Extension of time for registration cannot alter creditors' accrued rights once winding up and a liquidator have intervened.

An application under section 120 to extend time for registration of mortgages and collateral instruments was refused because the intervening winding up and appointment of a liquidator vested accrued rights in unsecured creditors and created a statutory trust for pari passu distribution; although the omission to register was inadvertent, the statutory protection preserving rights acquired prior to registration prevents an extension from altering the liquidator's or creditors' rights, rendering any order ineffective. The operative effect is that courts will not grant extensions under these facts where the extension cannot change the accrued distribution rights of the general body of creditors.

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Issues: Whether the Court should, under section 120 of the Indian Companies Act, extend the time for registration of mortgages and collateral instruments executed by the company after a winding up order has been made and a liquidator appointed.

Analysis: Section 120 permits extension of time for registration if omission was accidental, due to inadvertence, or for other sufficient cause, and confers wide judicial discretion to impose terms. Sub-section (2) of section 120 preserves rights acquired in respect of the charged property prior to actual registration. On a winding up, unsecured creditors acquire accrued rights to a ratable share of the company's assets and the assets are subject to a statutory trust for distribution pari passu. An order extending time made after winding up would not enable the applicant to enforce the unregistered charge against the liquidator or to obtain priority over creditors; the statutory condition in section 120(2) renders such an order futile where rights of the general body of creditors have accrued. While the omission to register was found to be inadvertent (negligence without bad faith), the intervening winding up and appointment of a liquidator mean that an extension would be ineffective to alter the creditors' acquired rights.

Conclusion: Application under section 120 of the Indian Companies Act for extension of time to register the mortgages and collateral instruments is dismissed.

Ratio Decidendi: Where a winding up order has intervened and unsecured creditors have acquired rights to the company's assets, the court will not grant an extension of time for registration under section 120 if the extension would be ineffective to alter the rights accrued to the liquidator and the general body of creditors.

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