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In Re: Reshma Estate Private Ltd. and - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtMumbai High Court
Decided On
Case NumberCompany Petition No. 334 of 1974
Judge
Reported in(1976)78BOMLR654; [1977]47CompCas447(Bom)
ActsCompanies Act, 1956 - Sections 141
AppellantIn Re: Reshma Estate Private Ltd. and ;advance Commercial Co. Ltd.
Appellant AdvocateJ.I. Mehta, Adv.;S.I. Gandhi, Adv.
Respondent AdvocateI.M. Chagla, Adv.
Excerpt:
.....of unsecured creditors.;the petitioners who were secured creditors of the company under a registered mortgage filed a petition for condonation of delay in filing the particulars of the mortgage in their favour with the registrar of companies. the indenture of mortgage was executed on august 30, 1971. on september 18, 1971, the company filed an application in form 8, with the registrar of companies. the company, however, did not file a copy of the indenture of mortgage. the same was filed on may 10, 1972. the registrar by his letter dated july 22, 1972 asked the company to apply to the court for condonation of delay. a copy of the said letter was sent to the petitioners. the petitioners, in the exercise of their powers as mortgagees, sought to put up the property for sale on july..........the company filed with the registrar of companies an application in form no. 8, to have the said charge registered in the records of the registrar. the said fact was intimated by the company to the petitioners by their attorneys' letter, dated 12th november, 1971. it, however, appears that the company did not file a copy of the said indenture of mortgage when the registrar required the company to file a copy of the said indenture of mortgage. the company having filed the said copy of the indenture on 10th may, 1972, the registrar intimated to the company that in view thereof an appreciation for condonation of the delay, which was for a period, of 7 months and 10 days, should be made under section 141 of the companies act to the competent court. a copy of the letter of the registrar,.....
Judgment:

Mridul, J.

1. By this petition, the petitioners seek condonation of delay in filing the particulars of charge created by M/s. Reshma Estate Private Ltd. (hereinafter referred to as 'the company') in their favour under an indenture of mortgage dated 30th August, 1971. This petition has been filed on 6th August, 1974, roughly after three years from the date of execution of the aforesaid indenture of mortgage.

2. The facts material for the purpose of determining as to whether the petitioners are entitled to condition prayed for by them are not very much in dispute. The company was incorporated on 9th February, 1971. Its incorporation was for the purpose of acquiring an immovable property known as : 'Krishna Mahal' situate at Netaji Subhash Road, Bombay. It appears that the company raised funds for the purposes of purchasing the said property. The loan given to the company in connection there in which by the petitioners was secured under an indenture of mortgage dated 30th August, 1971. The said indenture was duly registered with the Sub-Registrar of Assurances at Bombay. On 18th September, 1971, the company filed with the Registrar of Companies an application in Form No. 8, to have the said charge registered in the records of the Registrar. The said fact was intimated by the company to the petitioners by their attorneys' letter, dated 12th November, 1971. It, however, appears that the company did not file a copy of the said indenture of mortgage when the Registrar required the company to file a copy of the said indenture of mortgage. The company having filed the said copy of the indenture on 10th May, 1972, the Registrar intimated to the company that in view thereof an appreciation for condonation of the delay, which was for a period, of 7 months and 10 days, should be made under section 141 of the Companies Act to the competent court. A copy of the letter of the Registrar, dated 22nd June, 1972, was also sent to the petitioners. In response to the letter received by the petitioners, all that the petitioners did was to write two letters to the company on 27th June, 1972, and 27th August, 1972, inter alia, requiring the company to obtain an appropriate order from this court and file a certified copy thereof with the Registrar of Companies. Besides writing the said two letters the petitioners did nothing until July, 1974, when in exercise of powers as mortgages they sought to put up the property, covered by the said indenture of mortgage, for sale. The said sale was scheduled for 27th July, 1974. In the meanwhile, on 26th July, 1974, one Copper Rollers Private Ltd. claiming to be the unsecured creditors by virtue of and under an Unregistered deed of 2nd mortgage, dated 16th May, 1972, filed a petition in this court for an order that the company be wound up under the provisions of the Companies Act. The said Copper Rollers Private Ltd. also took out judge's summons for appointment of a provisional liquidator. These proceedings are pending in this court.

