TMI Blog1983 (1) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... d Hardoi. In the year 1946, the company opened a cash credit account with the bank in Delhi with a sanctioned limit of ₹ 1 lakh against the security of its assets and by a written instrument of March 26, 1946, the company purportedly created a pledge of its various assets in favor of the bank to secure the repayment of the outstanding in the account. Certain other documents are also said to have been executed to secure the repayment. Subsequently, the company offered additional security by way of shares in Vanguard Insurance Co. Ltd. The charge was apparently confirmed by the insurance company. In 1952, a sum of over ₹ 1 lakh was said to be outstanding in the account and on default in repayment, the bank sought the winding up of the company on default in repayment, the bank sought the winding up of the company on the ground of its inability to pay. The petition was resisted on the ground that the debt was bona fide disputed. The plea of the company was turned down and the company was ordered to be wound up. In 1954, the bank was also ordered to be wound up on its own petition and both have since been in liquidation. 3. It appears that some time in September 1950, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions without giving an opportunity to the parties to produce evidence, as indeed, the liberty to seek an amendment of the pleading. In my order of July, 30, 1979, it was further pointed out that the claim was admittedly out of time on the date of winding up of the bank out could be saved by the admitted cheque payment made in 1949. It was further pointed out that the question whether the payment could save the claim for the payment order simplicities or the claim for the enforcement of the security depended in the first instance, on the existence, effect and validity of the pledge, which are in dispute, and, secondly, on the way one looked at the relief claimed in C.A. No. 327, and the other application, C.A. No. 322 of 1972. It was also pointed out that prima facie the first of these applications merely sought a simple payment order without purporting to enforce the security. While the other application sought certain order to preserve the securities without the specific enforcement of it. I have since allowed the bank to amend each of these application so as to bring out the real questions in controversy between the parties. 5. On the amended pleading of the parties, the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ijay Talkies and Laxmi Talkies, Hardoi, and uncalled capital of the company, present and future and stock-in-trade, together with the receipts of the company by way of share money, booking money etc., etc., were pledged with the bank and shall be considered to be in the exclusive possession and under the exclusive control of the bank an be held as security for the due payment by the company of the balance in the cash and current account. But this agreement, the company bound itself not to pledge or otherwise charge or encumber any of the assets nor to permit any act whereby the security may, in any way, be prejudicially affected. The agreement further provides that the company would render full account to the bank of the receipts from and by way of exhibition of the pictures pledged with the bank and the securities would be duly insured. There are other provisions in the agreement with regard to the margin and certain other matters which are not relevant for our present purpose. By Ex. P-12, the company under took to deposit all monies received by it in terms of the agreement. But Ex. P-13, company assured the bank that the aforesaid deed would be duly registered with the Registrar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and the leasehold rights in the various cinemas were not specifically made part of the agreement, even though there are vague references in the document to property rights . Such a document, Therefore, did not need to be registered, since it did not purport to transfer any interest in any immovable property of the company. It is interesting to notice in this context that the bank had laid no claim to the leasehold rights in any of the cinemas and the claim for the enforcement of the securities is confined to the assets of the company consisting of machinery, equipment, furniture, fittings, fixtures, cinematographic films, prints, exhibition rights, publicity material, stock-in-trade and certain other assets. It is, Therefore, not possible to hold that on account of non-registration of the document, there was no valid or subsisting pledge of the assets of the company in favor of the bank. 11. Secondly, it was urged that the charge created by Ex. P-14 over the various assets of the company by pledge, etc., became void as against the official liquidator of the company and its creditor on the order to wind up the company, by virtue of s. 125 of the Companies Act, as the charge w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hedules said to form part of the agreement, but the schedules are not available apparently having been misplaced during the partition since the bank was a Muslim concern. The bank has, however, been able to salvage three lists referred to above Exs. P-16, P-17 and P-18, which purport to be lists of machinery furniture, etc., in three of the cinemas mentioned above. The absence of the schedules, however, does not render the agreement ineffective nor does it cease to be valid or subsisting for that reason. This is because the document itself contains sufficient description of the assets so as to identify the same even without further details, which were intended to be set out in the document rendered the schedules quite unnecessary and the same may not even have been drawn. It is interesting to notice in this context that there is no indication in the agreement if any of the assets of the company had been mortgaged, pledged or hypothecated earlier with any bank or creditor. There are also references in the agreement that the company would render a true and proper account of virtually all its dealings to the bank and that the company would hold these assets as the trustee of the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh