R.S. Bachawat, J.
1. The plaintiff Motilal Kejriwal is an unsecured creditor of the defendant No. 1, Indian Overseas Airlines Ltd. Previously, the plaintiff had instituted against the defendant No. 1 another suit, being Suit No. 4676 of 1950 for the recovery of his dues. In that suit, the plaintiff obtained an order of appointment of the Official Receiver as Receiver of the Dakota aircraft No. VT-AZV on the allegation that the aircraft belonged to defendant No. 1 absolutely. The Official Receiver took possession of the aircraft on or about 24-12-1950. On 2-2-1951, the defendant No. 2, Messrs. Air Friends, made an application in that suit for its examination pro interesse suo & for an order discharging the receiver on the allegation that the aircraft belonged to defendant No. 2 and that neither defendant No. 1 nor anybody else had any interest in the aircraft. In its petition the defendant No. 2 referred to and relied upon two agreements dated 16-7-1950 and also claimed that the aircraft was sold to the defendant No. 2 by the defendant No. 1 on 20-11-1950. The application was disposed of by an order dated 14-3-1951. The order embodies certain terms of settlement agreed to between the plaintiff and the defendant No. 2. Clauses, 1 and 2 of the terms of settlement are as follows :
'1. Official Reveiver will be forthwith discharged and he will make over possession to the applicant of the Dakota VT-AZV on counsel's endorsement without the order being drawn up.
2. In the event of the plaintiff in this suit instituting a suit within 3-4-1951 and establishing therein that the transfer of the Dakota Air Craft VT-AZV by Indian Overseas Airlines Ltd., to Air Friends who is the applicant in these proceedings is a sham or a fraudulent transaction and/or that the said applicant was not and/or did not become the owner of the said Air Craft at the time of the appointment of the Receiver in suit No. 4676 of 1950 (Motilal Kejriwal v. Indian Overseas Airlines Ltd.), the said Air Friend's will remain liable to and agree to pay to the plaintiff in the fresh suit upto a sum of Rs. 44,500/- or such sum as may remain outstanding in respect of the claim of the plaintiff in the said suit No. 4676 of 1950 against the defendant therein, the Indian Overseas Airlines Ltd. In the event of the plaintiff in the said suit No. 4676 of 1950 getting a decree against the said defendant therein he shall have to take all such steps in execution excluding personal execution or otherwise of realising the future decretal amount from the said defendant and in case of any such deficiency also and in the event of his establishing the said facts as hereinbefore mentioned, the said Air Friends hereby agrees to be liable and/or to pay such claim to the plaintiff.'
2. The subsequent clauses of the terms of settlement provided that the liability for the costs of the examination pro interesse suo proceedings, and of the costs, charges and dues of the Receiver would abide the result of the fresh suit and that in the event of the plaintiff not filing the suit within the time mentioned the plaintiff would bear such costs.
3. By a subsequent order the time to institute the fresh suit was extended by consent of the parties up to 9-4-1951. The plaintiff instituted this fresh suit on the 9th April claiming a decree against both defendants for Rs. 44,500/- and for other moneys payable under the aforesaid order dated 14-3-1951 and a declaration that the defendant No. 2 was not the owner and did not have any right, title and interest in the aircraft VT-AZV at the time of the appointment of the Receiver of the aircraft in Suit No. 4679 of 1950. The plaintiff asserts that the alleged transfer of the aircraft by the defendant No. 1 to defendant No. 2 had never taken place; that the defendant No. 2 never acquired any right, title or interest to the aircraft; that in any event the alleged transfer was a sham and/or a fraudulent transaction and/or was made with intent to defeat or delay the creditors of the defendant No. 1 including the plaintiff. These allegations were disputed by the defendant No. 2.
4. During the pendency of this suit the plaintiff obtained a decree in Suit No. 4676 of 1950 against the defendant No. 1 for Rs. 44,500/- with interest and costs and an order for sale of certain shares pledged by the defendant No. 1. and for appropriation of the sale proceeds towards satisfaction of the plaintiff's claim.
