1. In this suit the Imperial Bank of India is claiming against the Bengal National Bank Ltd., which is now in liquidation, a declaration that two debentures dated, respectively, 4th May 1923, and 1st August, 1923, constitute charges upon all the undertakings, property and assets including the uncalled capital of the defendant bank. The plaintiffs are also claiming an account of what is due to them as the holders of those debentures for principal, interest and costs, and further that the debentures may be enforced by the sale of the property and the assets of the defendant bank.
2. The claim has been resisted by the defendants upon the ground that the issue and the acceptance of the debentures in question were ultra vires the memorandum of the defendant bank, and were illegal and unauthorized or at any rate ultra vires so far as the Imperial Bank of India is concerned by reason of certain provisions in the Imperial Bank of India Act, which is Act 47 of 1920.
3. Two further points were also taken on behalf of the defendants, viz., that the debentures had not been properly registered as required by the provisions of the Companies Act of 1913, and also that, as the debentures were not registered in accordance with the requirements of the Registration Act, Section 17, in so far as they related to immovable property, they are unenforcible. This latter point was readily conceded by Mr. Page on behalf of the plaintiffs, and Mr. Page admitted that, in so far as any of the properties of the defendant bank consists of immovable property, that will not have been affected by operation of the two debentures.
4. So far as the other point in connexion with the registration is concerned, that is, registration under the Companies Act 1913, that has no substance at all, in my opinion, as it is clear that the plaintiffs did in fact register the debentures at the proper time with the Registrar of Companies, and they received from him the proper certificate showing that such registration had taken place, and, by the terms of Section 114, Companies Act that certificate is conclusive, Therefore it must be taken that ail necessary formalities in regard to the registration a the documents were complied with. It is quite true that subsequently the Register of Companies, owing to a misunderstanding, did make an alteration or even made a cancellation in the register with regard to these particular documents. I am, however, of opinion that nothing done by the Registrar of his own accord, after the plaintiffs had properly registered the documents, affected their validity as between the plaintiffs and the defendants.
5. The real points of substance in the defence, which was ably put forward and argued by Mr. Roy, are those relating to the question of whether or not these debentures were ultra vires either the plaintiff bank or the defendant bank. Now, so far as the latter is concerned, Mr. Roy relied upon Clause 3(e) of the Memorandum of Association of the Bengal National Bank Ltd., and that clause sets out that among, the objects for which the company was established was:
To raise money by the issue of shares (preference, ordinary or deferred) debentures, debenture-stock, bonds and other securities, and to invest the moneys so raised, or any part thereof, upon any of she investments specified in this Memorandum.
6. Mr. Roy, as Mr. Page contended, sought to put a restrictive meaning upon that clause and to make it read as if the Bengal National Bank were restricted to the raising of debentures for the purpose of obtaining money to invest and not otherwise. I agree with the view put forward by Mr. Page that that is not the right interpretation, and that the clause should be read as an enabling and not a limiting clause, and the real meaning of it is that the Bengal National Bank were empowered to raise money by the issue of debentures and that if they so desired to invest the money they raised or any part of it. That clearly gives them an option as to whether they invest the money raised by debentures either wholly or in part or not at all. Therefore, I think it is clearly within the objects of the Bengal National Bank to raise money by means of debentures.
7. The other point at first ht seems not altogether free from ambiguity or doubt. That is to P I the question of what are the peters of the Imperial Bank of India to a matter of this kind, because by Part 2 of the schedule to the Imperial Bank Act of 1920 it is laid down that the Bank shall not transact any kind of banking business other than those specified in Part 1 and in particular.upon mortgage or in any other manner upon the security of any immovable property, or the documents of title relating thereto.
8. That, on the face of it, is a specific prohibition. It is, however, subject to the provisions contained in Part 1, Schedule 1, and in Sub-Clause (a) read with the operative part of the clause it is provided that the Bank is authorized to carry on and transact the several kinds of business thereinafter specified, viz.,
the advancing and lending money, and opening cash credits upon the security of:
(vi) fully paid shares and debentures of companies with limited liability, or immovable property or documents of title relating thereto as collateral security only where the original security is one of those specified in Sub-Clauses (i) to (iv), and if so authorized by any general or special directions of the Central Board, where the original security is of the kind specified in Sub-clause (v).
