INDIAN BANK versus THE OFFICIAL LIQUIDATOR, CHEMMEENS EXPORTS (P) LTD. AND ORS.

Citation: [1998] 3 S.C.R. 255 · Decided: 08-05-1998 · Supreme Court of India · Bench: B.N. KIRPAL · Disposal: Case Allowed

Judgment (excerpt)

.. ----
INDIAN BANK 
v. 
THE OFFICIAL LIQUIDATOR, CHEMMEENS 
EXPORTS (P) LTD. AND ORS. 
MAYS,1998 
[B.N. KIRPAL AND S.S. MOHAMMED QUADRI, JJ.] 
Companies Act, 1956 : 
A 
B 
Sections 125 and 446--Charge created on the company's asset by way C 
of mortgage-Non registration of such charge-Effect of-Loan advanced by 
bank secured by equitable mortgage by deposit of title deeds uf the debtor 
company with the bank-Winding up proceedings initiated against the debtor 
company and winding up order passed by the Company Court-Bank moving 
on application to the Company Court for leave to file a suit against the D 
debtor company under liquidation and the same was allowed-Preliminary 
decree passed-No appeal preferred by the Official Liquidator against the 
decree -After the expiry of limitation to file the appeal against the decree, 
Official Liquidator moved an application before the Company Judge that 
under Section 125, charge having been not registered, the decree was void-
Preliminary decree prescribed certain date for deposit of decree amount by E 
the company and in default the Bank would be entitled to apply to trial court 
for passing final decree and realisation of the decree amount by way of sale 
of mortgaged property-Decree amount not deposited within the date fixed 
by the Court-Held, if upon construction of a decree, the court found that 
the unregistered charge was kept alive, provisions of Section 125 would F 
apply and if, on the other hand, the decree extinguished the unregistered 
charge, section 125 would not apply and a judgement-creditor will be 
entitled to relief from the Company Court-As such the preliminary decree 
was not void or inopertative--Companies(Court) Rules, 1959, Rule 9. 
Section 446-Applicability of -Power of Company Court-Held, it G 
has no power to declare a decree of a competent court void or inoperative-
Hence application filed by Official Liquidator to declare a decree void not 
maintainable. 
Appellant advanced certain amounts to a Company ("debtor company") 
which was secured by an equitable mortgage by deposit of title deeds of the H 
255 
256 
SUPREME COURT REPORTS 
[1998) 3 S.C.R. 
A debtor company with the appellant. Thereafter, winding up proceedi11gs were 
initiated against the debtor company on 01.03.1979 and winding up order 
•- ·· 
was passed. Appellant sought leave of the Company Court to file a suit for 
recovery of the debt amount and the same was granted by it on 07.12.1979. 
The appellant thereafter, filed .a suit against the debtor company in liquidation 
B which was represented by the Official Liquidator. The Official Liquidator 
filed written statement and contested the suit inter a/ia on the ground that 
the charge against the properties of the debtor company not having been 
registered under Section 125 of the Companies Act, it was void. However, 
in 28.05.1982, a preliminary decree was passed by the court in favour of the 
appellant. No appeal was filed by the Official Liquidator against the said 
C decree. However, on 21.03.1983, the Official Liquidator against the said 
decree.-However, on 21.03.1983, the Official Liquidator filed an application 
before the Company Court for the reliefs as indicated in its written statement 
filed in suit for recovery. The appellant resisted the application on the 
ground that the decree filed by the court had become final and operated as 
D 
E 
res judicata. Company Court referred the matter to a Division Bench 
expressing the view that the question was not free from doubt. The Division 
Bench held that the preliminary decree passed in the suit did not operate as 
res judicata; that on account of the non-registration of the charge it was void 
under Section 125 of the Act and that the decree was void. Hence this appeal. 
It was contended by the appellant that since no appeal was preferred 
against the decree passed in the suit on the basis of the prior permission 
of the Company Court it had become final; and that under Section 125 of the 
Act, what was required to be registered was charge created by the debtor 
company and as the preliminary decree in the suit could not be said to be 
a charge created by the debtor company, Section 125 had no application. On 
F the other hand it was contended by the respondent that as the charge created 
by the debtor company on its properties was void in view of mandatory 
provision of Section 125, 'the Division Bench had rightly held that the 
preliminary decree was also void against the c

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