Case: Indian Bank Vs. The Official Liquidator, Chemmeens Exports (P) Ltd. &amp; Ors

to 5 therein for recovery of the unrealized amount. 12. The aforementioned preliminary decree was passed by the Court even though the official liquidator raised the plea in the written statement that the charge created on the companys property was void under Section 125 of the Act. But it may be that plea was not argued at the hearing. However, what is clear from the material on record is that no appeal was filed against the said preliminary decree by the official liquidator and the preliminary decree has attained finality. From the above discussion, it follows that the right of the respondents including the company represented by the official liquidator to deposit the decree amount was available till August 28, 1982. In other words, the right to recover the amounts pursuant to the contract creating charge, even under the terms of the decree was available till the said date and thereafter `the matter had passed from the domain of the contract to that of judgment. 13. In Rani Sundar Koer v. Rai Sham Krishan, 1984 Indian Appeals 9 (P.C.), Lord Davey observed as follows : "Their Lordships think that the scheme and intention of the Transfer of Property Act (now the corresponding provisions of the Civil Procedure Code) was that a general account should be taken once for all, and an aggregate amount be stated in the decree for principal, interest and costs due on a fixed day; and that after the expiration of that day, if the property should not be redeemed, the matter should pass from the domain of contract to that of judgment and the rights of the mortgagee should thenceforth depend, not on the contents of his bond, but on the directions in the decree." That principle was followed by the Privy Council in Kusum Kumari v. Debi Prosad Dhandhania & Ors., 1936 P.C. 63, where the question of granting interest under Regulation 6 of 1872 fell for consideration. Regulation 6 provided, "the total interest decreed on any loan or debt shall never exceed one-fourth of the principal sum, if the period be not more than one year, and shall not in any other case exceed the principal of the original debt or loan". The trial court decreed the suit based on mortgage with interest at six per cent per annum from the date of the decree till its realisation. The amount of interest so decreed exceeded the limitation prescribed under the said Regulation. The Privy Council has observed that once a decree had been passed, the loan or debt as the subject of enforcement no longer exists; it was in effect merged in the decree and the allowance of interest on the decree was not the allowance of additional interest on the loan or debt. The same principle was reiterated by this Court in Gyarsi Bai v. Dhansukh Lal, AIR 1965 SC 1055 . This Court observed, "it cannot also be disputed that a mortgage merges in the preliminary decree and the rights of the parties are thereafter governed by the said decree". 14. In Suryakant Natvarlal Surati & Ors. v. Kamani Bros Pvt. Ltd., 1985(58) Company Cases 121, the company created a charge under a mortgage in favour of the trustees of the Employees Gratuity Fund. The creditors by a preliminary decree of December 3, 1977 were entitled to receive the amount secured on the property of the company; the court fixed December 8, 1988 as the date for redemption and ordered that in default of payment of the sum due by that date, the property was to be sold by public auction. On an application made on February 16, 1978, the company was ordered to be wound up by an order dated August 3, 1979. As default in payment of the decreed amount was committed, the mortgagees applied for leave of the court under Section 446 to execute the decree against the official liquidator by application dated July 10, 1981. Three contributories sought injunction against taking any further action on the ground that the charge created by the company was not registered under Section 125 of the Companies Act, therefore, the mortgagees should be treated only as unsecured creditor. Their application was dismissed by a learned Single Judge. On appeal, speaking for the Division Bench of the Bombay High Court Justice Bharucha (as he then was) laid down, inter alia, the principle that the question of applicability of Section 125 had to be decided on the terms of the decree whether the unregistered charge created by the mortgagor was kept alive or extinguished or replaced by an order of sale created by the decree; if upon a construction of the decree, the court found that the unregistered charge was kept alive, the provisions of Section 125 would apply and if, on the other hand, the decree extinguished the unregistered charge, the section would not apply. We are in respectful agreement with that principle. We hold that a judgment creditor will be entitled to relief from the Company Court accordingly. 15. Reverting to the facts of this case, on the construction of the decree we have already held that the charge was kept alive till August 28, 1982 and thereafter in default of payment of decree amount the sale order would take effect. In this case, admittedly the decree amount was not paid before August 28, 1982, as such the matter had pased from the domain of contract to the realm of the judgment. The official liquidator filed application on March 21, 1983 seeking to declare the decree as void. By that date what was operative in the decree was not a mere unregistered charge but an order for sale of mortgaged property for realisation of decree amount. The preliminary decree cannot therefore be said to be void and inoperative. 16. For the above reasons we hold that the Division Bench ought not to have held that the preliminary decree passed by the competent court on May 25, 1980 was void and un-enforceable and

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

Explanation:
1[ds]7. On a plain reading of sub-section (1) it becomes clear that if a company creates a charge of the nature enumerated in sub-section (4), after Ist day of April, 1914, on its properties, and fails to have the charge together with instrument, if any, by which the charge is created, registered with the Registrar of the Companies within thirty days, it shall be void against the liquidator and any creditor of the company. This, however, is subject to the provisions of Part-V of the Act. The proviso enables the Registrar to relax the period of limitation of thirty days on payment of specified additional fees, on being satisfied that there has been sufficient cause for not filing the particulars and instrument or a copy thereof within the specified period. Sub-sections (2) and (3) deal with repayment of money secured by the charge. Sub-section (2) provides that the provision of sub-section (1) shall not prejudice the contract or obligation for repayment of money secured by the charge and sub-section (3) says that when a charge becomes void under that section, the money secured shall become payable immediately. Though as a consequence of non-registration of charge under Part-V of the Act, a creditor may not be able to enforce the charge against the properties of the company as a secured creditor in the event of liquidation of the company as the charge becomes void against the liquidator and the creditor, yet he will be entitled to recover the debt due by the company on par with other unsecured creditors. It is also evident that Section 125 applies to every charge created by the company on or after the Ist day of April, 1914. But where the charge is by operation of law or is created by an order or decree of the court, Section 125 has noto the facts of this case, on the construction of the decree we have already held that the charge was kept alive till August 28, 1982 and thereafter in default of payment of decree amount the sale order would take effect. In this case, admittedly the decree amount was not paid before August 28, 1982, as such the matter had pased from the domain of contract to the realm of the judgment. The official liquidator filed application on March 21, 1983 seeking to declare the decree as void. By that date what was operative in the decree was not a mere unregistered charge but an order for sale of mortgaged property for realisation of decree amount. The preliminary decree cannot therefore be said to be void andthe above reasons we hold that the Division Bench ought not to have held that the preliminary decree passed by the competent court on May 25, 1980 was void and un-enforceable