Panchapagesa Sastry, J.
1. This is an application to vary the order of the Official Liquidator of the Andhra Paper Mills Co., Ltd., (in liquidation) disallowing the claim of. the applicant to have a charge over the movable assets of the company for a sum of Rs. 1,01,172-15-2. The liquidator admitted that the amount claimed was due, but he disallowed the claim to rank as secured creditor on the ground that the document creating, the security was not registered with the Assistant Registrar of Joint Stock Companies, Cocanada, as required by Section 109 of the Indian Companies Act. This order further states that in any event, the amount of Rs. 34,000 included in the claim representing payment made on 15th July, 1947 to Messrs. Natwarlal Shamaldas and Co. cannot be treated as a secured debt. No grounds for the same are however mentioned in the order.
2. The applicant Tansukhrai M. Karundia, claims to have advanced the aforesaid sums in circumstances set out below. The Andhra Paper Mills would appear to have issued debentures to the extent of eleven lakhs. By about 1945 interest on, the same had accumulated to another six lakhs. The company having made default in payment under the terms of the debenture document, the debenture trustees had taken possession, but they were themselves unable to work the concern. They seem to have delivered over the premises again to the Mills on certain conditions, which were not fulfilled and the trustees again entered into possession of the debenture premises on the 14th February, 1947. Certain proposals would appear to have been made by the trustees to the Board of Directors as to the terms, upon which moneys could be borrowed for running the concern and at the suggestion of the trustees the Company had agreed to execute deeds giving a lien or charge to any person who might be found by the debenture trustees to be willing to advance funds. A resolution to this effect was passed on 10th March, 1947 (Ex. P-1) and on the same day a draft agreement between the company and the company's banker and treasurer was also approved by them (Ex. P-2). In pursuance of the draft so approved, Ex. P-3 was executed on the 21st March, 1947, between the company and the applicant, therein referred to as the treasurer. It is under this document that the applicant claims to have advanced moneys from time to time to the company and now claims to have a security over the properties mentioned in the document for the balance of the amounts due to him. In view of the contentions urged-regarding the invalidity of the document, as against the liquidator, it is necessary to set out its main terms, which are as follows:
These presents witness : That in consideration of the said Tansukhrai M. Karundia having agreed to lend and advance to the company such sums or moneys or credit of any nature and kind whatsoever for the purpose of carrying on the business and affairs of the company and working the, factory at Rajahmundry, the Company hereby agrees and binds itself as under:
(1) All movable properties of every description in the treasurer's possession on the company's account, or for the time being held by the treasurer on company's behalf whether alone or jointly or with others in India or elsewhere including any bullion, deposit receipts, promissory notes, bills of exchange, hundies, bills of lading, railway receipts, other documents of title to goods, any other negotiable or transferable instruments or securities, bills or other documents relating to supplies made or services renderdd to Government or to any other person or mercantile documents of every v description or contracts other than those pertaining to immovable properties requiring registration in India and other documents evidencing the company's title as creditors or members of any corporation, association, company or syndicate in India or elsewhere, are hereby hypothecated for and shall stand charged with, and
(2) all marketable securities and goods coming into the treasurer's possession on the company's account or deposited with the treasurer or for the time being held by the treasurer on the. company's behalf, are hereby pledged for and shall stand charged with
the due payment of the amount of any advacne or credits with interest thereon at one per cent, over the bank rate with a minimum of 4 per cent, per annum with six monthly receipts, and all costs charges and expenses incurred by the treasurer in connection with such advances or credits.
The document contains various other clauses which are also important in this connection. It is stated to be a continuing security to cover the amount of advance.-It is provided that the treasurer shall not be responsible for any loss, damage or depreciation suffered by the movable properties, securities, and books in his possession or in the course of realisation, nor bear loss or damage caused by theft or burglary. The company undertakes to maintain a margin on the said movable properties, securities or goods and failing repayment on demand of the amount of advance with interest, etc., the treasurer is entitled, but not bound to sell or otherwise dispose of all or any of the movable property marketable securities or goods by public auction or by private sale without reference to the company or without obtaining its consent. The proceeds of such sale should be applied in payment of all costs and in repaying the amounts due to the treasurer and, if there is any balance, to be paid over to the company. The treasurer is to carry on business and maintain the necessary staff for which the company will pay the salaries, wages and expenses. The company is to give an irrevocable power of attorney to the treasurer with necessary powers to manage the concern. The power is not to be revoked until all the moneys due to the treasurer are fully paid up. Another clause expressly provides that all movable property in any shape or form including raw materials, stores and finished products, etc., shall be in the treasurer's possession and control and he-shall be entitled to deal with the same as he thinks fit. The treasurer has a right to sub-delegate his powers under the power-of-attorney to be granted to him and to grant power-of-attorney on his own behalf to other persons. On the same date the company gave a power-of-attorney as contemplated to the applicant, a copy of which is Ex. P-4. It is therein recited inter alia that he has power to hold moneys, negotiable instruments, goods, hundies, promissory notes, cheques, bills of lading, railway receipts, etc., and the proceeds thereof in his possession and to appropriate the same towards the moneys due to him as the company's banker. Further all moneys and all movable property belonging to the company, whether actually received or likely to be received by the treasurer and all goods actually held by the attorney or to be received by him on behalf of the company, are to be received, held and appropriated by him towards liquidation of the moneys advanced by the attorney. In pursuance of the power-of-attorney, the applicant appointed one Mr. N. K. Gokhale as attorney to be in charge of the Mills at Rajahmundry and run the concern. This arrangement was acted upon until the company was. ordered to be wound up by order of this Court dated 23rd September, 1947, in O. P. No. 235 of 1947, filed on 22nd August, 1947. The provisional liquidator, who was appointed took possession of the Mills on 6th September, 1947, from the said Gokhale, who was admittedly in possession till then on behalf of the applicant.
