1973 (3) TMI 70 - HC - Companies Law

Summary

Issues Involved:
1. Validity and binding nature of the promissory note, hypothecation agreement, and equitable mortgage.
2. Liability of Defendant No. 6.
3. Liability of Defendants Nos. 5 and 7.
4. Reliefs to which the plaintiff is entitled.
5. Compliance with Section 125 of the Companies Act.

Detailed Analysis:

Issues Nos. 1 to 4:
These issues pertain to the validity and binding nature of the promissory note, hypothecation agreement, and equitable mortgage. The court examined the evidence presented by P.W. 1, Gopal Shakar Kale, who testified about the execution of the promissory note (Exhibit P-1), the hypothecation agreement (Exhibit P-3), and the equitable mortgage (Exhibit P-4) by Defendants Nos. 2 to 5 on behalf of Defendant No. 1. The court found that these documents were duly executed and binding on Defendant No. 1, as the directors were authorized under the articles of association to borrow money. The court held that Exhibits P-1 to P-4 are valid and binding on Defendant No. 1, and the plaintiff is entitled to enforce these documents to recover the amount due.

Issues Nos. 5 to 8:
These issues address the liability of Defendant No. 6. Defendants Nos. 1 to 3 argued that Defendant No. 6 was liable to pay the amount due to an agreement dated July 17, 1964. However, the court found no evidence to suggest that Defendant No. 1's liability under Exhibits P-1 to P-4 ended with the agreement. The court concluded that the plaintiff is not estopped from recovering the amount from the assets of Defendant No. 1.

Issue No. 9:
This issue concerns the liability of Defendants Nos. 5 and 7. Defendant No. 5 had no objection to a decree being made, while Defendant No. 7, as a subsequent mortgagee, has rights subject to those of the plaintiff, who is a prior mortgagee.

Issue No. 10:
This issue pertains to the reliefs to which the plaintiff is entitled. The court deferred addressing this issue until the end of the judgment.

Additional Issues Nos. 1 and 2:
These issues involve compliance with Section 125 of the Companies Act regarding the registration of the mortgage. The official liquidator argued that the mortgage was not enforceable due to non-compliance with registration requirements. However, the court found that the mortgage was duly registered within the extended time granted by the district judge. The court also held that the certificate of registration issued under Section 132 of the Act is conclusive evidence that the registration requirements have been complied with. Therefore, the official liquidator's contention was rejected.

Relief:
The court decreed that the plaintiff is entitled to recover Rs. 1,97,343.01 with interest at six percent per annum on Rs. 1,50,000 from the date of the suit until the date of payment from the sale proceeds of the mortgaged properties. If the sale proceeds are insufficient, the plaintiff may apply to recover the balance from the other assets of Defendant No. 1 as an unsecured creditor. The plaintiff is also entitled to recover costs, with the advocate's fee calculated according to the rules governing original suits in civil courts in the state. A decree shall be drawn up accordingly.