these could be validly made subject-matters of charge. This contention, however, ignores the provision of the agreement that all the items of securities would be considered to be in the exclusive possession and under the exclusive control of the bank in such a manner that such possession and control shall be apparent and indisputable . This clearly changed the relationship between the assets and the company and on the execution of the agreement, the company continued to hold the assets not in its capacity as its owner but as a trustee for the bank. This was enough to constitute constructive delivery of the pledged goods to the bank, even though actual delivery was never made. The constructive delivery coupled with the agreement conferred on the bank special property in the pledged goods and the requirements of a valid pledge were, Therefore, fully satisfied. In any event, the mortgage of movable property is a recognised form of hypothecation and such hypothecation confers a good title upon the persons in whose favor it is made even in the absence of possession and the law recognises the transaction was security and equity gives effect to it AIR 1969 AP 201 (sic) and Pramatha N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the creditor had been in possession of the assets pledged with the bank. The creditor had been impleaded as party respondent in both the applications. In C.A. No. 327/72, the bank had directed the order application in para. (3) as the Main Petition . It is, however, true that the applications were not happily worded and there was, Therefore, some justification for the respondents to urge that there was no attempt to enforce the securities by any of these applications, even though the factum of pledge was mentioned in both the applications and permission of the court was sought to preserve the securities in C.A. No. 322. The position has, however, since changed because while considering the question of limitation and jurisdiction as preliminary issues. I found that the state of the pleadings was not happy. The applications have, however, since been amended with the leave of the court and the amended C.A. No. 327 in terms, seeks the relief of enforcement of the securities for the payment of the bank's outstandings. It is true that the form in which the security is sought to be enforced still does not conform to the strict requirement of the CPC but to my mind, that would not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1949, and the cheque was encased on October 31, 1949. If the limitation for the claim be three years, then, obviously, the claim became barred by time by October, 1952, the liquidation proceedings having been initiated in 1954. If, however, the limitation for the claim be six years, it was not barred by time by 1954. That, Therefore, is the crucial question that arises. It was also not disputed that as suit for the enforcement of security would be governed by art. 120 of the Indian Limitation Act of 1908, corresponding to art. 113 of the present Act, which provides the limitation of six years and by virtue of the payment, the claim would ordinarily be within time in 1954. It is, however, urged that the payment and/or acknowledgment implicit in it would ensure in relation to the liability of the creditor to the bank but not in relation to the security. Now, it is true that there in nothing in the payment or the manner in which it is made which may indicate an express acknowledgment of the relationship between the parties as pledge or pledges and there was no express acknowledgment with regard to the relationship between the parties as such pledges or pledges or hypothecator or hyp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not have been open because s. 45-O(1) of the Banking Regulation Act provides that the limitation would not run in such cases, notwithstanding the provisions of the Limitation Act, 1908, or any other law for the time being in force to the contrary. The present Limitation Act would be within the mischief of sub-s. (1) of s. 45-O and there would be no limitation for these applications in spite of art. 137. For all these reasons, it is not possible to hold that the claim or the present applications were barred by time. 17. Issue No. 2 This issue raises the question whether this court has no jurisdiction to entertain the applications. The plea of want of jurisdiction was raised on the basis of the provisions of s. 45D(10) of the Banking Regulation Act. Section 45D(10) would, however, have no application unless the matter involves a proprietary right in immovable property. Neither the company nor its creditor claims any proprietary right in an immovable property. In any event, I have already held that no part of any immovable property forms the subject matter of the pledge, hypothecation, etc. True, there is a reference in the agreement with regard to registration but tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vor of the creditor was in respect of the assets which had earlier been pledged or hypothecated with the bank, there would be no difficulty in holding that such mortgage and/or pledge would be subject to the prior rights of the bank. In the absence of schedules to the deed of pledge, the identity of the assets is not established. It is, Therefore, not possible to hold that the mortgage and/or pledge in favor of the creditor is subject to the prior rights of the bank as pledgee or hypothecate ,particularly where physical possession of none of these assets was at any stage taken by the bank and the bank was satisfied merely by a provision in the deed that the company would be holding the assets as its trustee. There was no floating charge on future assets with the result, the relief must be confined to such of the assets as formed the subject matter of the pledge, etc., and can be identified. It is, however, not possible to relieve the creditor altogether unless is established on a proper rendition of accounts that the debt secured by the mortgage deed had not been fully discharged and there are still outstandings in favor of the creditor which would exceed the value of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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