Citation Codes

Equivalent Citations

citation codes

Case Number

O.S Appeal No. 4 of 1952.

Attorney(S)

Messrs. Subramanyam, Rajagopal and D.H Nambudiripad for Appt.
Mr. C.S Vidyasankar for 1st Respt.

Judges

Rajamannar, C.J
Rajagopala Ayyangar, J.

Acts

Amendment Act of 1936, inserting Sub S. (2)
Indian Companies Act, originally, S. 120
S. 120(1) of the Indian Companies Act
S. 120 of the Indian Companies Act
S. 109 of the Indian Companies Act
S. 101 of the Companies Act, 1948,
S. 15 of the Companies Act, 1900,
Companies (Amendment) Act, 1936,
S. 120 of the Companies Act,
S. 15 of the Companies Act

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Smart Summary

Judgment Summary — (Delivered by the Chief Justice)

Factual and Procedural Background

On 26 June 1950 the Malayalee Bank Ltd. executed and registered a deed of sub-mortgage in favour of the appellant to secure Rs. 10,000 advanced by the appellant; the loan was repayable within six months. On 4 July 1950 the managing director forwarded prescribed particulars of the mortgage to the Registrar of Joint Stock Companies but did not file the instrument or a verified copy. The Registrar requested the instrument; the Bank said it had not received a copy and would furnish it when available. A copy was obtained by the managing director on 24 July 1950 but was not filed.

By order dated 10 October 1950 the Bank was directed to be wound up and the Official Liquidator (first respondent) was appointed. After the six months expired the appellant sought payment (letter dated 25 January 1951); the Official Liquidator replied that the mortgage was void as against the Official Liquidator and other creditors under S.109 of the Indian Companies Act because the required particulars had not been filed in time. The appellant applied to the Registrar on 29 February 1951 (after the 21-day period under S.109 had elapsed) and consequently filed an application under S.120 of the Companies Act. The learned Judge (Krishnaswami Nayudu, J.) dismissed the S.120 application; this appeal challenges that dismissal.

Legal Issues Presented

Whether, under S.120(1) of the Indian Companies Act, an omission to register a mortgage within the time required which is shown to be due to inadvertence or some other sufficient cause permits the Court to extend the time for registration.
Whether the commencement of winding up (or an intervening liquidation order) precludes the Court from granting an extension of time under S.120(1) so as to prevent a mortgagee from acquiring secured status.
How S.120(1)'s clauses are to be construed — whether the listed grounds are cumulative or disjunctive.
The legal effect of S.120(2) (inserted by the Companies (Amendment) Act, 1936) on the rights of creditors, particularly whether unsecured creditors acquire rights in respect of specific property that can be prejudiced by an extension order.

Arguments of the Parties

Appellant's Arguments

Reliance on the language of S.120(1) of the Indian Companies Act: if the Court is satisfied that the omission to register was due to inadvertence or some other sufficient cause, the Court has the power to extend the time for registration.
On the facts the learned Judge below had found the omission was due to inadvertence and that the appellant was not responsible; therefore the statutory ground for extension under S.120(1) was met.

Official Liquidator's Arguments

The Court could not, and in any event ought not to, grant an extension under S.120(1) if the company had been ordered to be wound up prior to filing the mortgage; this contention was supported by certain English decisions and statements in textbooks.
The practical effect of an extension after winding up would be to prejudice other creditors by giving the mortgagee secured status in priority to unsecured creditors.

