Case: O.N.G.C. Ltd Vs. Official Liquidator

of which a debt is to be paid and an intention to subject it to a charge in praesenti, the court must find the charge. Certain other decisions were also brought to our notice but it is not necessary to burden this judgment with them because in each case the question which the court would have to decide would be whether the agreement in question creates a charge in praesenti.:………” 22. The aforesaid observations would indicate that the court was examining the submissions made by the learned Attorney General. The effort of the Attorney General was to persuade this Court, on the cases mentioned in the aforesaid paragraph that there was an agreement which established an intention to create a charge. A reading of the order dated 15th April, 1987 clearly shows that it firstly gives the direction to the ONGC to continue the supply of gas at the rate of Rs.1000/- for 1000 cubic meter. Such a direction would be implemented only upon an undertaking given by the respondents that they will not charge encumber or alienate any asset except with the leave of this Court. A further direction was that the immoveable assets included in the respective undertaking will be made available for discharging the respective liabilities of the respondent company. The undertaking given by the company in liquidation in this case was as under : “3. I state that Respondent No.10 Company undertakes that none of immovable assets of the company will be further charged and encumbered hereafter with effect from 15.04.1987, i.e. from the date of order of this Hon’ble Court except with the leave of this Hon’ble Court.4. I state that Respondent NO.10 Company further undertakes not to alienate any of its immovable assets hereinafter with effect from 15.04.1987 except with the leave of this Hon’ble Court. The Respondent No.10 Company further undertakes to make available all its immovable assets in the event of discharging the liabilities which may arise on account of the difference between the price at which all the Gas being supplied to the company during the pendency of the proceedings in this connection and the price which may be determined by this Hon’ble court while disposing of the present Appeals finally." 23. A perusal of the aforesaid undertaking shows that Ambica Mills has not identified any particular immovable assets which would be made available in discharging the liabilities in favour of the appellant. Therefore, we have no hesitation in rejecting the submission of Mr.Kuhad that the interim order read with the undertaking expressed an intention to create an enforceable charge of any particular asset of the company in liquidation. 24. We are of the opinion that the judgment in the case of Praga Tools Ltd. Vs. Official Liquidator of Bengal Engineering Company (P) Ltd. (1984) 56 Comp. Cas.214 (Cal) would also not be applicable to the facts and circumstances of this case. Mr. Kuhad has relied on the following observations: “The fallacy in the argument of Mr. Mookherjee, in my view, is that after the passing of the order of S.K. Roy Chowdhury J. (as his Lordship then was), dated August 1, 1978, the position with regard to the security assumed a completely different complexion. By that order, as I have already indicated, the claim of the petitioning-creditor was settled at a certain amount. A mode for payment of that money was indicated. Then there is a default clause. That default clause contained a twin option either of initiating a fresh winding up proceeding or of executing the balance as a decree of court. It is only in the event of an option being exercised in favour of the last contingency, viz., in the event of the execution as a decree of court, that the security which was furnished pursuant to the order of R.M. Dutta J. would be a security for the applicant company for the satisfaction of the decree and would be the security for the decree until the decretal dues were paid. Thus, the benefit of the security in so far as the applicant company is concerned is entirely the creature of the order of Roy Chowdhury J. dated August 1, 1978. This can, in my view, by no stretch of imagination, be called a charge created "by a company" within the meaning of Section 125 of the Companies Act, 1956, requiring registration under the above section.It would follow, therefore, from what I have said that the question as to whether the security as originally furnished was registered under Section125 of the Companies Act, 1956, or not, would be totally irrelevant for the purpose of determining the right of the applicant company after the order of Roy Chowdhury J., dated August 1, 1978.” 25. The aforesaid observations, in our opinion, would not be applicable on the facts and circumstances of this case, as no charge have been created in favour of ONGC by any of the orders passed by this Court. 