3. The basis upon which the petitioners claim relief is that it was the obligation of the company to have the said indenture of mortgage dated 30th August, 1971, registered with the Registrar of Companies; that the petitioners, bona fide, believed that the company would have taken appropriate proceedings to have the said mortgage registered. It is stated in paragraph 6 of the petition that even after the receipt of the letter on 22nd June, 1972, and after writing two letters to the company on 27th June, 1972, 27th August, 1972, 'the petitioners remained under the belief that the said company must have taken the appropriate steps and got the mortgage registered under the provisions of the Companies Act and under the said belief did not make any inquiries from the company or the Registrar of Companies as to whether the said mortgage in favour of the petitioners was registered with the Registrar of Companies after obtaining the order of this hon'ble court.' It is further stated in paragraph 9 of the petition that, on coming to know of the aforesaid facts, the petitioners had requested the company to take necessary step 'as it was incumbent upon them to do and has had been agreed to by them.' Upon the basis of the said averments the petitioners claim in para 10 of the petition that the omission to register the charge was 'accidental or due to inadvertence and, in any event, was due to sufficient cause.'

4. Shri Gandhi, the learned counsel for the company, submits to the order of this court. Shri I. M. Chagla, the learned counsel for the said Copper Rollers Pvt. Ltd., opposes the petition. An affidavit of one Vijaykumar Gopaldas Agarwal affirmed on 15th October, 1974, has been filed on behalf of the said Copper Rollers Private Ltd., inter alia, setting out grounds of resistance to the petition. Besides the recital of facts it is stated in the said affidavit in paragraph 5 thereof as follows :

'In any event I submit that on their own showing the 2nd respondents have been negligent in the matter of registration of the mortgage in their favour as is evident from the fact that as far back as in June, 1972, i.e., after the petitioners became aware of non-registration of the charge in their favour the petitioners neglected to take any steps either to compel the said Reshma to make an application or to themselves make an application to this hon'ble court for condoning delay in registering the said charge in favour of the petitioners.'

5. In the light of these facts the two narrow questions that arise for my determination are as to whether the petitioners show sufficient cause for condonation of delay and as to whether on such a cause being shown, any relief should be granted. The second question will have to be determined with reference to the fact that the winding-up petition has been filed in this court and is pending in this court.

6. Before dealing with the matters in controversy, in fairness to the learned counsel, Shri Mehta, it may be observed that, after the hearing of the matter went on for some time, the learned counsel did make an application that in order to obviate the discussion as to whether the ratio or the rule laid down by the Supreme Court in J. K. (Bombay) Private Ltd. v. New Kaiser-i-Hind Spinning and Weaving Co. Ltd. : [1969]2SCR866 applies to the facts of the present case, the present petition might be adjourned until after the said winding-up petition is decided by this court. Normally, such an application ought to have been made before the court's time is taken by lengthy arguments of factual and legal character. This, however, is not a decisive factor which induces me to reject Shri Mehta's prayer for adjournment. I was inclined to grant an adjournment but for the fact that I had by then formed an opinion that no sufficient cause was shown for condonation and the petition had to fail on its own demerits.