5. The following issues were raised at the trial of this suit :
'1. Did the defendant No. 2 become the owner of Dakota Aircraft VT-AZV at the: time of the appointment of Receiver in Suit No. 4676 of 1950 ?
2. Was the transfer of the Dakota Aircraft VT-AZV by defendant No. 1 to defendant No. 2 a sham or fraudulent transaction ?
3. Has the plaintiff taken all steps in execution of the decree as provided in the consent order dated 14-3-1951 to realise the decretal amount in Suit No, 4676 of 1950 ?
4. Is the suit maintainable in the event of the plaintiff not establishing any of the facts mentioned in Issues 1, 2 and 3 ?
5. Is the defendant No. 2 a necessary or proper party to the suit ?
6. To what relief, if any, is the plaintiff entitled ?'
6. At the trial the defendant No. 2 claimed title to the aircraft both under the agreement dated 16-7-1950 as also by virtue of the transaction of sale of November 1950. The point was also made clear by Champalal Chandak in his evidence. QQ. 352-356.
7. The learned trial Judge Bose, J. found that large sums of money were advanced by the defendant No. 2 under the two agreements D/- 16-7-1950. He also found that the defendant No. 2 was a secured creditor of the defendant No. 1 and that the defendant No. 2 procured a transfer of the aircraft VT-AZV in part satisfaction of the outstanding debt. He held that the transfer was not a fraudulent or a sham transfer. He also came to the conclusion that the defendant No. 2 did not become the owner of the aircraft VT-AZV on 24-12-1950, and that the letters and documents dated 20-11-1950 relating to the sale of the aircraft were brought into existence in January 1951. He found that the plaintiff had not taken all steps in execution or otherwise to get the pledged shares sold. He ruled that in the circumstances the condition precedent to the liability of the defendant No. 2 under the order dated 14-3-1951 had not been fulfilled and that the plaintiff could not maintain the suit. On these findings, Bose, J. dismissed the suit. The plaintiff has preferred this appeal from the decree. The defendant No. 2 has preferred cross-objections.
8. The evidence on the record, clearly establishes that on 16-7-1930 the defendant No. 1 and the defendant No. 2 entered into a financing agreement as also a partnership agreement. Both the agreements were executed by Champalal Chandak, Ram Gopal Saharia, Nihar Ranjan Sen, Parashram Bawari on behalf of the defendant No. 2 & by J. M. Akhani and J. S. Rutnagar on behalf of the defendant No. 1-and were witnessed by S. C. Palit, Solicitor. The genuineness of these agreements was not challenged by Mr. Bhabra. It is not suggested by Mr. Bhabra that these agreements are sham or fraudulent transactions. The defendant No. 1 was in financial difficulties since prior to 1950. All its aircrafts, raw materials, stores and accessories were pledged with the Exchange Bank of India and Africa Ltd. Funds were required to re-condition and ply the aircrafts. The defendant No. 2 agreed to render financial assistance and eventually the two agreements dated 16-7-1950 were executed. Large sums of money were advanced by the defendant No. 2 to the defendant No. 1 both before and after the two agreements. The genuineness of the receipt, cheques and books of account tendered on behalf of the defendant No. 2 were not challenged by the appellant before us.
9. The defendant No. 2 advanced the sum of Rs. 45,000/- required for the release of the aircraft VT-AZV and large sums of moneys for purchase of Dakota aircraft engines for being fitted in the air-crafts and for meeting the salaries and remuneration of the staff of the defendant No. 2 and other expenses. The aircraft VT-AZV was released and engines were bought with the aid of the funds so advanced.
10. The aircraft VT-AZV was taken to Bangalore shortly after its release and was fitted with engines so purchased.
11. The financing agreement provided that the aircraft VT-AZV would be employed by the defendant No. 2 for the carriage of passengers and air freight, that the net profits would be shared equally by both the defendants. The agreed terms and conditions of the partnership were embodied in the separate partnership agreement dated 16-7-1950. The partnership agreement was acted upon. The partnership continued from August 1950 to November 1950. The aircraft VT-AZV was flown from 4-8-1950 till about 5-11-1950.
