KSFC Vs. SIVASANKARA PANICKER

JUDGEMENT

(1.) In Company Petition 1 of 1973 Sreeramavilasom Press and Publications Private Limited, Quilon, was ordered to be wound up. Pending the petition for winding up, the petitioner therein filed Company Application 197/75 praying for an order of injunction to restrain Sreeramavilasom Press and Publications Private Ltd. and also Malayalarajyam Private Limited from alienating any of their assets. At that time steps to sell a Plamag Rotary Press and other machinery of the Malayalarajyam Private Limited were being proceeded with in O.P. 4/71 on the file of the District Court, Quilon at the instance of the applicant in this company application 88/76. This court however ordered that proceedings for the sale of the press may go on but that release of the press to the purchaser should not be made except with the sanction of this court. In company application 254/75 this court had directed the provisional Liquidator to take possession of the assets of the S.R V. Press and Publications Private Limited. As this order was likely to affect the proceedings for sale of Rotary Press ordered to be proceeded with in C.A. 197/75 the winding up petitioner filed C.A. 515/75 to direct the provisional Liquidator to defer taking possession of the Plamag Rotary Press and the Block Studio equipments advertised for sale by the District Court in OP. 54/71. Later the winding up petitioner filed CA. 550/75 to restrain the sale proceedings in OS 54/71 under S.446 of the Companies Act and this court stayed the proceedings for sale. It is in these circumstances the Kerala Financial Corporation has come out with this application 88/76 to vacate the order staying the sale of the Plamag Rotary Press and Block Studio passed by this court as referred to earlier. In Company Application 189/77 leave is also applied for to proceed with the sale of the press.

(2.) The Kerala Financial Corporation claims to be a pledgee of the Plamag Rotary Press on the basis of certain transactions entered into between the Malayalarajyam Private Ltd. and Kerala Financial Corporation which are stated hereunder. In December 1969. the Malayalarajyam Private Ltd. applied for a loan of 10 lakhs of rupees from the Kerala Financial Corporation for the purpose of acquisition of a Rotary Press. The loan was sanctioned to the extent of Rs. 9 lakhs 60 thousand. The conditions for the sanction of the loan were communicated to the Malayalarajyam by a letter (Ext. P-1) dated 10th February 1970. As per the terms and conditions of that letter a mortgage deed (Ext. P-2) was executed by the Malayalarajyam as the mortgagor, its directors as guarantors and Sreeramavilasom Press and Publications Private Ltd. as comortgagor. The property mortgaged belonged to Sreeramavilasom Private Ltd. This mortgage was registered, according to the Corporation, as required under S.125 of the Companies Act. After execution of the mortgage a sum of Rs. 3,98,000 was received by the Malayalarajyam Private Ltd. and with it they placed an order to M/s Manubhai and Sons, Bombay, to supply the Plamag Rotary Press The balance of the amount sanctioned was later required by the Malayalarajyam Private Ltd. for payment to the suppliers. A letter was sent by the Corporation to the suppliers on 9th March 1970 requesting them to surrender to it the documents of title relating to the machine. This was accepted by the suppliers and they agreed to relinquish all their rights in the machine on getting the balance sum of Rs. 5 lakhs. Later the suppliers sent the documents relating to the machine through their bank to the Corporation and the Corporation handed over the delivery order to Malayalarajyam Private Ltd. subject to the terms and conditions specified by the Corporation. Pursuant to this the Malayalarajyam took delivery of the press and kept them as required by the Corporation in the premises mortgaged under the earlier mortgage deed. Thereafter a supplementary deed was also executed pledging the Rotary Press to the Corporation. The original of the supplementary deed is produced as Ext. P-12 Since Malayalarajyam Private Ltd. subsequently defaulted in the repayment of the loan the Corporation filed O. P. 54/71 under the State Finance Corporation Act to recover the amount advanced An order was passed on 30th January 1973 allowing the Corporation to recover the amount by sale of the properties pledged and mortgaged to the Corporation, and when proceedings were taken to realise the amount a stay order was received by that court from this court staying the proceedings According to the Corporation, they are secured creditors entitled to stand outside the winding up and to proceed against the security to realise the amount advanced and the order staying the execution of the decree in O. P. 54/71 is incorrect and has to be vacated.

(3.) On receipt of notice of this application the Official Liquidator and also the winding up petitioner have filed objections. In C. A. 188/77 a person claiming to be a creditor of the Malayalarajyam Private Ltd. has sought permission to intervene in these proceedings. As this is not opposed the same has been allowed The objections, as specified in the course of the proceeding, of the winding up petitioner as well as that of the Official Liquidator are that the Financial Corporation cannot be recognised as a secured creditor inasmuch as the registration with the Company Registrar of the first mortgage deed is not in accordance with the provisions of S.125 of the Companies Act and as such void. The supplementary deed having not been registered at all the claim for priority as a charge holder is not sustainable in view of the mandatory provisions in S.125 of the Companies Act. It is further contended that there has not been any proper decision of the Board of Directors either of the Sreeramavilasom Press and Publications Private Ltd. or of the Malayalarajyam Private Ltd. to take a loan and as such the two deeds are not binding on the two companies.