Position of the Learned Judge Below (as described in the opinion)

The learned Judge found the omission to be due to inadvertence by the managing director and that the appellant was not responsible; he considered this sufficient cause under S.120(1).
Despite that view, he felt unable to grant relief because he considered himself bound to be further satisfied that the extension would not prejudice creditors or shareholders — and, since liquidation had intervened, an extension would prejudice unsecured creditors by giving the appellant secured status; therefore he dismissed the application.
The learned Judge left open whether the mortgage had become void under S.109, but was inclined to hold that substantial compliance might mean the mortgage was not void.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court in this Opinion
In re Joplin Brewery Co., Ltd.	An order for extension of time was made but with a proviso: "without prejudice to the rights of parties acquired prior to the time when the debentures shall be actually registered"; the judge thought such words ought to be added generally.	Used to illustrate early practice of adding a saving proviso to extension orders and to contextualize English practice prior to the Indian statutory amendment.
In re Spiral Globe Ltd.	An extension was allowed after commencement of winding up but with the proviso "without prejudice to the rights of parties acquired prior to the time when such debentures shall be actually registered"; observed that winding up affects creditors' positions and justifies protective provisos.	Illustrated English decisions where extension after commencement of winding up was coupled with protective words to safeguard intervening rights.
In re S. Abrahams and Sons	Although omission was due to sufficient cause, application for extension made after voluntary winding up was dismissed because it would be unjust to other creditors without qualifying the order; the decision assumed the proviso was intended to benefit both secured and unsecured creditors.	Quoted as authority showing English courts' caution about granting extensions post-winding up without appropriate saving terms (pre-Amendment context).
In re Anglo Oriental Carpet Manufacturing Co.	An interim extension with saving words was held to protect general creditors under a subsequent winding up; debenture holders were not entitled to assert their debentures against creditors existing at the time of the winding-up resolution.	Reinforced the view that saving words were relied upon to protect creditor rights in English practice before the 1936 amendment.
In re Ehramann Bros. Ltd. (Court of Appeal)	The usual proviso to extension orders protects those who have acquired proprietary rights or rights against the property (e.g., secured creditors), but does not enable ordinary unsecured creditors to rank pari passu with charge-holders unless they had taken enforcement steps or a winding up intervened.	Invoked for the proposition that the protective proviso does not cover ordinary unsecured creditors; acknowledged that different consequences arise if winding up intervenes before registration.
In re Cardiff Workmen's Cottage Co., Ltd.	Held an order extending time for registration would not protect unsecured creditors; no winding up was involved.	Noted to support that English practice does not extend protection to unsecured creditors in extension orders.
In re M.I.C Trust Ltd. (Court of Appeal)	Mortgage omitted by inadvertence; order to extend made though company insolvent and winding-up petition impending; held liquidator was not entitled to relief and noted that evidence about absence of winding up or judgments is often irrelevant.	Used to show that solvency/insolvency is not decisive in exercising discretion on extension and to criticize the practice of demanding evidence about winding up status.
In re Kris Cruiser Ltd.	Similar provision; held that the protecting proviso in extension orders protects only secured creditors, not unsecured creditors; recognized a statutory right for mortgagee to seek relief where omission was inadvertent.	Quoted to support the view that mortgagees have a statutory remedy to cure inadvertent omission and that the proviso does not protect unsecured creditors.
In re Bootle Cold Storage and Ice Co.	Early reported case of extension under equivalent statute; the affidavit included evidence that the company was carrying on business and had no winding-up petition — this practice later became common but was criticized as irrelevant.	Referred to as the origin of a practice (furnishing evidence of no winding up) that later decisions considered irrelevant to the core statutory test.

Court's Reasoning and Analysis

The Court analyzed the statutory language and the competing authorities and proceeded in several steps:

Construction of S.120(1): The Court observed that the learned Judge below erred in treating the statutory grounds as cumulative. The Court emphasized the disjunctive "or" in S.120(1) and held that the listed conditions are alternative grounds — proof of any one (e.g., omission due to inadvertence or some other sufficient cause) suffices to permit the Court to extend time for registration.
Application to the facts: The Court agreed with the learned Judge's factual finding that the omission to file the instrument in time was due to inadvertence by the managing director and that the appellant was not responsible; therefore the statutory ground of "inadvertence or some other sufficient cause" was established.
Response to Official Liquidator's contention about winding up: The Court examined English case-law cited by the Official Liquidator and textbook statements which suggested that an order for extension would not be made after winding up commences. On closer scrutiny, the Court found that English authorities do not establish an absolute rule forbidding extension after winding up; rather they reveal a practice of adding a protective proviso to extension orders to safeguard intervening rights.
Significance of the 1936 Amendment (S.120(2) of the Indian Act): The Court stressed that the Indian legislature, by inserting S.120(2) (Companies (Amendment) Act, 1936), clearly prescribed the effect of an extension order: "the order shall not prejudice any rights acquired in respect of the property concerned prior to the time when the mortgage or charge is actually registered." The Court read this as an express statutory rule excluding unsecured creditors (who do not acquire rights in respect of particular property) from claiming that their rights are prejudiced by an extension.
Effect on unsecured creditors and winding up: The Court concluded that unsecured creditors do not acquire proprietary rights in respect of particular property by virtue of a winding up; they have a general recourse against the company's assets but not rights in rem over any specific charged asset. Therefore S.120(2)'s saving of "rights acquired in respect of the property concerned" does not include ordinary unsecured creditors even where winding up intervenes.
Treatment of English authorities and practice: The Court accepted the later English decisions which indicate that solvency or insolvency is not decisive and criticized the practice of requiring affidavits asserting absence of winding up or judgments as generally irrelevant. However, the Court regarded the Indian statute's S.120(2) as determinative for Indian applications.
Conclusion on relief: Because the statutory test under S.120(1) was met (inadvertence), and S.120(2) excludes unsecured creditors' claims to rights in the specific property, the Court held that an extension of time could properly be granted despite the intervening winding up.

Holding and Implications

Holding:

APPEAL ALLOWED — The Court granted an order extending the time for registration under S.120 of the Companies Act as prayed for.

Consequences and implications (as stated in the opinion):

Direct effect: The appellant's application under S.120 was allowed and the time for registration of the mortgage was extended; this enables the appellant to seek the rights attendant upon registration (i.e., to rank as a secured creditor in respect of the charged property once registration is effected under the extended time).
Statutory construction clarified: S.120(1)'s grounds are disjunctive — proof of any single ground (such as inadvertence) suffices to permit extension; S.120(2) (added by the 1936 Amendment) prescribes that extension orders "shall not prejudice any rights acquired in respect of the property concerned prior to the time when the mortgage or charge is actually registered." The Court interpreted this to exclude ordinary unsecured creditors from claiming that an extension prejudices their rights in the specific property.
Effect of winding up and insolvency: The Court held that the mere fact of winding up does not by itself prevent the Court from granting an extension under S.120(1); unsecured creditors do not acquire proprietary rights in particular property by virtue of winding up, and solvency or insolvency is not decisive in exercising the Court's discretion under S.120(1).
Costs: No orders as to costs between the parties were made; the Official Liquidator will have his costs from the Estate (as recorded in the judgment).

Note: This summary is confined to and derived exclusively from the provided opinion and does not introduce material that is not present in that text.

V.C.S

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Akkirath Mundanat Manakkal Thuppan Nambudiri v. A.P Kutti Sankara Menon, Official Liquidator Of The Malayalee Bank Ltd. (In Liquidation) And Another.

JUDGMENT

(Delivered by the Chief Justice.)

This is an appeal against the order of Krishnaswami Nayudu, J. dismissing an application filed by the appellant under S. 120 of the Indian Companies Act in the following circumstances:

On 26th June, 1950 the Malayalee Bank Ltd., executed and registered a deed of sub-mortgage of some of the securities held by the Bank in favour of the appellant to secure a sum of Rs. 10,000, advanced by the appellant to the Bank. The loan was repayable within six months. On 4th July, 1950 the managing director of the Bank forwarded to the Registrar of Joint Stock Companies particulars of the mortgage as prescribed in a form provided for the purpose, but he did not send either the instrument of mortgage or a copy thereof verified in the prescribed manner. The Registrar acknowledged receipt of the particulars and called upon the managing director to file the instrument or a copy of the same. The Bank replied to the Registrar on 13th July, 1950 that they had not received a copy of the mortgage deed and that as soon as it was received they would furnish the Registrar with it. It appears that a copy of the mortgage deed was obtained by the managing director on 24th July, 1950. but the same was not filed with the Registrar. By an order of Court dated 10th October, 1950, the Bank was directed to be wound up and the first respondent was appointed Official Liquidator. Soon after the expiry of six months, the time fixed for the repayment of the amount due under the sub-mortgage, the appellant wrote on 25th January 1951 to the Official Liquidator to make arrangements to pay the amount due to him. The Official Liquidator replied that the deed of mortgage in favour of the appellant was void under S. 109 of the Indian Companies Act as against the Official Liquidator and the other creditors, as the requisite particulars of mortgage bad not been filed with the Registrar of Joint Stock Companies in time. The appellant thereupon himself applied to the Registrar in the prescribed form on 29th February 1951 for registration. As the application was made beyond the 21 days provided for under S. 109 of the Act, the appellant filed the application under S. 120 of the Act, out of which this appeal arises.

The learned Judge held that the omission to file the particulars of the mortgage with the Registrar in time was due to inadvertence on the part of the managing director in not filing the copy of the mortgage deed, that the appellant was not responsible for his omission, and therefore there was sufficient cause for the applicant not applying in time. In spite of his conviction that the appellant's cause was just and that the omission was due to ignorance of the requirements of registration on the part of the appellant which he considered to be sufficient cause, the learned Judge held that he was helpless to pass an order in favour of the appellant, because in his opinion he should be further satisfied that the extension of time would not prejudice the position of creditors or shareholders of the company. As the liquidation had intervened in the meanwhile and the effect of extension of time would be to entitle the appellant to rank as a secured creditor in preference to other unsecured creditors of the company, he held that it was a case where the Court was unable to extend the time under the provisions of S. 120 of the Act. He, therefore, dismissed the application. He, however, observed that he was leaving open the question whether the mortgage in favour of the appellant had become void under S. 109 of the Indian Companies Act, The learned Judge was inclined to hold that since the requirements of S. 109 of the Act had been substantially complied with by the managing director, the mortgage in favour of the appellant had not become void. The appeal is against this order.

Learned Counsel for the appellant relied upon the language of S. 120(1) of the Indian Companies Act in support of his contention that on the finding of the learned Judge that the omission to register the mortgage within the time required was due to inadvertence or to some other sufficient cause, the learned Judge had the power to order that the time for registration be extended. S. 120(1) runs as follows:

“The Court, on being satisfied that the omission to register a mortgage or charge within the time required by S. 109, or that the omission or mis-statement of any particular with respect to any such mortgage or charge, or the omission to give intimation to the Registrar of the payment or satisfaction of debt for which a charge or mortgage was created was accidental, or due to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, or that on other grounds it is just and equitable to grant relief, may, on the application of the company or any person interested and on such terms and conditions as seem to the Court just and expedient, order that the time for registration be extended, or, as the case may be, that, the omission or mis-statement be rectified, and may make such order as to the costs of the application as it thinks fit.”

Undoubtedly, the language of the section supports the contention of the appellant. If the Court is satisfied that the omissipn 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 “or” which separates each of the clauses in S. 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 one of the following conditions is satisfied, namely, (1) the omission was accidental or due to inadvertence or to some other sufficient cause, (2) the omission is not of a nature to prejudice the position of creditors or snare-holders of the company, and (3) on other grounds it is just and equitable to grant relief. These conditions are not cumulative because of the disjunctive “or”.