12. The evidence of Chandak with regard to the total sum of money advanced by the defendant No. 2 to the defendant No. 1 and with regard to the dues outstanding on 20-11-1950 as also on 13-1-1951 is confused and unsatisfactory. We are, however, satisfied that on 20-11-1950 the dues of the defendant No. 2 exceeded Rs. 1,20,000/-. The mortgage deed dated 13-1-1951 and the oral evidence also show that even on 13-1-1951 a sum of Rs. 1,25,000/- was due to the defendant No. 2 from the defendant No. 1 upon adjustment of accounts and after giving to the defendant No. 1 credit for the price of the aircraft VT-AZV. Bose, J. found that the defendant No. 2 who was a secured creditor procured a transfer of the aircraft in satisfaction of its outstanding dues. Mr. Bhabra on behalf of the appellant formally conceded before us that he did not challenge the correctness of this finding.
13. The defendant No. 2 was a secured creditor and the mortgagee in possession of the aircraft VT-AZV. Clause 1 of the Financing agreement dated 16-7-1950 provides that possession of the aircraft would be made over to and would remain with the defendant No. 2 by way of security for the advances. Clause 2 of the agreement provides that as soon as the sum of 45,000/- is paid by the defendant No. 2 to the liquidator of the Exchange Bank of India and Africa Ltd., the aircraft would be considered as the property of the defendant No. 2, subject to the condition that upon payment and discharge of the full amount due on account of advances, the aircraft would become the property of the defendant No. 1. Clause 3 of the agreement provides that the money required for the purchase of engines for being fitted in the aircraft would be advanced by the defendant No. 2 and the engines so purchased would remain the properties of the defendant No. 2 and that upon payment in full of the amount advanced the property in the aircraft as well as in the engines to be so purchased would pass on to the defendant No. 1 but not otherwise. Clearly the agreement transferred the ownership of and the general property in the aircraft VT-AZV to the defendant No. 2 and the aircraft was thenceforth held by the defendant No. 2 as mortgagee. This conclusion is reinforced by Clause 11 of that agreement which provides that upon payment of the aforesaid sum of Rs. 45,000/- and before delivery of possession of the aircraft VT-AZV and at all times during the subsistence of the agreement and if and when the aircraft would come or remain in the control or power of Mr. Akhaney he would be deemed to hold the same as trustee for and on behalf of the defendant No. 2 and not for and on behalf of the defendant No. 1.
14. Quite clearly the financing agreement dated 16-7-1950 created a mortgage of the aircraft VT-AZV in favour of the defendant No. 2. On general principles and even apart from the express terms of the agreement the mortgage of the aircraft transferred the general property in the aircraft to the defendant No. 2. The effect of a mortgage of goods is explained thug in Story's Law of Bailments, 9th edition, Article 287, page 256.
'A mortgage of goods is, in the common law, distinguished from a mere pawn. By a grant or conveyance of goods in gage or mortgage, the whole legal title passes conditionally to the mortgagee; and if the goods are not redeemed at the time stipulated, the title becomes absolute at law, although equity will interfere to compel a redemption. But in a pledge, a special property only, as we shall presently see, passes to the pledgee, the general property remaining in the pledger,'
15. In Keith v. Burrows, (1876) 1 CPD 722 at p. 731 (A), Lindley, J. observed :
'A mortgage is a transfer of all the mortgagor's interest in the thing mortgaged: but such transfer is not absolute; it is made only by way of security; or, in other words, it is subject to redemption. Unless, therefore, there is any statutory enactment to the contrary, and so far as there is no enactment to the contrary, the plaintiffs in this case acquired by their mortgage the whole of the mortgagor's interest in the ship, or, in other words, the legal title to the ship as a security.'
16. The mortgage of the aircraft VT-AZV in favour of the defendant No. 2 was, therefore, a transfer of the ownership and of all the interest of the defendant No. 1 in the aircraft. The transfer was not absolute and was by way of security only. The ownership of the defendant No. 2 was subject to defeasance on redemption. Nonetheless the defendant No. 2 became the owner of the aircraft as contemplated by the terms of settlement dated 2-3-1951.
