TaxTMI 
TaxTMI 
2019 (6) TMI 219
X X X X Extracts X X X X
X X X X Extracts X X X X
....Official Liquidator as being payable to applicant with an undertaking to be given by applicant to return the same on such terms as may be directed by this Court. 2. In the above company application, the Official Liquidator has filed the Official Liquidator's Report ("OLR") seeking directions inter alia to change the status of applicant from being adjudicated as a secured creditor, to an unsecured creditor and to permit the Official Liquidator to modify its certified list dated 21st January 2016 to remove the name of applicant from the list of secured creditors. The question that arises for consideration in the present proceedings is ­ Whether Applicant is an unsecured creditor or a secured creditor? 3. It is the stand of applicant that it is a secured creditor inter alia by operation of law and under a decree/order of the Co-­operative Court inter alia directing attachment, possession and sale of an immovable property of the Company which was earlier mortgaged to applicant. It is the stand of the Official Liquidator that (i) decree/order did not create a charge on the assets of the Company and applicant is not a secured creditor, and (ii) as there is no charge c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd building was taken by the authorized officer under the Act. The Panchnama dated 1st December 2005 ("Panchnama") notes that the said property mentioned therein was being attached in pursuance of the Decree/Recovery Certificate. The Panchnama identifies the property which was being seized, which seizure in turn was done for facilitating sale of the property as directed by the Decree/Recovery Certificate. This was a step, Shri Cama submitted, taken in furtherance of the specific provisions of Section 156 of the Act and Rule 107 of the Rules as had been ordered by the Decree/Recovery Certificate. 9. Thereafter, in accordance with Rule 107 (11) of the Rules, a pre-­auction notice dated 17th March 2005 was sent to the Company which notice identified the property and notified the Company that upon failure to pay the decretal dues within 30 days from the receipt of the notice, the property would be sold by public auction. Shri Cama submitted, this is consistent with Rule 107 (11) (c) of the Rules which provides the Recovery Officer shall sell the property in execution of the Decree/Recovery Certificate. 10. Shri Cama said all of the aforesaid steps took place in the year 2004/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecurity had not been registered with the Registrar of Companies (RoC). (e) On 21st October 2014, the Regional Director, Western Region, condoned the delay on the part of Applicant in registering the charge. On 7th November 2014, the Company paid a sum of Rs. 10,000/­ towards penalty for delay in filing the application for registration of charge. (f) On 17th November 2014, even though the Company had been ordered to be wound up by this Court, the RoC registered the charge of Applicant to secure the loan amount of Rs. 1,25,00,000/­. On the same day, as the RoC issued the certificate for registration of charge, Applicant addressed a letter to the Official Liquidator intimating that the charge was registered and their claim should be considered as a secured creditor. (g) On 29th May 2015, the Official Liquidator adjudicated the claim of Applicant at Rs. 2,29,30,687/­ and Official Liquidator mistakenly, categorized Applicant as a secured creditor. (h) On 21st January 2016, the Official Liquidator filed a certified list with the office of the Prothonotary & Senior Master, High Court, Bombay. The said list included, and Official Liquidator s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d or order has been obtained or passed. Rule 107 (1) of the Rules provides the mode of sale of the property pursuant to Section 156 of the Act, but clarifies that no separate application is required in the event of a certificate issued under sub­-section 1 of Section 101 of the Act. sub-­rule 11 of Rule 107 of the Rules thereafter provides that a demand notice be issued by the Recovery Officer to the defaulting party stipulating the property to be sold and putting a defaulting party to notice of the sale in the event of non-­payment of the decretal dues. sub-­rule 11(c) of Rule 107 of the Rules is of considerable importance and provides a mandatory direction that the Recovery Officer "shall proceed to attach and sell, or sell without attachment, as the case may be, the immovable property...". Thus, upon non-­payment by the defaulting party, there is a peremptory order and a specific direction for sale of the immovable property pursuant to the Decree/Recovery certificate. This being the case, it is clear from the Scheme of the Act and the Rules that upon a Decree/Recovery Certificate being issued, as in the present case, the mechanism under Section 156 o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r of the Court and would not be void on account of being unregistered. 