Learned Counsel for the Official Liquidator contended that the Court could not, and in any event ought not, to grant an extension under S. 120(1) if before the filing of the mortgage with the Registrar under S. 109 the company is ordered to be wound up. This contention is based entirely on certain English decisions and statements in the text books. Though at first sight it does appear as if they support the respondent, on a closer examination of the entire case-law on the point, it is evident that there is no such rule established in England, In Palmer's Company Law, 19th Edn. 1949, learned Counsel cited to us the following passage at page 270:

“An order for extension will not be made after a winding up commences.”

This statement is apparently made on the authority of the decision in In re S. Abrahams and Sons(1). In Buckley on Companies Acts, 12th Edn., there is a reference to a practice to support an application for extension with evidence that no winding up is pending and no judgment has been recovered against the company and remains unsatisfied (page 237).

The first reported case on the point is In re Joplin Brewery Co., Ltd.(2). There was an application by a company for extension of time for the registration of certain mortgage debentures. The company was entirely solvent and there was no question of liquidation. The relevant section in force at the time was S. 15 of the Companies Act, 1900, which was in the following terms:

“A Judge of the High Court, on being satisfied that the omission to register a mortgage or charge within the time required by this Act, or the omission or mis-statement of any particular with respect to any such mortgage or charge, was accidental, or doe to inadvertence or to some other sufficient cause, or is not of a nature to prejudice the position of creditors or shareholders of the company, or that on other grounds it is just and equitable to grant relief may, on the application of the company or any person interested and on such terms and conditions as seem to the Judge just and expedient, order that the time for registration be extended, or, as the case may be, that the omission or mis-statement be rectified.”

Buckley, J., ordered the application, but he directed that the following words be added to the order, viz,:

“but that this order be without prejudice to the rights of parties acquired prior to the time when the debentures shall be actually registered.”

The learned Judge was of opinion that these words ought to be added in every case, unless there was some good ground to the contrary. A few months after this decision, Swinfen Eacy, J., dealt with a similar application for extension in In re Spiral Globe Ltd.(3). Here, the debenture holders were the applicants, and the application was made after the commencement of the winding up of the company. An order of extension was made but with the addition of the following words:

“without prejudice to the rights of parties acquired prior to the time when such debentures shall be actually registered.”

The learned Judge made the following observations on the effect of the winding up of the company:

“It is true that on the winding up of a company the property does not become vested in the liquidator as it does become vested in the trustee of a bankrupt on the bankruptcy of an individual. But the principle of the cases before referred to is not limited in its application to those cases in which the ownership of or property in goods or chattels has actually changed; it extends, in my judgment, to cases in which the rights of third persons have actually accrued, and which would be prejudicially affected if registration were allowed without saving and protecting those rights. Upon a winding up the rights of the whole body of the company's creditors have intervened, and the position of the liquidator, and through him of all the general creditors of the company, would now be very much prejudiced if the time for registration were unconditionally extended.”

In In re S. Abrahams and Sons, Buckley J. had to deal with an application for extension made by a debenture-holder after the company had passed an extraordinary resolution for voluntary, winding up. Though the learned Judge held that the omission to register was due to some other sufficient cause, he dismissed the application because it would be unjust to the other creditors to grant extension of time without qualifying the order as in In re Joplin Brewery Co. Ld., and to make an order in that form in a case where the winding up of the company had commenced could not benefit any one. The conclusion arrived at by the learned Judge was obviously on the assumption that the qualifying words as in In re Joplin Brewery Co. Ltd. were intended to benefit both secured and unsecured creditors. The facts in In re Anglo Oriental Carpet Manufacturing Co. were slightly different. In June 1901 the company issued debentures creating a charge but the charge was not registered within twenty one days. On 1st November, 1901, an order was made under S. 15 of the Companies Act, 1900, extending the time for registration until 15th November but “without prejudice to the rights of parties acquired prior to the time when such trust deed and debentures shall be actually registered.” The charge was registered on 15th November but in the meantime, on 11th November the company passed an extraordinary resolution for voluntary winding up. Buckley J. held that the rights of the general body of creditors under the winding up order were protected by the saving words of the order extending the time for registration, and the debenture holders were not entitled to set up the debentures in their favour against any of the creditors of the company existing at the time of the passing of the resolution for winding up. The learned Judge thought that the case was covered by his previous decision in In re S. Abrahams and Sons. In In re Ehramann Bros. Ltd.(4) the Court of Appeal had to deal with the effect of the usual proviso added to an order extending time, such as that in In re Joplin Brewery Co. Ld.. It was held that such a proviso did not enable an ordinary unsecured creditor of the company at the date when the charge was registered to rank pari passu with the charge-holders, unless he had taken steps to enforce his debt or unless a winding up had intervened. Vaughan Williams L.J said:

“………according to my reading of this order, the protection is given only to those who have acquired rights of property or rights against property, and this, as it seems to me, clearly does not include unsecured creditors who have no right against the property in question and no charge against it.”

Romer L.J was of the same opinion, and also Cozens-Hardy L.J It was pointed out, however, that different considerations would arise if a winding up intervened before the registration was made. Vaughan Williams L.J observed:

“One sees, of course, that if there is an order for extension of time, and before the registration actually takes place, there intervenes a winding up, these words would protect the rights of property so acquired in that interval.”

So also Romer L.J thus:

“An ordinary creditor would have no locus standi; if there was liquidation, of course, different considerations would apply, and if he had a charge different considerations would apply; he might then intervene, and I think his intervention would be accepted by the Court.”

Cozens-Hardy L.J specifically approved of the two decisions of Buckley J, in In re S. Abrahams and Sons and in In re Anglo Oriental Carpet Manufacturing Co., . In view of this decision of the Court of Appeal, the later decision of Buckley J. in In re Cardiff Workmen's Cottage Co., Ltd.,(5) does not require much notice. The learned Judge held that an order under S. 15 of the Companies Act granting an extension of time for the registration of debentures would not protect unsecured creditors of the company. There was no question of winding up involved in that case. The learned Judge, however, suggested, that it may be just and expedient to provide for protection of unsecured creditors also. The decision in In re M.I.C Trust Ltd., (6), is not directly on the point we are concerned with, but it is valuable for the discussion of the matter, particularly in the judgment of Romer L.J A mortgage by deposit of title deeds was by inadvertence omitted to be registered within twenty one days. The mortgagee 10 months later, applied to the Court to extend the time for registration. Notice was served on the company. At that date the mortgagor company was hopelessly insolvent, and a petition for its winding up was impending. The mortgagor company appeared by Counsel, who was instructed to oppose the motion. But a few days later, when the motion came on again, the opposition of the company was withdrawn, and the order extending time for registration was made. Shortly after the order for extension of time was made, the mortgagor company was ordered to be wound up compulsorily on its own petition. The liquidator took out a summons to declare the charge void against him in as much as the company had suffered a judicial proceeding when unable to pay its debts and thus was guilty of a fraudulent preference. It was held by the Court of Appeal that the liquidator was not entitled to any relief. Romer L.J once again pointed out that the protecting proviso usually added to an order for extension did not apply to unsecured creditors. But then it was asked by Counsel, if that be so, and if the Court was not going to protect unsecured creditors, why was it that the Court always insisted on being furnished with evidence that there had been no judgment obtained against the company and that no resolution had been passed or even notice sent out convening a meeting of the company to pass a resolution to wind up? The learned Lord Justice answered it thus:

“The Court, as far as I know, does not do it, I do not know of any case in which the Court has insisted upon having evidence of that kind. It is perfectly true that in practice such evidence is nearly always furnished to the Court when application is made under S. 85, but I think the reason for that is to be found by reference to In re Bootle Cold Storage and Ice Co., which is, as Mr. Tucker tells us, the first reported case of any extension made under S. 15 of the Act of 1900. In looking at this report, I find a statement that, in addition to other relevant facts, ‘evidence was given that the company was still carrying on business, and that no petition to wind up the company had been presented, nor had notice of a meeting to pass a resolution to wind up the same been given, nor had any creditor recovered judgment against the company.’………The result of that of course was that any one who made an application under the section after that note appeared in the Weekly Notes, if he knew his business, would put into his affidavit evidence similar to that in the case before Farewell J. and I think in that way the practice has sprung up and is still continuing of putting in statements which to my mind are wholly irrelevant; that is to say, statement which do not indicate that there is anybody who has obtained any interest in the property of the company, but statements dealing with the position of the company so far as regards its unsecured creditors.”