9. Sub-Clause (v) refers to this kind of business:
(v) accepted bills of exchange and promissory notes endorsed by the payees and joint and several promissory notes of two or more persona or firms unconnected with each other in general partnership.
10. In the present case, the debentures which were issued by the defendant bank in favour of the Imperial Bank of India were, in my opinion, securities 'collateral' to that of the kind mentioned in Sub-clause (v), viz., promissory notes made by the Bengal National Bank in favour of the directors of the Bank and by them endorsed in favour of the Imperial Bank of India, and indeed, in the first of the two debentures, the position is clearly stated, in that the debenture begins:
The Bengal National Bank, Ltd., in consideration of ten lakhs now paid on loan to them by the Imperial Bank of India against certain securities authorized by Act 47 of 1920, do hereby as an integral part of and collateral security for the said loan, undertake to pay....
11. The second debenture is not worded in exactly the same form, but I have no doubt whatever that both parties realized what their rights were, and that they deliberately put in the forefront of the list of securities which had been given the promissory notes executed by the Bengal National Bank in favour of its directors, who in their turn, endorsed them in favour of the Imperial Bank.
12. Mr. Roy sought to put upon the word 'collateral' in connexion with 'security' rather an extended meaning, and he said that as the clause refers to the original 'security,' collateral 'security must mean a security which is given-after the loan is actually paid, and the-primary or original security has been taken. He cited in support of that proposition two cases: Azeem v. Cruickshank  16 W.R. 203 and The National Bank of Australasia v. Cherry  3 P.C. 229. All that those cases decide, in my opinion, comes to this,, that if there were an express prohibition against giving a particular kind of security, in the first instance, that would not necessarily preclude that security from being given subsequently for the purpose, not of covering the original debt, but of securing repayment, of the debt as and when it became due. Those two cases do not really assist the defendants in the present instance, because they do not say that, in those circumstances, the word 'collateral' is to be read as if it meant collateral and subsequent.
13. There are, on the other hand, two cases: Athill v. Athill  16 Ch. D. 211 and Leonino v. Leonino  10 Ch. D. 460, which determine in my opinion that the question of whether a security is collateral or not depends upon the time of its operation, and not necessarily on the precise moment at which it is given. Security may equally be collateral, whether it is given at the same time as what may be called the principal security or whether it is given subsequently, provided only that it is intended to take effect and to operate and to enure for the benefit of the person to whom it is given, alongside and parallel with the other security that has been given. I have no doubt that the intention in the present instance was, as I have said, that the promissory notes should be the original security and that the other forms of security should, at the time when the loans were given, be collateral to that security, and, accordingly, they would fall within the terms of Part 1 of the schedule, Sub-clauses (v) and (vi).
14. I accordingly hold that these debentures did fall within the powers possessed by the Imperial Bank of India under the provisions of the Act of 1920. I am, therefore, bound to say that there is no reason why the plaintiffs are not entitled to the declaration that they ask for, except that from the operation of the debentures there must be excluded immovable properties belonging to the defendant bank by reason of the fact that these debentures were not registered under the terms of the Registration Act.
15. I make a declaration that the two debentures, dated 4th May and 1st August 1923, constitute charges upon all the undertakings, property and assets including the uncalled capital of the Bengal National Bank, Ltd., other than such part of the bank's property as is 'immovable.' I make an order at the defendants' request that an account be taken of what is due to the plaintiffs, the holders of those two debentures, on account of the principal and interest and charges.
16. There will also be an order that the debentures will be enforced by the sale of the property and the assets of the defendant bank. The plaintiff's costs will be added to his claim. The liquidator's costs to be paid by the receivers out of the assets in their hands as between attorney and client.