L P PRABHU Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) Appellant, a surety, claims the benefits of subrogation under Section 92 of the Transfer of Properties Act, 1882 (in short the T.P. Act ). Apart from issues relating to subrogation by operation of law, effect of registration/non-registration of charges with the Registrar of Companies under Section 125 and 135 of the Companies Act and Rule 14 of the Companies Rules and application of the principles of estoppel and Section 115 of the Evidence Act are the questions to be considered in this case.

(2.) Appellant was one of the directors of the company, M/s. Mittal Steel Re-rolling and Allied Industries Ltd. (hereinafter referred to as the company ). The above company, now in liquidation, applied for and availed of financial facilities from Canara Bank, Wadakkancherry to a limit of Rs. 75 lakhs out of which an amount of Rs. 22 lakhs and odd was outstanding as payable in June, 1981. The entire assets of the company including the land and machinery were mortgaged to the Canara Bank and directors of the company including the appellant had executed personal guarantee bonds and stood as sureties for the said loan. On account of the failure of the company to pay back the dues in proper time by 1981 the Canara Bank had expressed its inability to make further advances for the functioning of the company. It is the case of the appellant that in view of the above, he advanced Rs. 18, 38, 852.58 to the company and the company cleared die liabilities of the Canara Bank. According to him, he paid the same as per board resolution and minutes of the discussions of the company dated 20-4-1981 will prove the same. Two resolutions passed in the above meeting are as follows:

(3.) The A group will transfer their shareholdings in the company to the P group or their nominees, only if the following conditions are satisfied by the P group in the manner and within the time stipulated hereunder, the time being the essence of this contract.