26. Mr. Kuhad has submitted that the respondents have specifically agreed to make the assets available for discharging the liability of the ONGC, this, according to Mr. Paras Kuhad, was tantamount to creating an enforceable charge. We are unable to accept the aforesaid submission. In the face of the directions given by this Court in the case of Oil and Natural Gas (supra) wherein this Court had directed that the ONGC is at liberty to take immediate steps to recover the charges due from the respondents in the light of the judgment. This Court did not direct that in view of the undertaking dated 27th May, 1987 the respondents have created enforceable charge in favour of ONGC. Furthermore, it is a matter of record that even the ONGC did not consider itself to be a secured creditor. At the time when the Ambica Mills Co. Ltd. came under the jurisdiction of the Official Liquidator, none of the two options adverted to earlier was exercised by ONGC. The plea of being a secured creditor is clearly an afterthought.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]In our opinion, the appellant cannot claim that the order dated 15th April, 1987 created an enforceable charge on the assets of the company in liquidation. We are of the opinion that the learned counsel for the respondents are quite right in their submissions that an injunction was issued only to ensure that the company in liquidation does not further encumber or create charges in favour of third parties over the assets of the company in liquidation. In our opinion, neither the interim order dated 15th April, 1987 nor the undertaking given pursuant thereto can be said to be a charge on the assets of the company in liquidation.21. The observations made in paragraph 7, in our opinion, is a complete answer to the submission made by Mr. Paras Kuhad. Clearly the appellant is only entitled to recover the dues at par with other unsecured creditors. In our opinion, the order dated 15th April, 1987, was only in the nature of restraint on the Company in liquidation not to further encumber any of its assets. It did not have the effect of creating a charge. Mr. Kuhad in support of his submission that the interim order dated 15th April, 1987 has to be treated as a mandate of the Court, has relied on J.K. (Bombay) (P) Ltd. Vs. New Kaiser-I-Hind Spinning and Weaving Co. Ltd. [(1969) 2 SCR 866] In the aforesaid judgment, undoubtedly it is held thatparticular form of words is necessary to create a charge and all that is necessary is that there must be a clear intention to make a property security for payment of money inThe aforesaid observations of this Court ought not to be read out of context. The judgments of this Court are not to be read as statutory instruments. The ratio of the judgment has to be culled out, keeping in view the facts and circumstances involved in a particular case.22. The aforesaid observations would indicate that the court was examining the submissions made by the learned Attorney General. The effort of the Attorney General was to persuade this Court, on the cases mentioned in the aforesaid paragraph that there was an agreement which established an intention to create a charge. A reading of the order dated 15th April, 1987 clearly shows that it firstly gives the direction to the ONGC to continue the supply of gas at the rate of Rs.1000/- for 1000 cubic meter. Such a direction would be implemented only upon an undertaking given by the respondents that they will not charge encumber or alienate any asset except with the leave of this Court. A further direction was that the immoveable assets included in the respective undertaking will be made available for discharging the respective liabilities of the respondent company.23. A perusal of the aforesaid undertaking shows that Ambica Mills has not identified any particular immovable assets which would be made available in discharging the liabilities in favour of the appellant. Therefore, we have no hesitation in rejecting the submission of Mr.Kuhad that the interim order read with the undertaking expressed an intention to create an enforceable charge of any particular asset of the company in liquidation.We are of the opinion that the judgment in the case of Praga Tools Ltd. Vs. Official Liquidator of Bengal Engineering Company (P) Ltd. (1984) 56 Comp. Cas.214 (Cal) would also not be applicable to the facts and circumstances of thisMr. Kuhad has submitted that the respondents have specifically agreed to make the assets available for discharging the liability of the ONGC, this, according to Mr. Paras Kuhad, was tantamount to creating an enforceable charge. We are unable to accept the aforesaid submission. In the face of the directions given by this Court in the case of Oil and Natural Gas (supra) wherein this Court had directed that the ONGC is at liberty to take immediate steps to recover the charges due from the respondents in the light of the judgment. This Court did not direct that in view of the undertaking dated 27th May, 1987 the respondents have created enforceable charge in favour of ONGC. Furthermore, it is a matter of record that even the ONGC did not consider itself to be a secured creditor. At the time when the Ambica Mills Co. Ltd. came under the jurisdiction of the Official Liquidator, none of the two options adverted to earlier was exercised by ONGC. The plea of being a secured creditor is clearly an