instrument dated 24 April 1939 effected an assignment/sub mortgage of a debt; the court held that non-registration under the Registration Act did not destroy the assignment of the debt or proceeds, distinguishing efficacy of the debt assignment from registration of security over immovable property. Delivery of particulars to the registrar within the statutory period and subsequent issuance of a certificate meant failure under the companies registration provision did not avoid the charge as against the liquidator and creditors. Consequently the secured bank was entitled to be paid from funds deposited in court to satisfy its secured claim.

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Issues: (i) Whether non-registration under Section 17 of the Indian Registration Act invalidated the sub-mortgage of 24th April, 1939 so as to defeat the assignee's rights in respect of the debt; (ii) Whether failure to complete registration with the Registrar of Joint Stock Companies under Section 109 of the Indian Companies Act avoided the charge as against the liquidator and creditors; (iii) Whether the plaintiffs (Bank of Bihar) were entitled to payment out of the sum of Rs. 50,000 deposited in Court representing proceeds of the debts.

Issue (i): Whether non-registration under Section 17 of the Indian Registration Act defeated the assignee's rights in respect of the debt.

Analysis: The instrument of 24th April, 1939 assigned the debt due to the Benares Bank to the Bihar Bank. The Court analysed authorities establishing that non-registration may invalidate a charge as a security over immovable property but does not necessarily prevent transfer or assignment of the underlying debt or actionable claim. The Court relied on precedent distinguishing the efficacy of an assignment of the debt itself from the efficacy of any security over immovable property.

Conclusion: Non-registration under Section 17 did not destroy the assignment of the debt; the Bihar Bank retained a valid charge/assignment over the debt and proceeds thereof in its favour.

Issue (ii): Whether non-compliance with Section 109 of the Indian Companies Act avoided the charge as against the liquidator and creditors.

Analysis: The Court examined the chronology of delivery of particulars to the Registrar within the statutory period, subsequent disputes over fee payment, and ultimate registration and certificate under Section 114. It applied the distinction that section 109 penalises failure to send particulars rather than mere registrar delay, and noted that particulars were lodged within twenty-one days; the Registrar later issued a certificate. The Court considered authorities on the effect of irregularities and on the registrar's role, and observed that, given delivery of particulars and later certificate, the liquidator could not successfully challenge the mechanical steps of registration.

Conclusion: The sub-mortgage was not avoided as against the liquidator and creditors by Section 109 in the circumstances; the charge over the debt (and proceeds) remained valid and subsisting.

Issue (iii): Whether the plaintiffs were entitled to be paid out of the Rs. 50,000 deposited in Court representing realization of the debts.

Analysis: The parties had compromised so that the disputed rights in the mortgaged property were represented by the Rs. 50,000 in Court. The Court treated the question as one of distribution of those funds, applying the conclusions on Issues (i) and (ii) that the Bihar Bank held a valid charge over the debt and its proceeds. The Court clarified that the plaintiffs had not effectively abandoned their security claim and that the fund in Court should be applied to satisfy the secured claim.

Conclusion: The plaintiffs (Bank of Bihar) are entitled to payment out of the Rs. 50,000 standing in Court of the sum found due to them (Rs. 41,559-11-9 with interest and costs as ordered).

Final Conclusion: The sub-mortgage of 24th April, 1939 operated as a valid and subsisting assignment/charge over the debt and its proceeds despite defects as to registration of the security over immovable property and notwithstanding the registrar's delay; accordingly the plaintiffs are entitled to be paid the secured amount out of the funds in Court and the decree below is varied to give effect to that entitlement.

Ratio Decidendi: An unregistered charge that fails as a security over immovable property does not necessarily defeat a valid assignment of the underlying debt; where particulars of a charge are delivered within the statutory period and a certificate of registration is subsequently issued, the charge as against the debt and its proceeds may remain valid against a company's liquidator and creditors.

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