TMI Blog1959 (3) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... Chandler and Price Folio size treadle 1 Hongkong half-crown treadle 1 Chandler and Price 24" cutting machine 1 Perforating machine 1 Lead types 4000 lbs. Racks for types 50 Stands 12 Subsequently instead of the Indian National Industries Ltd., Messrs. Sayanas Ltd. were appointed as managing agents of Messrs. Kutty and Rao Ltd. There was an agreement entered into dated nth May, 1955, in and by which it was inter alia agreed that there should be a transfer of the assets and liabilities of Sayanas Ltd. to Kutty and Rao Ltd. On 3rd June, 1955, the board of directors of Sayanas Ltd. passed a resolution approving the agreement entered into by its managing director with the then managing director of Messrs. Kutty and Rao Ltd. They further resolved to hand over the fixed assets and liabilities of the company at the time of handing over. On 25th June, 1955. the general body of Kutty and Rao Ltd., passed an extraordinary resolution agreeing to accept the agreement mentioned above and to accept the taking over of the assets and liabilities of Messrs. Sayanas Ltd. at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., who must be deemed to have the same rights against the company in liquidation so long as they were enforceable against Sayanas Ltd., which had not gone into liquidation. The only party to the application taken out by the appellant before Subrahmanyam, J., was the official liquidator but it appeared that there were other parties who were vitally interested in the claim made by the appellant as a secured creditor. There was one Kalyanji N. Suchede who had a mortgage executed on August 16, 1956, over all the assets of Messrs. Kutty and Rao Ltd., and there was also one P.B. Raju who held a mortgage of the properties of the company created in 1950 and there were also holders of debentures issued with a floating charge over all the assets of the company in liquidation. They were certainly proper parties to the appellant's application before Subrahmanyam, J., but notice was not taken to them. It was only on the last day of the hearing of the appellant's application that their advocates were heard. But they were not made parties. Before us they have been added as parties and their counsel were heard. Subrahmanyam, J., dismissed the application of the appellant. Hence this appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... effected on the application of any person interested therein. Section 125 of the present Act corresponds to section 109 of the Indian Companies Act, 1913. Sections 127 and 134(1) of the present Act correspond to sections 109-A and 116(1) of the Act of 1913. The several sections are all based on the corresponding sections of the English Act. No direct authority on the question which falls for decision in this appeal was cited to us at the Bar. Learned counsel however relied on the observations in a few decisions to which we shall refer. Obviously neither section 125 (1) of the Act of 1956 nor section 109(1) of the Act of 1913 in terms applies to the facts of the present case if the properties belonging to Sayanas Ltd. are deemed to have been conveyed by that company to Messrs. Kutty and Rao Ltd. It is only Messrs. Kutty and Rao Ltd. that is in liquidation. Sayanas Ltd. as such has not been wound up. The parties who oppose this appeal are not creditors of Sayanas Ltd. They are only creditors of Messrs. Kutty and Rao Ltd. It was on this footing that the learned judge Subrahmanyam, J., disposed of the application before him. He starts by saying that certain properties which belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o extend the literal meaning of a word, such extension is not only permissible but obligatory. The learned judge thought that it would not be correct to hold that the content of the charge got enlarged by reason of the acquisition of the property by Messrs. Kutty and Rao Ltd. Learned counsel for the appellant contended that there was no warrant for the interpretation placed by Subrahmanyam, J., on sections 125 and 127 of the (Indian) Companies Act, 1956. Section 125 in terms renders an unregistered charge created by a company void only against the liquidator and the creditors of that company. An unregistered charge is not void for all purposes. It is binding on the company itself, of course, so long as it is a going concern. So the argument ran. This argument is certainly supported by authority. In In re Monolithic Building Co.: Tacon v. The Company [1915] 1 Ch 643 at 667 , Lord Cozens Hardy, M.R., made the following observations about an unregistered encumbrance: "Of course the deed is not void to all intents and purposes. It is a perfectly good deed against the company so long as it is a going concern. It is not void to all intents and purposes, but it is void as between ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds used in a statute as well as in support of an extension of meaning when such extension is considered necessary in certain circumstances. For the former rule of construction we may refer to the following observations of the Privy Council in Commissioner of Income-tax v. Buckingham and Carnatic Co. Ltd. [1936] ILR 59 Mad. 175; [1935] 3 ITR 384 : " Where there is no ambiguity in the provisions of a section in an enactment the words must properly be construed in their ordinary and natural meaning. The court cannot countenance a construction involving an insertion in the section of words which are not found therein and are not in the least necessary for an intelligible construction thereof." In our opinion this is a salutary rule and departure from this rule can only be justified in extreme cases where the words construed in their ordinary and natural meaning clearly conflict with the obvious intention of an enactment as gathered from the enactment itself. As Lord Macmillan said in Mayor etc. of the Borough of New Plymouth v. Taranaki Electric Power Board [1934] 66 MLJ 67 ; AIR 1933 PC 216 : "it is the rule that words are used in an Act of Parliament correctly and exactly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. A company has only to acquire a property subject to a mortgage and deliberately fail to comply with the requirements of section 127(1) and the result is that the creditors of the company will be benefited by having recourse to the property free of the mortgage. The mortgagee cannot be blamed at all because he took the mortgage from an individual under a registered deed and at the time of the mortgage there was nothing to compel either the mortgagor or the mortgagee to comply with the provisions of the Companies Act. Why should such a mortgagee lose the benefit of his mortgage when without his being a party to the transaction the mortgagor sells the equity of redemption to a company and that company fails to do its duty, that is, fails to furnish the Registrar with the particulars of the charge? There is only one case to which we shall refer though it is not a direct decision on the construction of the language of the corresponding provision of the English Companies Act. In In re Connolly Bros. Ltd. : Wood v. The Company [1912] 2 Ch. 25 , the facts were these: A company issued debentures creating a floating charge upon their undertaking and all their properties, one of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant it is stated that in the winding up proceedings the creditors of Sayanas Ltd. had also been directed to file their claims relating to the respective amounts due to them. The judgment of Balakrishna Aiyar, J., dated March 11, 1957, in Application No. 2799 of 1956, is based on this assumption. He inter alia stated: "As I read the documents, there has been a transfer of the entirety of the assets and liabilities of Sayanas Ltd. to Kutty and Rao (Engineers) Ltd." The learned judge, therefore, held that the official liquidator would be entitled to collect all the moneys due and payable to Sayanas Ltd. It follows that on and from after the date of such transfer the appellant must be deemed to be a creditor of Kutty and Rao Ltd., and Kutty and Rao Ltd. is in liquidation. The appellant cannot, therefore, rely on his unregistered charge as against the other creditors of Kutty and Rao Ltd., who would include also the other creditors of Sayanas Ltd. This flows from the provisions of section 125(1) read without giving any extended definition to the word "created". It follows that the claim of the appellant to be recognised as a secured creditor was rightly rejected by the official liqui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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