The latest case on the point is In re Kris Cruiser Ltd.. In that case, there was an order made under S. 101 of the Companies Act, 1948, which is in pari materia with S. 15 of the Act of 1900 and S. 120(1) of the Indian Companies Act. There was no winding up in that case. Vaisey J. held that the traditional and well settled form of proviso inserted in orders for extension of time for registration protected only secured creditors and not unsecured creditors. Such a proviso did not extend to protect the inchoate or other rights of unsecured creditors as such. The learned Judge said at p. 141:

“The true view is, however, that there is a statutory right in the mortgagee or chargee to come to the Court to be relieved of the consequences of his own negligence and lack of caution provided that the Court is satisfied that the omission to register was not an omission with any frandulent intention but was, in the words of the Act, ‘due to inadvertence or to some other sufficient cause’.”

The learned Judge was not satisfied in that case with the solvency of the company. But he thought that the solvency or insolvency of the company was not a matter to which he need pay attention. For this he had the authority of Romer L.J in In re M.I.C Trust Ltd..

In the Indian Companies Act, originally, S. 120 did not contain what it i now to be found in Sub-S. (2). It was by the Companies (Amendment) Act, 1936, that that sub-section was added. It runs thus:

“Where the Court extends the time for the registration of the mortgage or charge, the order shall not prejudice any rights acquired in respect of the property concerned prior to the time when the mortgage or charge is actually registered.”

Whatever may be the usefulness of the English decisions before the Amendment Act of 1936, inserting Sub S. (2) there is now very, little scope for the application of the practice in English Courts and of the protecting proviso added to an order for extension. In Sub-S. (2) of S. 120, the Legislature had laid down the effect of the order, namely, that it shall not prejudice any rights acquired in respect of the property concerned prior to the time when the mortgage or charge is actually registered. This sub-section obviously excludes unsecured creditors. In our opinion, it also excludes the rights of unsecured creditors even when there is a winding up order. As a result, of a winding up order, the unsecured creditors do not acquire any rights in respect of any particular property which is the subject matter of the charge. The unsecured creditors may have a general recourse to all the assets of the company left after satisfying the secured creditors, but it cannot be said that they secure any rights in respect of any particular property of the company. The later decisions in England make it clear that the solvency of the company is not a matter of any consequence in disposing of an application for extension of time. Romer, L.J pointed out in In re M.I.C Trust Ltd. how the practice grew of alleging that there was no winding up order and that no judgment had been obtained against the company. In Gore-Browne's Handbook on Joint Stock Companies, 41st Edn. 1952, the law on the point is thus stated:

“And it is now clearly established that the order only protects creditors who have acquired a security or levied execution on the property the subject matter of the charge, and that the Court will not insert any terms for the protection of the unsecured creditors of the company. An order to extend the time for registration may be made notwithstanding that the company is insolvent or that a meeting has been convened to consider a resolution for voluntary winding up.”

But, as mentioned before, we are directly governed by the language of S. 120(2) and that makes it clear that Unsecured creditors would not have any right to contend that an extension of time for registration made after the winding up order would not give the charge holder the rights of a secured creditor.

With respect to the learned Judge, we do not agree with him that he was helpless in the matter. 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.

We allow the appeal and make the order of extension of time under S. 120 of the Companies Act, as prayed for, No orders as to costs. The Official Liquidator will have his costs from the Estate.