COMPANY LAW BOARD, MUMBAI BENCH
Kalupur Commercial Co-operative Bank Ltd.
Registrar of Companies
CP No. 943 of 2008
JANUARY 31, 2012
1. The present petition is filed under section 14(1) of the Companies Act, 1956 (‘the Act’) seeking directions to the respondent No. 1 to rectify the register to company in liquidation, i.e., NavrangSynthfab (P.) Ltd. and to register the charge of the petitioner over the property of the company being the land bearing survey No.267/P situated at Mouje, Lyava, Taluka, SanandDistt. Ahmedabad, for which the company in liquidation has already created equitable mortgage with effect from 29th August, 2000 in favour of the petitioner.
2.ShriNandish, learned counsel appearing for the petitioner narrated the brief facts. He submitted that the petitioner-bank had granted certain financial facilities to NavrangSynthfab (P.) Ltd. (the company in liquidation) along with the other group companies administered and managed by the same group of persons. However, the company was irregular in repaying the advances granted by the petitioner. As on 30th March, 2007, the company was indebted to the tune of Rs.83,86,836 to the petitioner-bank, plus further interest thereon. It is submitted that the directors/guarantors of the company (in liquidation) had executed usual and necessary documents in favour of the petitioner-bank on 22nd October, 1999 to secure the repayment by the company (in liquidation) from the petitioner-bank as on the said date. Such documents were demand promissory note, letter of lien, deed in acceptance of the credit facilities, guarantee bond, agreement for issuance of bills, etc. all executed on 22nd October, 1999. It is further submitted that in order to further secure the repayment of its dues, the director of the company (in liquidation) vide letter dated 29th August, 2000, deposited the original title deed of the property of the company (in liquidation) being land bearing Plot No.267/P admeasuring 20,639 sq. meters situated at Mouje village Lyava (Vasna) Taluka : Sanand, District Ahmedabad, Gujarat (‘the subject property’), [ with an intention to create equitable mortgage over it in favour of the petitioner-bank. It is asserted that the petitioner-bank is presently holding the original copies of the title deeds of the subject property. Hence, under the provisions of Transfer of Property Act, more particularly section 58(f) of the Act, the deposit of original title deed of any property in order to secure the repayment by a debtor to the creditor itself constitutes an equitable mortgage and, hence, the petitioner-bank has become the sole secured creditor of the company (in liquidation) qua the subject property. It is submitted that as soon as the title deeds of the subject property were deposited by the company (in liquidation) to the petitioner-bank, the mortgage was completed and, hence, the petitioner-bank got its charge registered before the Revenue Authority by way of letter dated 4th September, 2000.
3. It is submitted that the petitioner-bank was neither aware of filing and/or pendency of the company Petition No.222/99 in the hon’ble Gujarat High Court whereby the company (in liquidation) was sought to be wound up, nor the directors or the guarantors of the company (in liquidation) had apprised the petitioner-bank about the said fact while creating the charge of the petitioner-bank qua the subject property. The petitioner had granted credit facilities to the company with all bona fides and after taking due care and caution and upon receiving the security of immovable property. The hon’ble Gujarat High Court passed an order dated 4th December, 2000 of winding up of the company (in liquidation) in the said petition. It is submitted that on 12th October, 2007, the respondent No.2 had published public advertisement in DivyaBhaskar newspaper, wherein, it was mentioned that the official liquidator, attached to the hon’ble Gujarat High Court (respondent No.2 herein) has put the properties of the company (in liquidation) for public auction and offers of the public at large were invited under the said advertisement. The subject property appeared in Lot No.4 of the said advertisement amongst other two properties. It was at that time that for the first time the petitioner came to know about the filing of the above petition and the order passed by the hon’ble Gujarat High Court ordering winding up of the company. On perusing the said advertisement, the petitioner-bank immediately addressed a communication dated 16th October, 2007 to the Official Liquidator, wherein the petitioner registered its objections for holding of