17. The defendant No. 2 as the mortgagee in possession of the aircraft was entitled to an unconotional order of discharge of the receiver appointed on 24-12-1950 even assuming that it was not the purchaser on that date. The plaintiff could not realise any part of his dues by proceeding against the aircraft as the secured dues of the defendant No. 2 exceeded the value of the aircraft. In these circumstances, it is difficult to impute to the parties an intention that the defendant No. 2 would be liable to pay the dues of the plaintiff even though it be found that the defendant No. 2 was the mortgagee of the aircraft and that the ownership of the aircraft was vested in the defendant No. 2 as such mortgagee. Though the petition for examination pro interesse suo refers to both the mortgage as also the subsequent sale of the aircraft the terms of settlement do not purport to impose any liability on the defendant No. 2 if it be found that it was a qualified owner of the aircraft on the material date.
18. The partnership agreement dated 16-7-1950 emphasises and recognises the property rights of the defendant No. 2 in the aircraft acquired under the financing agreement. Clause 10 of the partnership agreement provides that during the continuance of the partnership and until full payment or satisfaction of the moneys advanced by the defendant No. 2 for the purpose of the partnership or otherwise, all air-crafts released or refitted with the moneys so advanced would remain in the custody and management of the defendant No. 2 in the same manner as if the paid aircrafts were the properties of the defendant No. 2. The aircraft VT-AZV was undoubtedly used for the purposes of the partnership and the nett profits earned by its employment were to be shared by the partners. It does not appear however that the aircraft was brought into the stock of or became the property of the partnership. The property right in the aircraft acquired by the defendant No. 2 under the financing agreement continued to remain with the defendant No. 2 in spite of the partnership agreement.
19. The mortgage of the aircraft VT-AZV created by the financing agreement dated 16-7-1950 was not registered with the Registrar of Companies. Mr. Bhabra contended that the mortgage was 'a mortgage or charge, not being a pledge on any movable property of the company except stock-in-trade' and that therefore in view of Section 109(1)(e) of the Indian Companies Act 1913 in force at the relevant time the security is void against the plaintiff who is an unsecured creditor of the company. I am unable to accept this contention. Possession of the aircraft was given to the defendant No. 2 by way of security. Though the defendant No. 2 employed the aircraft for purposes of the partnership, the aircraft continued to be in the possession of the defendant No. 2 as contemplated by Clause 10 of the partnership agreement and Clauses 1 and 6 of the Financing agreement. On 24-12-50 the defendant No. 2 was in exclusive possession of the aircraft. There was a bailment of the aircraft to the defendant No. 2 as security for payment of a debt and the transaction satisfied all the essential requirements of a valid pledge. Though a possessory mortgage is not directly a pawn or a pledge, Section 109(1)(e) of the Indian Companies Act 1913 contemplated that there can be a mortgage which is not a pledge. The section does not require registration of a mortgage which is also a pledge. The mortgage of the aircraft is therefore not a 'mortgage or charge not being a pledge' and as such it is excepted from the operation of Section 109(1)(e) of the Indian Companies Act, 1913. I respectfully agree with the following observations of Leach, C. J. in Radhakrishnan Chettiar v. Madras Peoples' Bank Ltd. (1943) 13 Com Cas 21 at p. 24: (AIR 1943 Mad 73 at p. 74) (B)
'The section clearly contemplates that there can be a mortgage which is also a pledge. In inserting the words 'not being a pledge' in this clause the Legislature must have had some object in view and the only object I can see it could have had was to provide that registration should not be necessary where the person entitled to the security has obtained possession of the goods. The transaction now in question may amount to a mortgage, but as there are here all the requirements for a valid pledge it is also a pledge, and being a pledge did not require registration.'
