Extension of time for registration under Section 120 allowed for inadvertence, but protects only prior secured rights, not unsecured creditors.

Section 120(1) permits the court to extend the time for registration of a mortgage or charge where omission was accidental, due to inadvertence, or for some other sufficient cause, or where registration omission is not prejudicial or where it is just and equitable; any one ground suffices and the solvency of the company is not determinative. Subsection (2) prevents an extension from prejudicing rights acquired in respect of the particular property prior to actual registration, thereby protecting prior secured rights but excluding unsecured creditors even if winding up has intervened; extension was granted on that basis.

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Issues: Whether the court under section 120 of the Indian Companies Act may, on ground of inadvertence or other sufficient cause, extend the time for registration of a mortgage or charge after the statutory period has lapsed and a winding up order has intervened.

Analysis: The Court examined section 120(1), which permits the court to extend time where the omission to register a mortgage or charge was accidental, due to inadvertence, or for some other sufficient cause, or where registration omission is not of a nature to prejudice creditors or shareholders, or where it is just and equitable to grant relief. The Court held that these grounds are disjunctive and any one of them suffices for relief. The judgments from English authorities were reviewed; earlier practice of adding a proviso protecting rights acquired prior to actual registration was considered. The Indian Companies Act now contains subsection (2) (introduced by the Companies (Amendment) Act, 1936) which expressly provides that an order extending time shall not prejudice rights acquired in respect of the property concerned prior to actual registration. The Court concluded that subsection (2) confines the protection of such extension to rights in respect of the particular property (i.e., secured rights) and excludes unsecured creditors even where winding up has intervened. The solvency or insolvency of the company is not decisive; what matters is whether omission was due to inadvertence or other sufficient cause and the statutory saving in subsection (2) preserves rights acquired prior to registration.

Conclusion: The omission to register was due to inadvertence or other sufficient cause and, under section 120(1) of the Indian Companies Act the Court may extend the time for registration; subsection (2) ensures that such extension does not prejudice rights acquired in respect of the property prior to actual registration, and unsecured creditors are not entitled to protection by such an order. The appeal is allowed and time for registration is extended.

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