2008 (3) TMI 478 - HC - Companies Law

Charge - Right of mortgagor - applicants have sought an order directing that the action on the part of the Court receiver in taking physical possession of the property in dispute is contrary to an order dated 13-4-2006 passed by this cou Held that - Considering the view taken namely that even assuming that the said sales were valid they are subject to and do not affect the plaintiffs rights under the said mortgage we do not consider it necessary to deal with these submissions. Suffice if to state that the said submissions were strangle urged by Mrs. Srikrishna both during the hearing as well as in the written submissions tendered by her. In the circumstances the Chamber Summons is dismissed. It is however clarified that in the event of this suit being dismissed or in the event of the plaintiff s mortgage not being enforced for any reason whatsoever the rights if any of the applicants are kept open both in respect of the sale proceeds if any as well as in respect of the property. Further the applicant is at liberty to redeem the mortgage as permissible in law. For this purpose although the sale in favour of the said auction purchaser is confirmed the order shall come into effect only on 16-7-2008. This order is itself also stayed till 16-7-2008.

Issues Involved:
1. Validity of the Court Receiver's possession of the disputed property.
2. Validity of the sale of the disputed property by the defendant to the first purchasers and subsequently to the applicants.
3. Impact of the prior mortgage created by the defendant in favor of the plaintiff.
4. Constructive notice and the effect of registration under the Companies Act and the Registration Act.
5. Applicability of sections 125 and 126 of the Companies Act.
6. Potential impact of the pending suit on the enforceability of the mortgage.

Detailed Analysis:

1. Validity of the Court Receiver's possession of the disputed property:
The applicants, who are not parties to the original suit, sought an order declaring the Court Receiver's possession of the property as null and void, arguing that it contradicted an order dated 13-4-2006. The court clarified that the applicants essentially sought to set aside the 13-4-2006 order, claiming they were in physical possession of the property after purchasing it. The court agreed to interpret the prayer in this manner without requiring an amendment.

2. Validity of the sale of the disputed property by the defendant to the first purchasers and subsequently to the applicants:
The defendant sold the property to the first purchasers on 30-11-2004, who then sold it to the applicants on 22-12-2004. The plaintiff argued that the sale was void ab initio under section 536 of the Companies Act, as it occurred after the commencement of the winding-up proceedings. The court noted that the sale could have been sanctioned subject to any orders under section 538 of the Companies Act if the applicants had applied for validation.

3. Impact of the prior mortgage created by the defendant in favor of the plaintiff:
The plaintiff held a mortgage over the property created on 11-6-1999, which was registered under the Registration Act and the Companies Act. The court emphasized that the mortgage gave the plaintiff an interest in the property, leaving the defendant with only the equity of redemption. Thus, the defendant could only transfer this equity of redemption to the purchasers.

4. Constructive notice and the effect of registration under the Companies Act and the Registration Act:
The plaintiff contended that the applicants had constructive notice of the mortgage due to its registration in Mumbai. The court acknowledged that the registration was valid under the pre-amendment provisions of section 30(2) of the Registration Act. The court also noted that the applicants were deemed to have notice of the mortgage under section 3 of the Transfer of Property Act, despite not having actual notice.

5. Applicability of sections 125 and 126 of the Companies Act:
The mortgage was registered under section 125 of the Companies Act on 14-6-1999. Section 126 deemed any person acquiring the property to have notice of the charge from the date of registration. The court held that the applicants, being subsequent purchasers, were also bound by this notice. The court dismissed the argument that section 126 did not apply to subsequent purchasers, emphasizing the need for prudent purchasers to investigate the title thoroughly.

6. Potential impact of the pending suit on the enforceability of the mortgage:
The court noted that the suit's pendency did not affect the mortgage's validity, as there was no indication that the mortgage was invalid. The applicants, seeking relief under Order 40 Rule 1(2) of the CPC, failed to demonstrate the mortgage's invalidity. The court assured that the applicants' rights would be protected if the suit was dismissed or the mortgage was not enforced.

Conclusion:
The Chamber Summons was dismissed, but the court clarified that the applicants' rights would remain open in the event of the suit's dismissal or the mortgage's non-enforcement. The applicants were given the liberty to redeem the mortgage as permissible by law. The sale in favor of the auction purchaser was confirmed but stayed until 16-7-2008 to allow the applicants time to act.

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