auction of the subject property. Pursuant to the said communication, the petitioner-bank received a communication dated 19th October, 2007 from the office of the official liquidator stating therein that the advertisement was published pursuant to the order passed by the hon’ble Gujarat High Court and if the petitioner wants to get the same cancelled or withheld, it may approach the hon’ble court for suitable orders. Pursuant to the said letter dated 19th October, 2007, the petitioner-bank again wrote a letter dated 23rd October, 2007 to the office of the official liquidator, whereby, it was conveyed that out of the properties described in the public advertisement, the property in Lot-IV being plot No.267/P, i.e., land admeasuring 20,639 sq. metres, situated at Mouje – village Lyava (Vasna), Taluka :Sanand, Distt. Ahmedabad is given as security by Mr. JagrutJayantilalBhagdev, director of the company (in liquidation) by executing power of attorney dated 4th September, 2001 in favour of the petitioner-bank. The respondent No.2 again wrote a letter dated 25th October, 2007 to the petitioner reiterating (that the petitioner cannot be considered as a secured creditor and may file its claim against the company (in liquidation) as prescribed under the Companies (Court) Rules, 1959. Thereafter by way of communication dated 6th November, 2007, the petitioner submitted its claims against the company (in liquidation) as per the Form No.66 prescribed in Companies (Court) Rules, 1959 (‘Court Rules’) to the respondent No.2 on 6th November, 2007. It is submitted that thereafter without giving any hearing to the present petitioner, the respondent addressed a communication purporting to be an order dated 20th November, 2007 passed under rule 163 of the Court Rules. On perusing the said order, it was found that by way of the said order the respondent had rejected the claim to the petitioner. The petitioner-bank filed the Company Application No. 71/2008 being an appeal as provided under rule 164 of the Court Rules challenging the communication (order) dated 20th November, 2007 of official liquidator. The hon’ble court directed the official liquidator to consider the present petitioner as a creditor of the company and further restraining him from dealing/disbursing with the sale proceeds recovered from the subject property. It is submitted that under the provisions of the Act, subject to the exceptions stated in rule 149, no charge of any secured creditor would be valid against the liquidator, if the same is not registered as per section 125 of the Act. Since the company is in winding up proceedings before the hon’ble Gujarat High Court, permission of the court was required to be obtained. Hence, the petitioner filed an application being Company Application No. 90 of 2008 in the hon’ble Gujarat High Court under section 446 of the Act, seeking permission of the court to initiate proceedings before this Board. The said application came to be allowed by the hon’ble Court vide order dated 25th February, 2008, permitting the petitioner to file the present, proceedings. The learned counsel relied upon the judgment of the Madras High Court in AkkirathMandanatManakkalThuppanNambudiri v. Official Liquidator, Malayalee Bank Ltd.  24 Comp Cas 489. lt is of the view “undoubtedly the language of the section supports the contention of the appellant”. If the court is satisfied that the omission to register in time was due to inadvertence or some other sufficient cause, it is not necessary that the court should be further satisfied that it “is not of a nature to prejudice the position of creditors or shareholders of the company”. With great respect to the learned judge, we think that he overlooked the effect of “are” which separates each of the clauses in section 120(1) from the other. On a proper construction of the section, it is clear that the court is entitled to extend the time provided the court is satisfied that any of the following conditions is satisfied, viz., (i) the omission was accidental or due to inadvertence or to some other sufficient cause, (ii) the omission is not of a nature to prejudice the position of creditors or shareholders of the company, and (iii) on other grounds it is just and equitable to grant reliefs, these conditions are not cumulative because of the disjunctive “or”. The court held that “but we agree with him that this is a case in which it must be held that the omission to register in time was due to inadvertence or some other sufficient cause”. In view of the reasons and facts as stated above, he prayed this Bench to grant the relifes as prayed for.
