TMI Blog1955 (10) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... made in O.P. No. 96 of 1952 the company was ordered to be wound up. The Indian Bank claimed that various quantities of newsprint had been pledged to it by the company and on various dates in April, 1952, and, later this newsprint was sold for a sum of Rs. 92,227-2-0. The Indo-Commercial Bank Ltd., made a similar claim in respect of other quantities of news-reel and these were sold on nth December, 1952, for a sum of Rs. 8,606-6-6. Two petitions have been filed in relation to the moneys thus realised. Application No. 4436 of 1954 is one by Narayana Rao, and his case is this. In January, 1951, in association with four of his friends he formed a syndicate for the purchase and sale of paper. In January, 1951, the, purchased various quantities from "Dinasari Ltd." A further two lots were purchased in February, 1951. Yet more lots were purchased on 31st March, 1951, 4th April, 1951, 10th April, 1951, 23rd May, 1951, 18th October, 1951, and 28th December, 1951. In his affidavit he stated: "In respect of the above purchases on 31st March, 1951, 4th April 1951, and 10th April, 1951, 32 reels of newsprint of 17933 pounds were delivered by the company on account of D. Govindarajulu and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not a pledge as the legal possession of the goods was always with the company, on the facts stated above, (2) Even assuming the transaction amounts to a pledge of moveables, the property pledged is the stock in trade of the company as mentioned above. Hence the transactions required to be registered under Section 109 of the Act before the Registrar of Joint Stock Companies and as they were not so registered, they are void against the Official Liquidator or the creditors. Thus the amount realised by the sale of the said stock is liable to be refunded to the Official Liquidator as assets available for distribution." The case of the Indian Bank Ltd. is that there had been a valid pledge of the goods sold at its instance, that it is secured creditor in respect of the amounts due to it, and that it is perfectly entitled to appropriate the amount realised by the sale of the pledged goods towards the money due to it. The contention of the liquidator that the goods formed the stock in trade of the Dinasari Ltd. is not sound. The affidavit filed on behalf of the bank states: "It (the company) imported these goods for the purpose of utilising them in its business for printing and publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et, in answer to a question put to him, counsel for Narayana Rao stated that the goods were delivered to him on 2nd April, 1951, by Chokkalingam. Now Exhibit I.B. 16( a ) will show that the goods which formed item 16 in the sale notice were cleared from the harbour only on 10th April, 1951. It follows that they could not have been delivered to Narayana Rao on 2nd April, 1951. Besides, even on 2nd April, 1951, the goods had been pledged with the Indian Bank Ltd. Vide Exhibit I B. 16. Mr. Thyagarajan made an attempt to show that some at least of the paper sold in auction, viz., items 5 and 6 in the sale notice, must have been those previously sold and delivered to Narayana Rao. An examination of the relevant exhibits, however, indicate that what happened was this : out of the goods pledged with the Indian Bank no double reels, that is to say, 220 reels, were at the instance of Dinasari Ltd., sent to the Express Newspapers, the understanding being that the Express Newspapers would replace these reels by 136 other reels. Accordingly, the Express Newspapers sent 136 reels in two lots, one of 104 reels and the other of 32 reels. The 104 reels were accepted and stored in Rundalls Road ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being handed over. The ownership of the goods remained with Dinasari Ltd. Delivery of the documents of title to the goods was effected in order that the goods might be security for the moneys advanced by the bank. The transactions were therefore pledges in the proper sense of the word. In some instances, this applies only to the Indian Bank however, the goods actually pledged were released and other goods substituted as security in that place. In one or two instances this too applies only to the Indian Bank Ltd., the amount due on the pledge had been paid, but, the bank still kept the goods as security for its overall accounts. This the Indian Bank Ltd., was allowed to do under one of the clauses of the instrument pledging the goods. Now none of these pledges was registered under section 109 (1) of the Indian Companies Act. The question, therefore, is whether the pledges are valid or void on this ground. So far as is now material, section 109 of the Indian Companies Act runs as follows: "Every mortgage or charge created after the commencement of this Act by a company and being either XXX ( c ) a mortgage or charge on any immoveable property wherever situate, or any interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quidator took out a judge's summons calling upon the appellant to show cause why the agreement between the bank and the appellant should not be declared void and why he should not be required to nay over the money he had realised. The case of the Official liquidator was that the agreement between the appellant and the bank required registration under section 109 of the Companies Act and as that had not been done the agreement was void against him. Gentle J, found for the Official Liquidator. From that order there was an appeal. The Bench held that the transaction of 29th June, 1939, amounted to a bailment of the promissory notes and a bailment as security for the payment of the debt due to the appellant by the bank. Therefore, all the requirements of the Contract Act for a valid pledge had been fulfilled. The court held: "The transaction now in question may amount to a mortgage, but, as there are here all the requirements for a valid pledge it is also a pledge, and being a pledge did not require registration." This case is therefore a direct authority for the position that a pledge does not require to be registered. Now, it is possible to say in respect of this case that promisso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n stock-in-trade does not require registration under clause ( e ). But, in view of the concession which counsel for the applicant had made earlier I doubt whether this case can be regarded as containing any judicial decision on the question now before me. The last case I have to examine is reported in Rajah of Vizianagaram v. Official Liquidator, Vizianagaram Mining Co. Ltd. [1952] 22 Comp. Cas. 1 where a consolidated judgment in six appeals was delivered. One of the appeals was C.M.A. No. 103 of 1950. The facts there were as follows: A company called the Vizianagaram Mining Co. Ltd., went into liquidation. A foreign company called S.A. Belgi Miners et. Commercial claimed a sum of 9,500 principal and also interest thereon. It further claimed that it was entitled to a charge on the mineral ore quarried by the company. The District Judge disallowed the claim for interest as also the claim for a charge on the ground that the charge had not been registered under section 109 of the Companies Act. The argument in appeal was that according to paragraph 8 of the agreement between the foreign company and the company under liquidation, the foreign company was entitled to a lien on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pledge of honour, pledge of loyalty, pledge of fealty, pledge of secrecy, pledge of affection, pledge of goods, pledge of documents of title and not of a pledge on good faith, pledge on honour, pledge on loyalty, pledge on fealty, pledge on secrecy, pledge on affection, pledge on goods, pledge on documents of title. I am free to say that I have not seen any case where any reputable writer uses the preposition "on" in association with the words "pledge" immediately after it. Glancing through the law reports I find in Mercantile Bank of India Ltd. v. Central Bank of India Ltd. [1938] ILR Mad. 360 a decision of the Privy Council, that Lord Wright uses the preposition "on" and not "of" after the word pledge. See pages 366 and 368. Section 178 of the Indian Contract Act, (since repealed) says, "A person who is in possession of any goods, . . . . .may make a valid pledge of such goods or documents; . . . . ." See also section 30 of the Sale of Goods Act where the words used are "pledge thereof" and not "pledge thereon". I spent sometime trying to discover whether in any English statute the preposition "on" is used after the word "pled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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