20. Mr. Bhabra next contended that the aircraft VT-AZV was part of the stock-in-trade of the defendant No. 1 and that Section 109 (1) (e) did not except from its operation a pledge of the stock-in-trade. I am unable to accept this contention. In my opinion the section does not require registration of a pledge of any moveable property of the company whatsoever. It is impossible to read these words 'except stock-in-trade' as qualifying the word 'pledge'. The words 'on any movable property of the company except stock-in-trade' must be read as qualifying the words 'a mortgage or charge not being a pledge'. All mortgages or charges on the property of the company are not within the purview of Section 109 (1) (e). The preceding Sub-clause of Sub-section 109 (1) deal with mortgages and charges of different types and on the different classes of the properties of the company. Section 109 (1) (e) specially deals with and enjoins registration of a mortgage or charge on any movable property of the company. At the same time Section 109 (1) (e) excepts from its operation (1) a mortgage or charge which is a pledge and also (2) a mortgage or a charge on stock-in-trade. With respect I am unable to agree with the observations of Chandra Reddy J., in Rajah of Vizianagram v. Vizianagram. Mining Co. Ltd., : AIR1952Mad136 that 'what is exempted from registration is a pledge of moveable property of the company other than the stock-in-trade.' I may add that there is no evidence on the record to show that the aircraft VT-AZV was part of the stock-in-trade of the defendant No. 1.
21. Section 109 (1) of the Indian Companies Act 1913 does not therefore require registration of the mortgage of the aircraft and the mortgage cannot be avoided under that sub-section. It is therefore not necessary to decide the further question whether in the absence of an order of winding up of the company an unsecured creditor having no interest in the mortgaged property can at all avoid a mortgage under Section 109 (1) (e).
22. Mr. Bhabra next contended that the defendant No. 2 has abandoned and relinquished its rights as mortgagee acquired under the financing agreement dated 16-7-1950. He relies upon the admission of Champalal Chandak in paragraph 6 of the petition for examination pro interesse suo that 'on or about 1-9-1950 it was inter alia agreed in writing between the parties that the aforesaid agreement dated 16-7-1950 would stand superseded and/or be treated as cancelled and void subject to the terms and conditions thereof. The writing referred to in the paragraph is not produced: The context of paragraph 6 of the petition shows that the allegation of supersession and cancellation relates to the partnership agreement dated 16-7-1950. The point is made clear by the oral evidence on the record. See evidence of J.S. Rutnagar Qs. 442 to 452 and Champalal Chandak, Qs. 635 to 641. The evidence on the record shows that in September 1950 the defendant No. 2 decided to stop making further advances and to close the partnership business. Subsequently the partnership was terminated by mutual consent as from 15-11-1950. It is impossible to hold that in September 1950 the defendant No. 2 abandoned and relinquished its rights as secured creditor under the financing agreement dated 16-7-1950. I am satisfied that the mortgage created by the financing agreement dated 16-7-1950 was operative and subsisting after September 1950.
22a. The ownership of the aircraft VT-AZV was vested in the defendant No. 2 as mortgagee-and for the purpose of securing its dues by virtue of the financing agreement dated 16-7-1950. It follows that even assuming that the aircraft was not sold to the defendant No. 2 in November 1950 the plaintiff has failed to establish that the defendant No. 2 was not the owner of the aircraft on 24-12-1950. This finding by itself is sufficient to dispose of the appeal.