4.the 2nd respondent filed a detailed reply to the petition opposing for grant of reliefs. Shri P Sharma, learned counsel appearing for the 2nd respondent submitted that, the petitioner’s claim to have advanced the alleged loans to the company under liquidation NavrangSynthfab (P.) Ltd., very negligently and without going in depth into the precarious condition they were in the official liquidator, High Court of Gujarat by their letter dated 20th November 2007 passed an order under rule l63 of the Court Rules whereby the claim of the petitioner-bank has been rejected. That the only remedy available to the petitioner-bank is that the bank could file an appeal against the said order dated 22nd November, 2007 in the hon’ble High Court of Gujarat under rule 164 of the Court Rules. A Company Application No. 71 of 2008 was filed in this regard by the petitioner-bank. The same was heard by the hon’ble High Court of Gujarat on 19th February, 2008 and is admitted pending for final hearing. The order of rejection by the official liquidator dated 20th November, 2007 on the claim of the petitioner-bank, sufficiently specifies the reasons and grounds for rejection, as the company is under winding up and the order has been passed on 4th December, 2000. One of the grounds of rejection of claim of the petitioner-bank is that no charge is registered under section 125 of the Act till date and the Registrar of Companies (‘RoC’), Gujarat, Ahmedabad has not issued any certificate under section 132 of the Act in favour of the petitioner-bank. That the claim of the petitioner-bank is already concluded by rejection of its claim by the official liquidator, High Court of Gujarat by order dated 29th November, 2007. Therefore, the relief cannot be granted so as to re-open the concluded adjudication of the claim of the petitioner-bank. Moreover, the present petition cannot be entertained at this belated stage as the process of liquidation on the orders of the hon’ble Gujarat High Court has already begun and the present process is a clear bid to thwart the legal winding up process. The official liquidator being successor of the company, the subsequent security is not binding and the charge is ipso facto becomes void against the liquidator when the winding up commences. It is utterly false on the part of the present Petitioner Bank that hon’ble Gujarat High Court had prima facie believed that the present Petitioner Bank is a secured creditor or the company qua the subject property. The hon’ble Gujarat High Court had directed the official liquidator to consider it as a creditor and restrained the official liquidator from disbursing the amount recovered from the sale of the subject property, the hon’ble High Court of Gujarat had in its order dated 25th February, 2008 merely stated in para 7 which reads as “the court is of the view that since the applicant-bank wants to file an application before the Company Law Board (‘CLB’) for getting the charge registered, there may not be any objection in granting such permission. However, it is made clear that the applicant-bank may deposit a sum of Rs. 15,000 within one week from today with the official liquidator and as soon as the application is filed, a copy thereof should be served on the official liquidator. While applying the CLB may also be requested to intimate about hearing to the official liquidator so that necessary objection can be raised by the official liquidator before the CLB. Subject to this direction, the application may be disposed of”. In para 8 in last two lines it states as “it is made clear that the court has not expressed any opinion on merits of this application and, hence, the application will be decided by the CLB without being influenced by the fact that this court has permitted the applicant-Bank to move such application. Since the auction of the property in question is in process and the matter is pending before the court, the CLB is hereby in requested to decide such application as expeditiously as possible”. From the above order it is crystal clear that no order has been issued, no stay has been granted, no inference made to be considered as secured creditor. The hon’ble High Court only permitted the petitioner to move the hon’ble CLB and be heard expeditiously on payment of Rs. 15,000. The present petition which states that the director of the company (in liquidation) Mr. JagrutJayantilalBhagdev had executed an irrevocable power of attorney dated 4th September, 2001 in favour of the petitioner-bank. When the order for liquidation was passed on 4th December, 2000 all the directors of the company then ceased to be functional as directors of the company and their acts are void as the official liquidator of High Court would be appointed as successor and he would take over the affairs of the company and all acts are done by him. This basic fact is ignored and wilfully suppressed by the present petition. It is submitted that the rectification of charges cannot be ordered under section 125 of the Act after the date of the order for winding up of the company passed by the company court and after such a long time as this would be against the spirit of section 125 of the Act and would defeat the very purpose for which this section has been framed and render the whole section 125 of the Act as redundant. It is submitted that it was the fault of the present petitioner-bank and their total negligence to have advanced so much money to the respondent-company in liquidation as alleged during the period from the year 1999 without proper verification and the fact that a company petition was pending in the hon’ble High Court of Gujarat at that time. It is a case of sheer negligence on the part of the petitioner-bank and thereafter a mischievous indent for advancing loan to a company in liquidation. No where is the bank stated to be a secured creditor. The learned counsel for the respondents relied upon the following judgments in support of his case :
(i) Resinoid& Mica Products Ltd., In re  3 All ER 677 it is held,–
“[T]he court ought not to extend time for registering a charge over property of a company under section 101 of the 1948 Act after the company had gone into liquidation because the rights of all parties were determined at that date and those rights should not be prejudicially affected by subsequent registration of a charge. It followed, therefore, that the Registrar and the Judge had been right to refuse the application.
