TMI Blog1971 (10) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Sons Private Ltd., Madurai, the applicant herein, for carrying out certain repairs. The applicant-company carried out repairs by supplying certain spare parts. The repairs were completed in July, 1967. The applicant-company issued debit notes for a sum of Rs. 489.04. This amount carried interest. By August, 1970, the amount, including interest, was Rs. 649.21. In spite of repeated demands, the amount remained unpaid. After the winding-up order was passed, the affairs of the company were taken over by the official liquidator, the respondent in this application. When the applicant-company demanded payment of the amount due to it the official liquidator took up the position that the charge claimed by the applicant was void against him as it had not been registered under section 125 of the Act and that the applicant-company had no right to retain possession of the machineries but should return them to him and rank only as an ordinary creditor and prove its claim. It is in these circumstances that the applicant-company has come forward with this application contending, inter alia , that it is entitled to a statutory lien on the machineries and is a secured creditor, and that appro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " That the applicant has a right to retain the repaired machineries until it receives the due remuneration for the services rendered is thus clear. This right is only a right to retain the goods until payment and does not carry with it a right of sale to secure the amount. That is the distinction between the lien under section 170 of the Contract Act and a pledge carrying with it the right of sale. That the applicant-company has sold spare parts and has made use of those spare parts in carrying out the repairs of the machineries is also not in controversy. The amount due to the applicant-company, by way of sale amount of such spares supplied, has not been paid. Thus, the applicant-company is in the position of an unpaid seller. Under section 46 of the Sale of Goods Act, an unpaid seller has, notwithstanding that the property in the goods may have passed to the buyer, a right of re-sale as limited by that Act. Where the property in the goods has not passed to the buyer, the unpaid seller has, in addition to his other remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and a stoppage in transit where the property has passed to the buyer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a holder of a lien, the applicant-company did not have the lien registered as required by section 125 of the Act (Companies Act, 1956) and that in the absence of registration the lien is void as against him. Sub-section (1) of section 125, which alone is relevant, reads : "125. Certain charges to be void against liquidator or creditors unless registered. (1) Subject to the provisions of this Part, every charge created on or after the 1st day of April, 1914, by a company and being a charge to which this section applies shall, so far as any security on the company's property or undertaking is conferred thereby, be void against the liquidator and any Creditor of the company, unless the prescribed particulars of the charge, together with the instrument, if any, by which the charge is created or evidenced or a copy thereof verified in the prescribed manner, are filed with the Registrar for registration in the manner required by this Act within thirty days after the date of its creation.........." (Proviso omitted) Placing reliance upon this provision, the official liquidator contended that inasmuch as the lien claimed by the applicant-company is not registered, it is of no ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the winding up of an insolvent company, the same, rules shall prevail and be observed with regard to ( a )debts provable; ( b )the valuation of annuities and future and contingent liabilities; and ( c )the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent. (2) All persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company, may come in under the winding up, and make such claims against the company as they respectively are entitled to make by virtue of this section. Provided that if a secured creditor instead of relinquishing his security and proving for his debt proceeds to realise his security, he shall be liable to pay the expenses incurred by the liquidator (including a provisional liquidator, if any), for the preservation of the security before its realisation by the secured creditor." Though the expression "insolvent company" is not defined, obviously it refers to a company which has been ordered to be wound up on a petition founded upon section 433( c ), that is, the company being una ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a consideration of section 529 read with the relevant provisions of the insolvency law, I come to the conclusion that the holder of a statutory lien or the holder of a lien created by contract and registered as required by section 125 is a secured creditor in the matter of winding up of the insolvent company with regard to, among other things, debts provable in the winding up proceedings. The applicant-company being the holder of a statutory lien is thus in the position of a secured creditor. Though the lien to retain possession of the goods as a bailor does not confer a right of sale on the applicant-company, the applicant-company, as an unpaid vendor of the spare parts supplied, has a right of re-sale. Having regard to these circumstances, I am of the view that in the interest of justice and for the purpose of closing the administration of the insolvent-company, it is necessary that the machineries, which are in the possession of the applicant-company, are ordered to be sold in public auction by the applicant company after due publicity so as to enable the applicant-company to adjust its dues including the cost of sale out 6f the sale proceeds. If there is any balance left, it sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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