T R TYAGARAJAN Vs. OFFICIAL LIQUIDATOR

JUDGEMENT

(1.) THIS is an appeal against the order of SUBRAHMANYAM J., passed by him on an application made by the appellant, T.R. Tyagarajan (Appln. No. 584 of 1958) to modify an order of the official liquidator dated 27th January, 1958, passed in the course of the proceedings in the liquidation of a public limited company named Messrs. Kutty and Rao (Engineers)ltd. The Indian National Industries Ltd., were the managing agents of kutty and Rao Ltd. There was another private limited company called Sayanas Ltd., of which the appellant claims to be a secured creditor for a sum of Rs. 21, 180. He alleged that Messrs. Sayanas Ltd., gave, as security for the sums advanced by him, certain moveable properties of the approximate value of Rs. 20, 000. They Comprised Chandler and price Folio size treadle I Hongkong half-crown treadle I Chandler and Price 24" cutting machine I Perforating machine I Lead types 4000 lbs Racks for types 50 Stands 12 Subsequently instead of the indian National Industries ltd., Messrs. Sayanas Ltd. were appointed as managing agents of Messrs. Kutty and Rao ltd. There was an agreement entered into dated 11th May, 1955, in and and by which it was inter alia agreed that there should be a transfer of the assets and liabilities of Sayanas Ltd. to Kutty and Rao Ltd. On 3rd June, 1955, the board of directors of Sayanas Ltd. passed a resolution approving the agreement entered into by its managing director with the then managing director of Messrs. Kutty and Rao Ltd. They further resolved to hand over the fixed assets and liabilities of the company at the time of handling over. On 25th June, 1955, the general body of Kutty and Rao Ltd., passed an extraordinary resolution agreeing to accept the agreement mentioned above and to accept the taking over of the assets and liabilities of Messrs. Sayanas Ltd. at the valuation approved by the board of directors. of Kutty and Rao Ltd. passed the following resolution " That the business of Messrs. Sayanas ltd. be merged with this company from 25th June, 1955, tentatively the actual de facto merger to take place from the date of approval of the managing agency and issue of consideration shares to the managing agents."

(2.) ON 11th March 1957, BALAKRISHNA IYER, J., construed the effect of the above transactions to mean that there has been a transfer of the entirety of the assets and liabilities of Sayanas ltd. to Messrs. Kutty and Rao ltd. it is evidently on this footing that the appellant came to make his claim before the official liquidator in the winding up of Messrs. Kutty and Rao Ltd. The claim of the appellant was made under three promissory notes dated November 10, 1952, December, 17, 1952, and November 7, 1955, for Rs, 2, 000 Rs. 8, 000 and Rs. 6, 000 respectively carrying interest at the rate of 12 per cent., 13 per cent, and 10 per cent per annum. The official liquidator admitted the claim of the appellant for principal and interest due on the first two promissory notes but refused to admit his claim in respect of the third promissory note but refused to admit his claim in respect of the third promissory note because it had been executed on November 7, 1955 after the date of the agreement between the two companies in June 25, 1955. The appellant also claimed to be a secured creditor so far as the properties mentioned earlier in this judgment were concerned. He relief upon a letter given by I.S. Rao, managing director of Sayanas ltd., on December 17, 1952. The official liquidator refused to recognise this charge because it had not been registered with the Registrar of Companies and was, therefore void against the official liquidator under section 125 of the (Indian) Companies Act, 1956. The appellant thereupon made an application, out of which this appeal arises, to the judge dealing with company matters praying that the order of the official liquidator may be modified by treating the appellant as a secured creditor for the amount claimed on the ground that even, after the merger between Sayanas Ltd. and Messrs. Kutty and Rao ltd., so far as the creditors of Sayanas Ltd. were concerned, they were not to be affected by the merger and the provisions of section 125 of the (Indian) Companies Act do not affect the right of the creditors of Sayanas Ltd., who must be deemed to have the same rights against the company in liquidation so long as they were enforceable against Sayanas ltd., which had gone into liquidationThe only part to the application taken out by the appellant before SUBRAHMANYAM, J., was the official liquidator but it appeared that there were other parties who were vitally interested in the claim made by the appellant as a secured creditor. There was one Kalyanji N. Suchede who had a mortgage executed on August 16, 1956, over all the assets of Messrs. Kutty and Rao ltd., and there was also one P.B. Raju who held a mortgage of the properties of the company created in 1950 and there were also holders of debentures issued with a floating charge over all the assets of the company in liquidation. They were certainly proper parties to the appellant's application before SUBRAHMANYAM J., but notice was not taken to them. It was only on the last day of the hearing of the appellant's application that their advocates were heard. But they were not made parties. Before us they have been added as parties and their counsel were heard SUBRAHMANYAM J., dismissed the application of the appellant, Hence this appeal

(3.) IN our opinion this is a salutary rule and departure from this rule can only be justified in extreme cases where the words construed in their ordinary and natural meaning clearly conflict with the obvious intention of an enactment as gathered from the enactment itself As LORD MACMILLAN said in Mayor etc. of the Borough of New Plymouth v. Taranaki Electric Power Board (3) 1934 (66) MLJ 67 ; 1933 AIR(PC) 216.: it is the rule that words are used in an Act of Parliament correctly and exactly and not loosely and inexactly. Upon those who assert that that rule has been broken the burden of establishing their proposition lies heavily."After giving the matter our best consideration we are clearly of the view that the word "created" in section 125(I) does not include in its meaning'accepted". it is not clear what the learned judge meant by the word "accepted." Evidently he was referring to a case when a company acquires property with notice of an and subject to a charge. For one thing if the word "created " is given an extension of meaning as to include also "accepted" in the above sense then there is no purpose served by section 127 because section 127 specifically deals with a case where a company acquires property which is subject to a charge which requires registration if it had been created by the company