23. The defendant No. 2 also contends that in November 1950 it bought the aircraft VT-AZV from the defendant No. 1 for the price of Rs. 120,000/-. We have to approach this part of the case of the defendant No. 2 with great caution. (After discussion of evidence the judgment proceeds:)
24. I find that in fact the defendant No. 1 sold the aircraft to the defendant No. 2 at and for the price of Rs. 1,20,000/-. I also find that the sale is not a fraudulent or a sharn transaction. The dispute is as to the date of the sale. The respondents' case is that the sale took place on or about 20-11-1950. The appellant's version is that the sale must have taken place sometime in the middle of January 1951. We are asked by the appellant to hold that the several documents dated 20-11-1950 have been fabricated and brought into existence as a result of a fraudulent conspiracy between defendant No. 1 and defendant No. 2. We asked Mr. Bhabra again and again what motive he could ascribe to defendants fur entering into this fraudulent conspiracy. Mr. Bhabra was unable to assign any motive for this conspiracy. The petition for examination pro interesse suo is dated 2-2-1951. Assuming that there was no sale on 20-11-1950, the defendant No. 2 was on 24-11-1950 in possession of the aircraft as a secured creditor. The dues of defendant No. 2 exceeded Rs. 1,20,000/-. On proof of the mortgage and the possession and of the indebtedness of defendant No. 1 to defendant No. 2, the defendant No. 2 was entitled to an immediate order of release of the aircraft. The plaintiff could not realise any part of his dues by proceeding against the aircraft. On 2-2-1951 for the purpose of obtaining release of the aircraft it was not necessary for the defendant No. 2 to set up a false and fictitious sale. It is not shown that the sum of Rs. 1,20,000/- is not the fair price of the aircraft. It is not suggested that the sale was at an undervaluation. There was no question of shielding the aircraft from the creditors of defendant No. 1. The defendant No. 1 could not gain anything by ante-dating the sale and by entering into the conspiracy. In the absence of any motive for the ante-dating of the documents and for the alleged fraudulent conspiracy, many of the criticisms of the evidence lose their force. I am satisfied that the aircraft was sold by the defendant No. 1 to the defendant No. 2 in November 1950. Having regard to the surrounding circumstances and the probabilities of the case we accept the evidence of Champalal Chandak that the sale took place in November 1950. I am satisfied that the several documents relating to the transaction and dated 20-11-1950 were written on, or about the date which they bear and that they were not brought into existence in January 1951 and that the finding of Bose J., to the contrary should be set aside. We hold that the defendant No. 2 was the owner of the aircraft on 24-12-1950.
25. On the question of maintainability of the suit, I agree with Bose J., that the plaintiff did not take all steps in execution for realisation of the decree in Suit No. 4676 of 1950. He did not even move the Registrar for the sale of the pledged shares. I am however unable to hold that the plaintiff is not entitled to maintain his suit because he did not take such steps in execution for realising the decretal amount. The terms of settlement dated 14-3-1951 require the plaintiff to institute a suit against the defendant No. 2 within the time mentioned. If the plaintiff did not institute a suit within that time he would have been deprived for ever from claiming the valuable rights conferred upon him by the terms of settlement. On a fair reading of the terms of settlement, it is impossible to hold that a suit instituted by the plaintiff within the time mentioned is premature. In a suit so instituted the plaintiff is entitled to establish the facts enumerated in the first sentence of Clause 2 of the terms of settlement. Such a suit so far as it seeks to establish these facts and to obtain a consequential declaration cannot be said to be premature or not maintainable. I am also inclined to think that the parties intended that the plaintiff should not be driven to a third suit for the purpose of obtaining a decree against the defendant No. 2. In my opinion the parties intended that if the plaintiff was successful in establishing the facts mentioned he would be entitled not only to a suitable declaration but also to an order giving him liberty to apply in that very suit for a decree against the defendant No. 2 for the amount which may remain outstanding in respect of the decree in Suit No. 4678 of 1950 after he has taken all steps in execution for the realisation of the decretal amount. As the plaintiff has failed to establish the facts mentioned he is not entitled to any relief.
26. In my opinion, the decree for dismissal of the suit must be affirmed for the reasons already given and not on the ground that the plaintiff is not entitled to maintain the suit.
27. The appeal is dismissed. The finding of the learned trial judge that the defendant Air Friends was not the owner of the aircraft VT-AZV on 24-12-1950 is set aside and to that extent the cross-objection is allowed.
28. Having regard to all the circumstances of the case, we direct that each party will pay and bear his or its own costs of the appeal and of the cross-Objection. The direction of the learned trial. Judge with regard to the costs of the trial as also of the pro interesse suo proceedings in Suit No. 4676 of 1930 is affirmed. Certified for two Counsel.
P.B. Mukharji, J.
29. I agree.
30. I wish only to add a few observations on Section 109 of the Indian, Companies Act, 1913, as amended by the Act of 1936, which applies to the point raised in this Appeal, Section 125 of the Companies Act of 1956 not being applicable.