3. The question for decision is whether the document, Ex. P-3, is void against the liquidator for the reason that it has not been registered with the Assistant Registrar of Joint Stock Companies as required by Section 109. The applicant's-advocate contends that this document' created a pledge on the movable properties, of the Company and does not require registration under Section 109(1)(c). Although, the order of the Official Liquidator does not refer to any particular clause of Section 109, in the counter-affidavit filed by him in this application, it is stated that the document requires registration, as the applicant claims a charge on the stock-in-trade of the company. The learned advocate for the applicant conceded that a pledge on stock-in-trade would require registration, but he submitted that he was willing to give up his claim for security over stock-in-trade and was content with a declaration that he is entitled to have his security over all the properties covered! by the document, Ex. P-3 other than stock-in-trade. In the argument before me, however, the advocate for the liquidator took a different line and contended that the entire document is void against the liquidator for the reason that it amounted to creating a floating charge and hence required registration under Clause (f). He relied on the decision of the Judicial Committee in Imperial Bank of India v. Bengal National Bank (in liquidation) (1931) 61 M.L.J. 589 : L.R. 58 IndAp 323 : I.L.R. 59 Cal. 377 (P.C.)., and that of the High Court of Allahabad in Babu Nandan Lal v. Parsottam Sahu I.L.R. 1942 All. 119. As pointed out by Buckley, L.J., in Evans v. Rival Granite Quarries, Ltd. (1910) 2 K.B. 979, a floating security is not a specific security; it is only one which affects the assets included in it, which are mortgaged in such a way that the mortgagor can deal with them without the concurrence of the mortgagee.
A floating security is not a specific mortgage, of the assets, plus a license to the mortgagor to dispose of them in the course of his business, but is a floating mortgage applying to every item comprised in the security, but not specifically affecting any item until some event occurs or some act on the part of the mortgagee is done which causes it to crystallise into a fixed security.
In the present case it will be noted that the applicant was given possession of the items pledged to him. As and when other moveable properties come into his. possession, they also stand pledged to him. The security itself is expressly stated to be a continuing one. On default of payment when .demanded, he is given the right to have the properties in his possession sold by public or private auction and apply the net proceeds in liquidation of the amounts due to him. No doubt, the company is allowed to run its business, but it is only run by him as an agent under an irrevocable power-of-attorney. This scheme was devised apparently to ensure his possession of the properties delivered to him and also his continued, possession of all the moveable properties covered by the doqument. These-characteristic features are sufficient to negative the contention that this is a mere floating charge coming under Clause (f) of Section 109. As pointed out by Rankin, C.J., in Jones & Co. v. Ranjit Roy I.L.R. (1926) Cal. 513, the element of possession, which is contemplated, by the deed and which was actually given, is an important factor, which stands in the way of the document being regarded as creating a purely equitable charge of a character coming fairly within the description of a, floating charge. The decision in Bank of Baroda v. Shivdasani I.L.R. (1926) Bom. 547 is also in point. In the present case, the possession of the moveable properties should be taken to be with the applicant in his capacity as pledge and not merely and solely as an agent of the company.. I am of opinion, therefore, that Clause (f) is not applicable and that the document does not require registration, as a floating charge.
4. If it is a pledge of moveable properties other than stock-in-trade, the document does not require registration either under Clause (e). In answer to a specific question from the Court, the learned advocate for the liquidator admitted that the document can be given effect to as regards all moveables contained therein other than stock-in-trade, in spite of the inclusion of the stock-in-trade also in the document and its non-registration. It was not contended that the document is. bad in toto. As I stated already it was admitted that it may be enforced as creating a good security over the rest of the properties other than the stock-in-trade. In view of that admission, it is not necessary to deal with that point.
5. It is next argued that,' at any rate, a sum of Rs. 34,000 cannot be treated as a secured advance. No reasons are given why this amount is treated in a different manner from the rest of the advances either in the order of the liquidator, or in the counter-affidavit filed by him. In the arguments, however, the advocate for the liquidator stated that this amount was advanced within three months prior to the winding up order and hence it was bad under Section 211 as a fraudulent preference. No evidence was let in to show that the payment was made by the applicant with a view to give that creditor a preference over other creditors. The mere fact that the money was paid within three months prior to the presentation of the petition for winding up is not by itself sufficient to avoid the transfer or payment as invalid under Section 231. When this was pointed out, the learned advocate-for the liquidator tacitly gave up his contention, as he had no evidence to let in.
6. In the result, the applicant is entitled to a declaration that he has a valid security over such of the moveable assets of the company as are comprised in the document, Ex. P-3, but excluding stock-in-trade therefrom for the total sum of Rs. 1,01,172-15-2. The order of the liquidator is varied accordingly to that extent. The applicant will get his costs from the respondent. The liquidator will have his costs from out of the company's funds. I fix advocate's fee for each side at Rs. 350.