(ii) Ashpurton Estates Ltd., In re  1 Ch 110-it is held,
“[D]ismissing the appeal, that it was the established practice of the court, in the exercise of its discretion to grant an extension of time for registration of a charge under section 101 of the Companies Act, 1948, to make the order with a proviso that it was made without prejudice to the rights of the parties acquired prior to the time when the charge became registered and it was also firmly established practice that the order would not he made once a company went into liquidation, that there was no exceptional circumstances in the present case indicating that the court should not follows its normal practices and since the Registrar had properly considered the imminence of the company’s liquidation to be a relevant factor and the charge sheet had in its own interest deliberately deferred making the application, the Registrar and the judge have properly exercised the discretion under the section by refusing to make the order.
(iii) In the matter of Industrial Credit & Investment Corp. of India Ltd. v. Official Liquidator of Usha Automobiles &Engg. Co. Ltd.  144 Comp Cas 403 (Cal.) : It is held, –
“(D]ismissing the appeal, that if it were to be held that an application under section 141 could be received for registration of a charge in respect of any assets of a company in liquidation and for time to be enlarged, therefore, to the date beyond the order of winding up, section 25 and the condition it seeks to impose on the creditors could not be nearly diluted but completely obliterated. The appellant had not made of its case that since a part of the charge in its favour had been registered and recognised by the official liquidator, this was a matter of rectification or enlarging, the extent of the charge rather than a fresh registration of a charge.”
(iv) In the matter ofReshma Estate (P.) Ltd., In re  47 Comp Cas 447 (Bom.).
(v) In the matter of Ravi Constructions, Engg. & Contractors v. Registrar of Co.  1 Comp LJ 115 (CLB), it is settled Taw that the court ought not to extend time for registering a charge over property of a company after the company had gone into liquidation, because the rights of all parties were determined at that day and those rights should not be prejudicially affected by subsequent registration of charges.
(vi) In the matter ofOfficial Liquidator of Piramal Financial Services Ltd. v. RBI  51 SCL 69 (Guj.) it is held winding up deemed to commence from date of petition.
(vii) In the matter of Krishna Silicate & Glass Works Ltd., In re 1975 Tax LR 1253 (Cal.), it is held,—
“[A]pplication for condemnation of delay, no reservation of directors sanctioning loan, statement of secured loan not including alleged loan, applicant is not entitled to order under section 141.”
5. Heard, the learned counsel appeared for the respective parties, perused the pleadings, documents and citations relied upon by them. After analysing the pleadings the only issue is that whether the petitioner-bank is entitled to the relief as prayed for. The case of the petitioner that they had granted certain financial facilities, L/c discounting facilities to the company during the year 1999 and stated that the company was irregular in repaying the advances granted by the petitioner. It is also stated that as on 30th March 2007 the company was indebted to the tune of Rs.83,86,836 plus interest. It is also stated that the company has executed necessary documents, i.e., deed of hypothecation in favour of the petitioner on 22nd October, 1999 and also obtained personal guarantees of directors. After creation of equitable mortgage by hypothecating the immovable property, to secure the same in favour of the lender, necessary form, i.e. form 8 along with supporting documents has to be filed with the concerned RoC alter duly signed by the borrower and the lender After filing the form with the necessary fees, the concerned RoC may take note of the same. In the present case the petitioner has not even filed form 8. The petition was filed before this Bench on 1st April, 2008 against the mortgage which the company created in the year 1999. Apart from the above, the fact retrains that a petition was filed for winding up on 23rd July, 1999 to wind up the respondent-company before the hon’ble Gujarat High Court. Once a petition is filed, the winding up of the company commences from that date i.e., 23rd July, 1999 in terms of section 441 of the Act. Accordingly whatever decision taken by the directors and the company after 23rd July, 1999 is void in terms of section 536(2) of the Act. The sanction of bill discounting facility to the company on 22nd October, 1999 is after the presentation of the winding up petition before the High Court. Therefore, creation of encumbrance on the property of the company is void. As also the