15. Mr. Cama added, the judgment of the Hon'ble Calcutta High Court in Praga Tools (Supra), which was approved by the Hon'ble Supreme Court as stated above, was a case where by a consent order a sum of Rs. 1.45 lakhs was held to be payable. A sum of Rs. 50,000/­, which had earlier been deposited in the Court pursuant to the winding up proceedings instituted by petitioner therein, was ordered to be retained as security for the purpose of satisfaction of the decree in the event that the judgment debtor defaulted in paying the decretal amount. It was urged by petitioning creditor that petitioner, upon winding up, was a secured creditor to the tune of Rs. 50,000/­ and there was no requirement for registration of a charge created by the order of the Court. The Hon'ble Calcutta High Court, Shri Cama submitted, laid down certain principles that form a guide as to what would constitute a charge created by a decree or order, and the same may be summarised as under: (i) there must be a decree or order for a certain identified amount; (ii) a mode for payment of the money must be indicated; a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Rules, the Recovery Officer "shall" sell the property which has been identified for satisfying the decree. Rule 107 of the Rules, which forms part of the Recovery Certificate, is a mandatory direction / order for attachment and sale of the property to satisfy the decree. It is thus clear from the scheme of the Act and Rules, the Recovery Certificate itself, and in any event the Panchnama and pre-­auction notice read with the Recovery Certificate, constitutes an order for sale of the property towards satisfying the decree. Thus such an order for sale of the identified property in execution of the decree constitutes a charge on the subject property of the company, i.e., the plots and building thereon, which charge does not require registration. In the present case, the Panchnama and the pre-auction notice, both clearly identify the property which is attached and which is notified and directed to be sold. Applicant is thus, a charge holder/secured creditor to the extent of the value of the land and building sold, and is entitled to claim as a secured creditor in the present winding up proceedings. 17. Shri Engineer, per contra submitted as under: A). Applicant cannot re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s bankruptcy. This, indeed, is the necessary effect of the express provision of the Companies Act that the estate is to be distributed among the creditors pari passu. Every creditor is to have an equal share, unless any one has already a part of the estate in his hands, by virtue of an effectual legal right." Tulsidas Jasraj Parekh v. Industrial Bank of Western India, 32 BLR 953. Similarly, in Re Anglo­Oriental Carpet Manufacturing Company, [1903] 1 Ch. 914, it was held that even where a company had executed a trust deed and issued debentures creating a charge on its assets but the charge had not been registered as required by the Companies Act by the time the company had passed an extraordinary resolution for voluntary winding-­up the debenture­holders were not, as against the joint body of creditors, secured creditors. 32. It is thus well established that once a winding-­up order is passed the undertaking and the assets of the company pass under the control of the liquidator whose statutory duty is to realise them and to pay from out of the sale­ proceeds its creditors. Such creditors acquire on such order being passed the right to have the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed that the registration of charge was obtained on the basis of suppression of the material fact that the Company was in liquidation. (vi) Applicant now states that they are not relying on the Mortgage Deed dated 23rd January 2004. This is too little too late. After committing an illegality and getting caught, Applicant cannot seek to avoid the legal consequence merely by stating that they are not going to rely on the Mortgage Deed. The very fact that the charge was registered with the RoC after the winding up at the behest/instruction of Applicant would warrant dismissal of their Application for withdrawal of the money lying with the Official Liquidator. (vii) The aforesaid clearly shows that Applicant cannot claim to be a secured creditor on the basis of the Mortgage Deed. B). Reliance on Sections 47 and 48 of the Act is completely misconceived and is wholly inapplicable in the facts of the present case, and therefore, Applicant is not a secured creditor. (i) Section 47 of the Act reads as follows: "47. Prior claim of society:­ (1) Notwithstanding anything in any other law for the time being in force, but subject to any prior claim of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....termined in such manner as may be specified in the bye­laws." (emphasis added) (ii) A plain reading of Section 47 would indicate that a charge is created in respect of outstanding dues of a member towards the society only under the provisions of Section 47(1) of the Act. Section 47(1)(a) is wholly inapplicable as none of the circumstances set out therein apply. A charge is created on crops or other agricultural produce, cattle, fodder for cattle, agricultural or industrial implements or machinery, raw materials for manufacture, workshop, etc. supplied to or purchased by such member from any loan made to the member by the society; or any moveable property which may have been hypothecated, pledged or mortgaged by a member to the society. It is evident that in the present case, none of these situations exist. The Company does not have any crops or agricultural produce, it has not purchased any fodder or any other specified item from the loan it raised from Applicant, and it has not hypothecated or pledged any moveable property to Applicant. Therefore, no charge within the meaning of Section 47(1)(a) can be said to exist. (iii) Furthermore, as regards a charge under Section 4....