AI Drafter 
TaxTMI 
TaxTMI 
1955 (5) TMI 12
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....h, 1953, the company executed a further mortgage of S. S. Ramkrishna then known as S. S. Orsa in favour of the petitioner to secure the repayment of the said sum. By an instrument in writing dated the 5th June, 1953, the company executed a collateral agreement in respect of the said mortgages. The mortgages dated the 9th January, 1953, and the 2nd March, 1953, were duly registered under the provisions of the Merchant Shipping Act. The several mortgages and instruments were not registered in accordance with section 109 of the Indian Companies Act and have not been entered in the register of mortgages and charges kept by the Registrar of Joint Stock Companies. Neither the original mortgages and instruments nor attested copies thereof made out in the prescribed manner were filed with the Registrar for registration in accordance with the section. Non-compliance with the statutory provisions was due to ignorance of law and the inexperience of the officers of the petitioner. I am satisfied that the omission to register was due to the negligence and carelessness of such officers. I am also satisfied that such negligence and carelessness were not actuated by bad faith or by any fr....
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....st the liquidator, and against any creditor, and it leaves the security to stand as against the company while it is a going concern. It does not make the security binding on the liquidator as successor of the company." : Per Phillimore L.J. in In re Monolithic Building Co., Tacon v. Monolithic Building Co. [1915] 1 Ch. 643, 667. In spite of the generality of the expression "any creditor", an ordinary unsecured creditor of the company cannot avoid the mortgage, for he has no enforceable right either against the mortgagee or against the property comprised in the mortgage. Only a creditor of the company who has acquired a right against the property may intervene and avoid the mortgage, e.g., where he has a charge over the property or where the company is in liquidation and he has acquired a right to the ratable distribution of the assets of the company : In re Ehrmann Brothers Ltd. [1906] 2 Ch. 679, 708-9 On the assumption that section 109 requires registration of the instruments dated the 5th January, 1953, 9th January, 1953, 2nd March, 1953, and the 5th June, 1953, the security comprised therein has now become void against the liquidator and the creditors of the company in liquid....
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....r motive: In re Kris Cruisers Ltd. [1949] 1 Ch. 138, 141, 142 The section confers a wide judicial discretion. In exercising this discretion it is not material to consider (a) the solvency or insolvency of the company (b) the presence or absence of any judgment against the company and (c) the pendency of a Winding up petition : In re M.I.G. Trust Ltd. [1933] 1 Ch. 542 ; In re Kris Cruisers Ltd. [1949] Ch. 138 ; 19 Comp. Cas. 134 Even if the petitioner makes out a condition of relief the court is not bound to extend the time and may decline to do so in appropriate circumstances, e.g., where the order for extension will be useless. The effect of extension of the time of registration and of actual registration within the extended time is that the mortgage is constituted a valid charge ab initio, from the date of its execution subject to the conditions, if any, imposed by the order for extension: per Sir Lancelot Sanderson in Ram Narain v. Radha Kissen Motilal Chamaria [1930] L.R. 57 I.A. 76, 83-84, per Romer L. J., in In re Ehrmann Bros. Limited [1906] 2 Ch. 697, 707. Prior to the enactment of sub-section (2) of section 120 an unconditional order for extension of the time o....
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.... registration of the charge including the right acquired by the general body of creditors under a winding up order. Sub-section (2) of section 120 also introduces a change in the practice. Though the sub-section has not put a fetter on the general power conferred by sub-section (1) upon the court to attach to the order such terms and conditions as may be just and expedient, in view of the statutory condition it is no longer necessary to attach to the order the usual condition in the form adopted in In re Joplin Brewery Ltd.'s case (supra). It was not the practice to insert in the order any condition for the protection of unsecured creditors as such because they necessarily run the risk of dispositions of the property by the company while it is a going concern and are, therefore, not prejudiced by the order: In re M.I.G. Trust Ltd. [1933] 1 Ch. 569-70; In re Kris Cruisers Ltd. [1949] 1 Ch. 138, 140-1 I have briefly indicated my views with regard to the effect of a winding up order on an application under section 120 of the Indian Companies Act in my judgment delivered on the 2nd March, 1955, in In re Air Transport Ltd. [1955] 25 Comp. Cas. 473 That case is somewhat distingu....
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....whose duty it was to convert them into money, and out of the proceeds to pay the creditors existing at that date. The assets have been said to be impressed in the hands of the liquidator with a statutory trust in favour of the creditors. Upon the commencement of the winding up an immediate duty was cast upon the liquidator to collect the assets and distribute them among the creditors then existing..........The order extending the time for registration was made 'without prejudice to the rights of the parties acquired prior to the time when such trust deed and debentures shall be actually registered.' Whatever the exact limit of those words may be, they certainly in my judgment include the right of creditors, acquired on the passing of the winding up resolution to have the assets realised and distributed among them pari passu.........I hold that the rights of the general body of the creditors at the commencement of the liquidation are within the terms of the order, because on the winding up commencing every creditor had a right to say 'so much per cent. of the assets belongs to me in a due course of liquidation.' " In In re Ehrmann Brothers Ltd. : Albert v. Ehrmann Brothers Ltd. [....
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....a conditional order was useless in the circumstances. He observed at pages 700-1: "Unless in very exceptional cases, I think that orders extending the time for registration ought to be qualified as in In re Joplin Brewery Co. [1902] 1 Ch. 79 I am unable to see how if a winding up has commenced, an order contained in the words inserted in the order made in that case can do anybody any good. If you have secured and unsecured creditors of a company in liquidation, you must, under an order in the form in In re Joplin Brewery Co.'s case (supra), first pay the secured creditors in full or to the extent of the assets. If there is a surplus after paying the secured creditors in full, the debenture holder whose debenture has not been registered in time, and who. obtains an extension of time on the terms imposed in In re Joplin Brewery Co.'s case (supra), cannot claim priority over but will come in pari passu with the unsecured creditors, and this position would obtain without any order from the court under section 15 of the Act of 1900. Such an order as I made in In re Joplin Brewery Co.'s case (supra), would, in my judgment be useless to the applicant." The case in In re S. Abrahams & S....
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....solvent company to an application for extension during the pendency of a petition for winding up did not amount to fraudulent preference as the liquidator failed to prove that the dominant motive of the company was to prefer the mortgage. In connection with the question whether the preference was due to the suffering of the judicial proceeding and whether the Judge would have made an order for extension in the face of an opposition Romer L. J. and Hanworth M. R. also construed the relevent section and made observations with regard to what were material considerations in an application for extension of the time of registration. In that case however no order for winding up had been made nor had a resolution for winding up been passed and the observation of Romer L.J. in In re M.I.G. Trust Ltd.'s case (supra) [1933] 1 Ch. 542, 571, that resolution for winding up was not a material consideration was not strictly necessary for that decision. Those observations are to be contrasted with the observation of Romer L.J. in In re Ehremann Bros. Ltd. [1906] 1 Ch. 697, 768, 709 In Thuppan Nambudiri v. Official Liquidator, Malayalee Bank [1954] 24 Comp. Cas. 489 a Division Bench of the Madras....