7. The real questions not whether the petitioners had a valid justification for trusting the company, assuming that the petitioners had an agreement with the company where under the company undertook the liability to have the charge registered. The question is whether such a belief was bona fide one or whether negligence of the petitioners in not making any enquiries after June, 1972, remains unexplained and thereby disentitles them to any relief. I do not find any justification for inaction of the petitioners after the petitioners received a copy of the letter dated 22nd June, 1972, from the Registrar of Companies. It is inconceivable that after having known the fact that the company was negligent in not complying with requisition so as to have the charge registered with the Registrar of Companies within time (this was very clear from the fact that the company's negligence had already resulted in a delay of 7 months and 10 days) a diligent secured creditor would have rested on his oars in the so-called belief that the company would take steps to obtain the order from this court. The so-called formation of belief by the petitioners appears to be untenable. No reasonable person could have entertained such a belief. The plea appears to be a clumsy attempt to camouflage utter negligence on the part of the petitioners in not making any enquiry as to whether any order for condonation was obtained to have the charge registered. I am constrained to observe that my query as to an explanation for inaction after June, 1972, did to evoke any opposite response beyond the invocation of the so-called belief of the petitioners. I have been shown nothing which will justify the so-called bona fide belief of the petitioners. The belief could at the highest absolve the petitioners from adopting proceedings themselves. It could not absolve them of obligation to make diligent enquiries with the company or with the Register of Companies to ascertain whether any order of this court was obtained and the charge registered with him. There is nothing in the affidavit to justify the claim of the learned counsel to the effect that this is a case of inadvertence or that there has been any sufficient cause which prevented the petitioners from applying to this court under section 141 of the Companies Act for getting appropriate reliefs. It is true that the expression 'sufficient cause' must be construed in favour of the person who invokes exemptions form the rigorous of the law. But a person who on his own showing is unable to say as to what prevented him from adopting proceedings from June, 1972, until August, 1974, in my opinion, is not entitled to get any relief even on the most liberal construction of the said concept. Courts do not lean to protect the negligent or those who lack bona fides. I, therefore, reject the claim of the petitioners that they were prevented from applying for extension of time or to have their charge registered with the Registrar of Companies or for condonation of delay in that behalf.

8. There is yet another reason to decline reliefs to the petitioners. I find warrant in Shri Chagla's submission that having regard to the fact at that there is a winding-up petition pending in this court, the rights of the unsecured creditors, in the event of a winding-up order being passed in the petition, cannot be defeated. It is unnecessary for me to determine whether the ratio of the Supreme Court in J. K. (Bombay) Private Ltd. v. New Kaiser-i-Hind Spinning and Weaving Co. Ltd. [1970] 40 Comp Cas 686 (SC) applies only to a post and not a pre-winding-up order situation. suffice it to observe that the Supreme Court cited with approval the rule laid down in the case of In re Anglo-Oriental Carpet . [1935] WN 15 (Ch. D).

9. Normally, the courts accede to an application to register a mortgage or charge out of time provided the application is made bona fide and in good faith. An application of a negligent creditors cannot be said to be the one made in good faith. An application which is highly state and which seriously prejudices the rights of other persons must fail on the narrow grounds that it adversely affects rights of other persons : persons who could not be prejudiced by reason of negligent conduct of the charge-holder in not adopting proceedings to perfect his title in accordance with the provisions of the Companies Act. In such a situation, fact of registration under the Registration Act of no consequence. It is true that vested rights of the unsecured creditors to have the assets of the company distributed arise only after a winding up order is made but that does not detract from the position that on the facts of a particular case it can be safely predicated that a pending winding-up petition may in future result in a winding-up order. On such facts the normal probability of winding-up order militates against grant of any relief to the secured creditor. I have not been shown any material to infer that the winding-up petition of the said Copper Rollers Private Ltd. would not succeed either in point of fact or in point of law. There is nothing on record to show that the said winding-up petition will, in all likelihood, be dismissed by this court. Even otherwise, in the absence of persons who would be interested in the said company by reason of the pendency of the proceedings which proceedings are in rem, I am of the view that the petitioners who, on their own showing, have been guilty of gross and unexplained delay, should not be permitted to defeat the rights or legitimate expectations of the other creditors who might ultimately benefit as a result of the winding-up order that may be passed in the said petition. No other ground has been urged in support of the petition.

10. In the result, the petition is dismissed. The petitioners to pay the costs of Shri Chagla's clients.


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