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Provided that, it shall be lawful to a member to execute a mortgage / bond in respect of such land or any part thereof in favor of an Agriculture and Rural Development Bank or of the State Government under the Bombay Canal Rules made under the Bombay Irrigation Act, 1879 or under any corresponding law for the time being in force for the supply of water from a canal to such land, or to any part thereof: Provided further that, if a part of the amount borrowed by a member is paid the society with the approval of the Central Bank to which it may be indebted may, on an application from the member, release from the charge created under the declaration made under clause (a) or (b), such part of the movable or immovable property specified in the said declaration, as it may deem proper, with due regard to the security of the balance of the amount remaining outstanding from the member: (e) any alienation made in contravention of the provisions of clause (d) shall be void (f) Subject to all claims of the Government in respect of land revenue or any money recoverable as land revenue, and all claims of the Co-­operative Agriculture and Rural Multipurpose Deve....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the society to the member. No such declaration has been pleaded, produced or proved to have been made by the Company. (c) A register of such declarations is also required to be maintained under Rule 48(2) of the Rules, which is also not produced by Applicant. This also shows that the mandatory requirements before claiming a first charge have not been fulfilled. (d) Further, in order to claim the benefit of first charge under Section 48(f) of the Act, every charge must be registered in the Record of Rights, as mandate by Section 48(g) read with Rule 48(5) of the Rules, which reads as under: "48. Form of declarations be made by members borrowing loans from certain societies and conditions on which any charge in favour of a society shall be satisfied: ... (1)... ... (5) Where a charge is created by a member on his land or on his interest in any land as a tenant by declaration under section 48, the society shall record or cause to record such particulars of charge in the Record of Rights maintained by the village officers of the village where such property is situated. Such recording of the Charge in the Record of Rights o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....isions of the Maharashtra Co-­operative Societies Act and/or the Maharashtra Co-­operative Societies Rules and/or the steps taken thereunder, no charge is created on the property. (i) The Recovery Certificate dated 16th November 2004 only states that an amount is due and payable. It does not say that Applicant is a secured creditor or that it has a charge on the assets of the Company. Further, on a perusal of Section 101, it is clear that Section 101 is only a summary manner in which certain types of societies can recover amounts that are loaned. The section does not state that the amounts that are found to be payable are recoverable as a secured creditor. On the contrary, Section 101(3) of the Act makes it clear that the effect of a recovery certificate under Section 101 is that the amount so stated to be due shall be recoverable "according to the law for the time being in force as arrears of land revenue". (ii) The fact that the amount under the Recovery Certificate was recoverable from the Company "as arrears of land revenue" as per the provisions of Maharashtra Land Revenue Code, 1966 also does not create a charge and does not make Applicant a secured creditor. In....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ers Supply Corporation, referred to above, in our opinion, has made the position absolutely clear. Following observations in the case of Builders Supply Corporation, in our opinion, are relevant. They read as under: We have referred to this decision, because it brings out emphatically the real character of the provisions prescribed by Section 46(2). Section 46(2) does not deal with the doctrine of the priority of Crown debts at all; it merely provides for the recovery of the arrears of tax due from an assessee as if it were an arrear of land revenue. This provisions cannot be said to convert arrears of tax into arrears of land revenue either, all that it purports to do is to indicate that after receiving the certificate from the Income Tax Officer, the Collector has to proceed to recover the arrears in question as if the said arrears were arrears of land revenue. We have already seen that other alternative remedies for the recovery of arrears of land revenue are prescribed by sub­-sections (3) and (5) of Section 46. In making a provision for the recovery of arrears of tax, it cannot be said that Section 46 deals with or provides for the principle of priority of tax due....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r alienate its properties. ONGC sought to contend that this amounted to a charge created by law or decree. The Hon'ble Supreme Court negated this contention. It held that an undertaking not to alienate properties would not create a charge. Further, the Hon'ble Court noted that no particular asset was identified in the undertaking. Even in the present case, there is no identified asset that was mentioned in any order that was to be treated as security. The judgment in Oil and Natural Gas Corporation Limited (Supra) further holds that if the charge is not registered under Section 125 of the Companies Act, it would be void against the Official Liquidator. It is only if the charge is created by operation of law /decree that Section 125 would not be attracted. As can be seen, there is no charge created by law/decree. The Recovery Certificate under Section 101 read with Section 156 of the Act read with Rule 107 of the Rules does not create a charge. The Recovery Certificate is akin to a money decree and Section 156 read with Rule 107 is just a mode of execution. The