31. Section 109 originally did not include movable property within the orbit of registration under the Company Law. It was for the first time-introduced by Section 60 of the Indian Companies (Amendment) Act, 1936.
32. A glance at the scheme of Section 109 of the Act makes it clear at once that the subject that it deals with is a mortgage or a charge. The opening words of Section 109 (1) of the Act says that 'Every mortgage or charge created after the commencement of this Act by a company and being either etc.' Then follow Sub-clauses (a), (b), (c), (d), (e) and (f) which in every clause refers to 'a mortgage or a charge'. On plain language, therefore, it seems to me that 'pledge is outside the purview of this theme of 'mortgage or charge' as contemplated in Section 109 of the Act.
33. Mortgage or charge on immovable property was already there in Section 109 of the Statute of 1913. Movable property was brought in much later but under considerable qualifications as the words of Sub-clause (e) sufficiently indicate. Business practice and commercial considerations alike dictated that the requirement of registration of a mortgage or a charge on movable property should not be so unqualified as to cripple the commercial flexibility of securing money by the use of 'pledge' or 'stock-in-trade', normally resorted to in business to tide over difficulties and obtain temporary accommodation. Two exceptions are, therefore, expressly indicated in Sub-clause (e) of Section 109 of the Act. They are (1) pledge and (2) stock-in-trade.
34. To invest more meaning than the words indicate or the policy justifies, would be erroneous-both from the point of view of legal construction and interpretation as well as from the point of view of practical business consideration.
35. The interpretation of Section 109 from this point of view follows logically. Registration is necessary for a mortgage or charge on movable property. Exception is expressly and clearly made in favour of (1) pledge and (2) stock-in-trade. The reason for excluding pledge is not far to seek because pledge of movables usually means parting with possession.
36. The argument of the appellant that the Finance Agreement of 16-7-1950 is void because it was not registered, cannot be sustained because under Section 109(1)(e), it cannot be said that this document is a ''mortgage or charge not being a pledge' within the meaning of Section 109(1)(e). A second more important reason is that this Dakota was not the 'movable property of the company' within the meaning of Section 109(1)(e) of the Indian Companies Act. Movable property, in this context, appears to me to mean the property which belongs to the company. Such property may be the possessory property in the shape of control, custody, possession or manage-ment or titular property in the sense of the title or ownership. Now, the Company, in this case, was the Indian Overseas Airlines Ltd. who had not this Dakota either in its control or in its management or in its possession at the time of this document of 16-7-1950. It had at best a right to redeem the Dakota which was already charged with the Exchange Bank of India and Africa and who in him pledged it with the Reserve Bank of India and the possession of this Dakota was not with the Indian Overseas Airlines Ltd. Therefore it is clear that the Indian Overseas Airlines Ltd. had no possessory title over this Dakota. It had also no titular property either. In fact, this document of 16-7-1950 expressly provides for the release of the Dakota but that release was only on the express condition that the property in this Dakota would be not of the Indian Overseas Airlines Ltd. but of the Air Friends until their dues were paid up in which event the Dakota in the future would belong to the Company. Therefore, the Dakota was not the 'movable property of the Company' at the time of the Finance Agreement of 16-7-1950 within the meaning of that expression in Section 109(1)(e) of the Companies Act. Lastly the Indian Overseas Airlines Ltd. had at best only a right to redeem the Dakota. A right to redeem is not itself such a 'movable' property as is contemplated in Section 109(1)(e) of the Companies Act.
37. In that view of the matter, it is no longer necessary in this appeal to decide whether the Dakota was a 'stock-in-trade' or the more vexed question whether 'any creditor' in Section 109 means any and every creditor or means a creditor haying a charge or mortgage on the property of the company such as was discussed by Lord Cozens-Hardy, M. R. Phillimore L. J. and Joyce, J. in the well-known case of In re Monolithic Building Co.; Ta-con v. The Company, (1915) 1 Ch D 643 (D).
