2015 (5) TMI 1263 - HC - Companies Law

Rejection of appellant s application to be treated as a first charge holder/secured creditor pari-passu - dismissal of application on the ground that the appellant s charge had not been registered under section 125 of the Companies Act 1956 - HELD THAT - It is important to note that the Assistant General Manager of the Ist respondent in a letter dated 17.05.1999 addressed to the Official Liquidator stated that respondent Nos.2 to 4 as well as the four insurance companies had a pari-passu first/exclusive charge on the company s fixed assets. The letter admitted that the aggregate principal amount due to the four insurance companies is Rs. 200 lacs. This admission stands. It has never been contended that it was a mistake or made under a mistaken impression. The respondent Nos.1 and 2 do not state that the charge had not been registered. They merely state that the appellant has not been able to establish that the charge was registered. Absent any indication to the contrary and there is none it must be presumed that the charge was registered. Admittedly the charge was created. In any event it is clear beyond doubt from the above facts that it was. Reference made to the documents and specifically Form No. 8 which establishes that respondent No.1 had submitted the necessary documents for registration in accordance with Section 125 of the Act. It is inclined to presume that the authorities concerned in the Registrar of Companies fulfilled the statutory obligation of registering the charge. There was no legal bar to the charge being registered. The impugned order and judgment are setaside. It is declared that the appellant holds a pari-passu charge as claimed by it and shall be entitled to a pro-rata distribution of the sale proceeds after making necessary deductions therefrom - Application allowed.

Issues Involved:

1. Registration of the appellant's charge under Section 125 of the Companies Act, 1956.
2. The validity and enforceability of the appellant's claim to a pari-passu charge.
3. The implications of the registration or non-registration of the charge on the appellant's status as a secured creditor.
4. The procedural compliance concerning the submission of documents for registration of the charge.
5. The distribution of sale proceeds among secured creditors.

Issue-wise Detailed Analysis:

1. Registration of the Appellant's Charge:

The primary issue was whether the appellant's charge was registered under Section 125 of the Companies Act, 1956. The learned Company Judge initially dismissed the appellant's application on the grounds that the charge was not registered. However, upon review, it was established that the appellant's charge was indeed registered. Evidence included a receipt dated 20.11.1995 from the Registrar of Companies, acknowledging the filing of Forms 10 and 13, which are critical for registering charges. The court presumed the charge was registered due to the absence of any contrary indication and the receipt's evidence.

2. Validity and Enforceability of the Appellant's Claim to a Pari-passu Charge:

The appellant, as a Debenture Trustee, claimed a pari-passu charge alongside other financial institutions. The court found that the appellant's dues were secured by a first mortgage and charge, as outlined in the Trustee Agreement. The agreement was supported by letters from other respondents, confirming no objections to the creation of a pari-passu charge in favor of the appellant. This agreement was further solidified by the execution of a hypothecation agreement on 03.11.1995, coinciding with the Trustee Agreement.

3. Implications of Registration or Non-registration:

The court addressed the contention that the charge was void due to non-registration. It was concluded that the charge was registered, and thus valid against the liquidator and other creditors. The court emphasized that the registration was evidenced by Form-8, which detailed the creation of an equitable mortgage, thereby affirming the appellant's secured status.

4. Procedural Compliance for Registration:

The respondents argued that the documents might have been submitted beyond the prescribed period under Section 125. The court dismissed this argument, noting the proviso to Section 125 allows an additional 30 days for registration. There was no evidence of refusal by the Registrar of Companies to register the charge. The court presumed procedural compliance, given the lack of contrary evidence from respondents who had complete knowledge of the documentation.

5. Distribution of Sale Proceeds:

The court ordered a recalculation of amounts due to secured creditors, acknowledging the appellant's pari-passu charge. The Official Liquidator was instructed to ensure a pro-rata distribution of sale proceeds, with necessary deductions, among the secured creditors. The judgment clarified that the appellant holds a first-charge pari-passu with other charge-holders, entitling it to a fair share of the proceeds.

In conclusion, the court set aside the impugned order, allowing the appellant's application and affirming its status as a secured creditor with a pari-passu charge. The Official Liquidator was directed to adjust the distribution of proceeds accordingly, ensuring the appellant's claim is honored.

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