property is merely attached, and attachment has been held not to constitute a charge. (vi) That being so, clearly there ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the sale proceeds from the Satara property. (b) There is nothing in law to support this proposition. In fact, the authorities are quite clear that an attachment does no more than prevent a debtor from dealing with an asset, thus ensuring that it would be available to satisfy any legitimate debt. Official Liquidator has relied in this behalf on the judgment of the Hon'ble Supreme Court in Kerala State Financial Enterprises Ltd. V/s. Official Liquidator, High Court of Kerala, (2006) 10 SCC 709, where the Court, inter alia, observed that 'an attachment itself does not create any charge in the property'. Official Liquidator also relied on the judgment of the Hon'ble Calcutta High Court in Mahadeo Saran Sahu (Supra) where the Court following the Full Bench ruling in Frederick Peacock V/s. Madan Gopal. I.L.R. 29 Cal 428. and the dictum of the Judicial Committee in Motilal V/s. Karrabuldani, I.L.R. 25 Cal 179 (1897), held that it was impossible to contend that plaintiff in that case 'acquired any title or charge upon the property by reason of the attachment in question'." (iii) In light of the aforesaid position of law, Applicant's contention that the attachment of the Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The second question before the Court on the interplay between the State Financial Corporations Act and the Companies Act, was answered by the Hon'ble Kerala High Court to say that the State Financial Corporations Act would have priority over the Companies Act. It is only in respect of this second question as regards the interplay between the two statutes, that the Hon'ble Supreme Court had taken a somewhat different view [paragraph 20]. The correctness of this reading of the judgment of the Hon'ble Supreme Court is evident from the subsequent paragraphs of the judgment, i.e., paragraphs 21 to 23, where the "somewhat different view" of the Hon'ble Supreme Court has been set out and which view only pertains to the second question viz., the interplay between the State Financial Corporations Act and other similar statutes on the one hand, and the Companies Act, 1956 on the other hand. Thus, the finding of the Hon'ble Kerala High Court on the order creating a charge has been in no manner been interfered with or differed from by the Hon'ble Supreme Court. (ii) J. K. (Bombay) Private Limited (Supra) - This judgment has no application, as applicant is not seeking to complete any ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... arrears of land revenue was different from an order stating that the dues would be recovered "as arrears of land revenue". Firstly, this judgment has no application to the facts of the present case, which pertains to a charge being created under a decree which provides for an order of sale. In any event, paragraph 12 of this judgment makes it clear that the Court was deciding only the issue as to whether the State would have priority over secured creditors and workers in exercising its charge. The judgment nowhere holds that the State did not have a charge per se. The only question was whether that charge would prevail over the workers and secured creditors. In the present case, it is sufficient for applicant's purpose if this Hon'ble Court was to hold that applicant had a charge on par with secured creditors and workers and applicant is not seeking any priority over secured creditors/workers. 19. Shri Engineer also submitted that the Recovery Certificate issued under Section 101 of the Act is in the nature of a statutory form being Form V and that this statutory form does not in any manner create a charge on the assets of the Company, which would equate the position of applica....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the ex­director, who he was appearing for, has studied only upto B.A., did not know that getting the charge registered after an order of winding up was passed, was incorrect and he had no malafide intentions. Shri Narichania added now that the company has been ordered to be wound up, he would submit to any orders that the Court would pass in the application made by applicant and the stand taken by the Official Liquidator. 24. Heard the counsel, considered the pleadings and written submissions. 25. For ease of reference quoted herein are the relevant provisions of Section 2 (16) of the Companies Act, 2013, which defines a 'charge', Section 101 and Section 156 of the Act and Rule 107 of the Rules : Section 2 (16) of the Companies Act, 2013 "charge" means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage; Section 101 of the Maharashtra Co-­operative Societies Act, 1960 :­ "101. Recovery of arrears due to certain societies as arrears of recovery of land revenue. (1) Notwithstanding anything contained in section 91, 93 and 98, on an ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n for grant of such certificate shall be made in such form and by following such procedure accompanied by such fees and documents as may be prescribed. Explanation-­I.­For the purposes of this sub­-section, the expression "other agricultural purposes" includes dairy, pisciculture and poultry. Explanation-­II.