38. Certain cases were relied on at the Bar. My learned brother has already dealt with the case of (1943) 13 Com Cas 21: (AIR 1943 Mad 73) (B). That is a decision of a Division Bench of Leach C.J. and Bell J. of the Madras High Court. At page 24 of that report (Com Cas): (at p. 74 of AIR), Leach C. J. puts the construction of Section 109 very forcibly in the following words:
'The section clearly contemplates that there can be a mortgage which is also a pledge. In inserting the words, 'not being a pledge', in this clause, the Legislature must have had some object in view and the only object I can see it could nave had was to provide that registration should not be necessary where the person entitled to the security has obtained possession of the goods. The transaction now in question may amount to a mortgage, but as there are hero all the requirements for a valid pledge, it as also a pledge, and being a pledge, did not require registration.'
We respectfully agree with this view of the construction of Section 109 of the Companies Act.
39. Reliance was also placed by Mr. Bhabra on the Privy Council decision in Ram Narain v. Radha Kishen Moti Lal Chamaria Firm and specially on the observation of Sir Lancelot Sanderson at p. 83 (of Ind App): (at pp. 74, 75 of AIR) where it was said:
'Section 109 provides that a mortgage, such as the bank's mortgage of 10-8-1922, shall so far as any security on the Company's property or undertaking is thereby conferred, be void against the Liquidator and any creditor of the Company unless the prescribed particulars are filed with the Registrar within twenty-one days after the date of its creation. It is to be noted that the section does not avoid the mortgage absolutely but only so far as any security is given thereby on the Company's property or undertaking. The effect, therefore, is that if a mortgage is not registered, it is valid as an admission of debt, but as against a creditor or the Liquidator, it could not be said that a valid charge on the Company's property had been created.'
40. This decision does not help the question at all. In the first place, this was a decision on mortgage of immovable property. In the second place, it was a decision before the new amendment of mortgage on movable property was introduced within the purview of Company registration with the exception of pledgre and stock-in-trade.
41. Tendolkar J in In re, East Africa Hardware Co. reported in AIR 1949 Bom 262 at p. 263 (F), came to the conclusion:
'The result would be that a pledge would not require registration, though a mortgage or a charge on movable property would require registration provided the movable property was not stock-in-trade. The proviso leads to the result that a mortgage or a charge on stock-in-trade would not require any registration.'
42. This view supports the construction that we have taken.
43. In the decision reported in : AIR1952Mad136 a Division Bench of the Madras High Court disagreed with the views of Tendolkar J. Gobinda Menon J. at page 144 of that report observed:
'In our opinion, what the clause contemplates is that where there is a mortgage or a charge on the stock-in-trade of a company which is a movable property of the company, such mortgage or charge requires registration. But what is exempted from registration is a pledge of movable property of the company other than the stock-in-trade. We do not agree with the learned Judge (Tendolker T.) that the preposition 'on' after the word 'pledge' is inapposite. Though in common parlance one speaks of a pledge of property, there is nothing incongruous or ungrammatical in saying that there can be a pledge on property. The word 'pledge' connotes possession as well as right and in both cases the preposition 'on' cannot be said to be inaccurate. The clause is not so inartistically worded as Tendolker J. seems to think. In our opinion, where stock-in-trade is made the subject of a mortgage or charge, it should be registered.'
44. I have already expressed my own reasons and I am afraid it is not a question of the preposition 'on' and the facility of such preposition in describing whether a pledge is a pledge on property or a pledge of property. Even on the assumption that the preposition 'on' is a correct preposition, there are larger questions which, as I have already indicated, seem to suggest both on the language as well as in the context of Section 109 as well as on business considerations and the history of the introduction of movable property within the orbit of registration under the Companies Act, that clear exceptions were made in favour of (1) pledge and (2)stock-in-trade. It is noticeable that this subsequentDivision Bench decision of the Madras High Courtin Rajah of Vizianagram's case (C) did not noticethe older Division Bench decision of the same HighCourt of 1943. We prefer the view expressed inthe older Division Bench case of the Madras HighCourt in (1943) 13 Cora Cas 21: (AIR 1943 Mad 78(B) as being more in accord with the language andintention of the Statute.