additional security created by deposit of title deeds on 22nd August, 2000 is also void. The hon’ble High Court of Gujarat passed winding up order on 4th December, 2000. The stand of the petitioner that they came to know on 12th October, 2007 from the paper advertisement that the immovable property of the company was put to auction and they addressed a letter dated 16th October, 2007 to the official liquidator registering their objections. It is shocking to know that the petitioner-bank without verifying the documents of the company and without safeguarding its interest, advancing huge monies to the company on mere belief on the directors is absolutely irresponsible on the part of the concerned officials. The petitioner being a co-operative bank dealing with the monies of public at large, carelessly and negligently acted while advancing loans to the company which went into liquidation prior to its sanction. Further the petitioner-bank disbursed the loan amount without obtaining signed Form 8 from the company. In case had it obtained duly signed Form 8 and had it filed the same with the concerned RoC by completing the formalities under section 125 of the Act, the interest of the public money could have been protected. Advancing loan to the respondent-company is nothing but negligent on the part of the petitioner and they are only responsible for the present state of affairs. The official liquidator vide its letter dated 20th November, 2007 made clear that the petitioner has not produced any valid document creating charge or mortgage on any of the assets of the company in petitioner’s favour. The official liquidator also made it clear that the petitioner-bank failed to produce any document or certificate evidencing the creation of charge issued by the RoC’, Gujarat, Ahmedabad under section 132 of the Act, certifying that any charge or mortgage on the assets of the company in favour of the petitioner-bank in terms of section 125 of the Act. As stated supra the charge has to be registered by filing Form 8 with the concerned RoC in terms of section 125 of the Act, within a period of 30 days after the creation of the charge. The RoC may allow another 30 days time on payment of additional fee. Therefore, total 60 day time is available to file the necessary forms with the RoC for creating the charge over the properties. The Act states that company has to file the necessary forms with the concerned RoC for registration of charges. It is obvious that the lender need to take action to get it registered with RoC to safeguard their interest. It is unequivocal that section 141 of the Act, empowers the Bench (CLB) to condone the delay in filing of Form 8. The condition of delay arises only when Form 8 duly signed by both the parties, i.e., the borrower and the lender, is filed with the RoC. The CLB while exercising powers under section 141 may on the application of the company or any other person interested and on such terms and conditions as seem to the CLB just and expedient, direct that the time for the filing of the particulars or for the registration of the charge or for the giving of intimation of payment or satisfaction shall be extended or as the case may require, that the omission or misstatement shall be rectification in the present case, there is no omission, on the other hand it is a case of negligence on the part of the petitioner. It is needless to say that there is remedy for omission or misstatement occurred. However, there is no remedy for negligence, wilful delay and the acts done to cause loss to the petitioner before this forum/Bench. In the present case the petitioner seeking to rectify the register of company in liquidation and also sought directions to register the charge of the petitioner over the property of the company. Since the petitioner failed to obtain Form 8 and having failed to file the same within the time as prescribed in section 125 of the Act, the petitioner is not having any locus standi to seek such reliefs. More particularly this Bench does not have the powers to grant the reliefs under section 141 of the Act as prayed in the petitioner. As far as execution of power of attorney by Shri J JBhagdav and Shri S D Agarwal on 4th September, 2001 and 16th April, 2004 in favour of the petitioner is concerned, the said power of attorney has executed, only after the winding up order passed by the hon’ble High Court of Gujarat dated 4th December, 2000. Therefore, in terms of section 512 of the Act the execution of power of attorney by ex-directors of the companies after the winding up of the company is void. The citation relied upon by the petitioner is of no relevance to the facts on the present case. In view of the above reasons, the petition is miserably failed and liable to be dismissed. Hence, the CP is dismissed. No order as to cost.