­For the purposes of this sub­-section, the expression "maintenance and service charges" means such charges as are specified in the by­laws of the concerned Co-­operative housing society. (2) Where the Registrar is satisfied that the concerned society has failed totake action under the foregoing sub­-section in respect of any amount due as arrears, the Registrar may, of his motion, after making such inquiries as may be prescribed, grant a certificate for the recovery of the amount stated therein, to be due as arrears and such a certificate shall be deemed to have been issued as if on an application made by the society Concerned. (3) A certificate granted by the Registrar under sub­-section (1) or (2) shall be final and a conclusive proof of the arrears stated to be due therein, and the same shall be rec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... made to him for such recovery, to be Civil Court for the purposes of Article 136 in the Schedule to the Indian Limitation Act, 1963." Rule 107 (1), (8)(i) to (iii), (11)(a) to (c) and (12) of the Maharashtra Cooperative Societies Rules, 1961 :­ "Rule 107. (1)[Procedure for attachment and sale of property under Section 156]:­ (1) A creditor holding a decree requiring the provisions of Section 156 to be applied, or society to which- (a) any amount is due under a decree or order of a Civil Court obtained by the society; (b) any amount is due under a decision, award or order of the Registrar, Arbitrator, Liquidator or Tribunals; (c) any sum is awarded by way of costs under the Acts; (d) any amount is due under a certificate granted by the Registrar to the assets of the society; (e) any amount is due under a certificate granted by the Registrar under Section 98 under sub­-sections (1) or (2) of Section 101 or under sub­-section (1) of Section 137 together with interest, if any, due on such amount or sum and the costs of process by the attachment and sale or by sale without attachment of the property....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... expenses, if any, and the batta to be paid to the person who shall serve the demand notice, the time allowed for payment and in case of non­payment, the particulars of the properties to be attached and sold or to be sold without attachment, as the case may be. After receiving the demand notice, the Recovery Officer shall serve or cause to be served a copy of the demand notice upon the defaulter or upon some adult male member of his family at his usual place of residence, or upon his authorised agent or, if such personal service is not possible, shall affix a copy thereof on some conspicuous part of the immovable property about to be attached and sold or sold without attachment, as the case may be: Provided that where the Recovery Officer is satisfied that a defaulter with intent to defeat or delay the execution, proceeding against him is about to dispose of the whole or any part of his property, the demand notice issued by the Recovery Officer under sub-­rule (3) shall not allow any time to the defaulter for payment of the amount due by him and the property of the defaulter shall be attached forthwith. (c) If the defaulter fails to pay* the amount specifi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en a charge becomes void under this section, the money secured there by shall immediately become payable. (4) This section applies to the following charges: (a) a charge for the purpose of securing any issue of debentures; (b) a charge on uncalled share capital of the company; (c) a charge on any immovable property, wherever situate, or any interest therein; (d) a charge on any book debts of the company; (e) a charge, not being a pledge, on any moveable property of the company; (f) a floating charge on the undertaking or any property of the company including stock­in­trade; (g) a charge on calls made but not paid; (h) a charge on a ship or any share in a ship; (i) a charge on goodwill, on a patent or a licence under a patent, on a trademark, or on a copyright or a licence under a copyright." 27. During the oral hearings, Shri Cama for applicant after conceded that : (i) It was aware of the fact that the Mortgage Deed was not registered; and that the registration of the charge on 17th November 2014 was not correctly carried out, should not have been done and is of no legal e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evenue". (ii) The fact that the amount under the Recovery Certificate was recoverable from the Company "as arrears of land revenue" as per the provisions of Maharashtra Land Revenue Code, 1966 also does not create a charge and does not make Applicant a secured creditor. In this regard, the decision of a Division Bench of this Court in SICOM Limited (Supra) is relevant. In the said case, the company in liquidation owed sales tax dues to the State Government. One of the issues that arose for the Court's consideration was whether the sales tax dues, which were recoverable as arrears of land revenue, made the State Government a secured creditor of the company in liquidation. This Court answered the question in the negative. It held that there is a distinction between a sum which is recoverable as land revenue and a sum which is recoverable as arrears of land revenue, and it is only in case of the former that the State Government has a first charge under Section 169 of the Maharashtra Land Revenue Code. Therefore, it is clear that the Recovery Certificate under Section 101 is only in the nature of a money decree and only makes the amount recoverable as arrears of land revenue a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Revenue Code 1966 as arrears of Land Revenue or; Applicant should get the above amount recovered through the officers who have been delegated the powers under section 156 of the Maharashtra Cooperative Societies Act, 1960 and Rule 107 of the Maharashtra Cooperative Societies Rules, 1961. There is no need to file a separate application for implementation of this recovery certificate." (b) It is thus evident that the Recovery Certificate issued in favour of applicant is in the prescribed format and the reference to the provisions of Section 156 of the Act and Rule 107 of the Rules is not a distinctive feature of applicant's Recovery Certificate. Every recovery certificate issued under Section 101 will mention that the amount is to be recovered under Section 156 read with Rule 107 without requiring any further orders to be passed. Therefore, the sequitur to Applicant's contention is that every holder of a recovery certificate under Section 101 of the Act would be a secured creditor. This interpretation is against the plain language of Section 101(3) which only sets out that the amounts are recoverable as arrears of land revenue which does not make the holder of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t, 1956 and such alteration is not permissible without the express mandate of the legislature. (vi) The legislature, in fact, has impliedly excluded the interpretation proposed by applicant. The latin maxim expressio unius est exclusio alterius, i.e., the express mention of one is the exclusion of another is relevant. The Hon'ble Supreme Court of India relied on the expressio unius principle in Ethiopian Airlines V/s. Ganesh Narain Saboo . In this case, one of the issues before the Hon'ble Court was whether Section 86 of the Code of Civil Procedure, 1908 applies to proceedings under the Consumer Protection Act, 1986. The Hon'ble Court held that the Consumer Protection Act clearly enumerates those provisions of the CPC which are applicable to proceedings under Consumer Protection Act. Since the said provisions do not include Section 86, the legislature is deemed to have excluded its applicability to proceedings under the Consumer Protection Act. The Hon'ble Supreme Court held (in paragraph 65) as follows: "65. However, notwithstanding the fact that proceedings of the National Commission are 'suits' under the Carriers Act, vide the expressio unius principle, the Con....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arge is created on members' interests in respect of debt owed to the society, by not providing for creation of a charge in respect of amount due under a recovery certificate granted under Section 101 of the Act, in light of the ex-pressio unius principle, the Act is deemed to have excluded the creation of a charge for an amount due under such recovery certificate. (x) Even applicant's reliance on the decision in Praga Tools Ltd. (Supra) is misplaced for the following reasons : (a) The judgment was cited for the proposition that an order of a court could create a charge and section 125 of the Companies Act would not apply to it. However, what is important to note is that the order that was held to have created the security was a consent order. Parties by consent agreed that Rs. 50,000 would be the security. In law the effect of consent terms is that it is a contract of the parties with the imprimatur of the Court. It was in such a case that the Hon'ble Calcutta High Court held that a charge had been created. This is completely distinguishable as compared to the facts of the present case. (b) The security furnished by the company in liquidation in Praga....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 156 of the Act and Rule 107 of the Rules for the purpose of execution of the Recovery Certificate. Neither the Recovery Certificate nor Section 156 nor Rule 107 identifies any property which would be treated as security for the amount due under the Recovery Certificate. Therefore, no charge can be said to have been created. (d) The Hon'ble Supreme Court in Oil and Natural Gas Corporation Limited (Supra) also distinguished Praga Tools (Supra) and held that no charge had been created in favour of the appellant therein. (xi) Applicant has also relied on the decision in Indian Bank (Supra) to contend that a charge that has been created by operation of law and/or by the Recovery Certificate and therefore it does not have to be registered under Section 125 of the Companies Act, 1956. This judgment is completely distinguishable for the following reasons : (a) The decree in the Indian Bank (Supra) case was in a mortgage suit in which preliminary decree was passed. The fact that it was in a mortgage suit is a crucial difference when compared to the facts in the present case, which was just a summary procedure for recovery of money. It was in this regard that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ompanies Act, Section 48 of the Act, and recovery of land revenue under Section 169 of the Maharashtra Land Revenue Code. Where a charge is created by the decree, it would necessarily contemplate a situation where a party has either a contractual right or a statutory right for claiming a charge. If neither of them is available, then the court would not pass a decree creating a charge. It is for this reason that in Indian Bank (Supra) case, which was a mortgage suit, it was held that the preliminary decree did not require to be registered. However, parties had agreed in that case that the asset was to be the security for the creditor and the legal proceedings had been taken out to enforce the security. In the present case, the Recovery Certificate is only a summary procedure for recovery of money and does not create a charge or even refer to any property being the security. As set out above, the Recovery Certificate is a plain and simple money decree and therefore, no analogy or parallel can be drawn with the Indian Bank (Supra) case. The same is completely distinguishable on facts. 31. Applicant contends that since the attachment of the Company's assets and issuance of pre-­....