Officers of a company cannot enforce an unregistered mortgage or charge on company property because they are responsible for ensuring its registration. This prohibition applies regardless of whether they act in their individual capacity or have ceased to be officers.

Judgement

Consolidated Appeals from a judgment and from orders of the High Court (April 30, 1915) reversing an order of the District Judge of Tinnevelly (December 22, 1913).

The proceedings arose in the winding up of the Swadeshi Steam Navigation Co., Ld., a company registered under the Indian Companies Act, 1882, and related to a charge upon unpaid calls granted, before the winding-up order, to the appellant, the secretary of the company; the charge had not been registered in accordance with s. 68 of the Act. The order of the District Court was made in an execution petition by the appellant to enforce an order made by the same Court on April 27, 1912, whereby the validity of the charge, although unregistered, had been recognized, the appellants name being then included by the District Judge in the list of creditors who had a charge upon the property of the company. The company, at a date earlier than that of the specific charge in favour of the appellant, issued debentures constituting a floating charge upon the assets. The debenture-holders were not parties to the proceedings in 1912, but the first four of the present respondents were debenture-holders who intervened upon the appellants petition to enforce his security. The official liquidator was also joined and was the fifth respondent.

The acting District Judge, on December 22, 1913, allowed the appellants petition, holding that he was entitled to execution of the order of April 27, 1912. The four debenture-holders appealed to the High Court, and the appeals were consolidated. Notice of the appeals was not given within three weeks from the making of the order, as required by s. 169 of the Indian Companies Act, 1882, but the High Court, upon petition, extended the time and admitted the appeals. There was no appeal, nor any application to extend the time for giving notice of appeal, from the order of April 27, 1912. The present respondents in their memorandum of appeal to the High Court did not include the failure to register the appellant s charge as a ground of appeal.

The High Court (Sir John Wallis C.J. and Tyabji J.) allowed the appeal. The learned judges, while holding that in other respects the charge was valid against the debenture-holders, were of opinion that upon the true construction of the explanation to s. 68 of the Indian Companies Act, 1882, the present appellant could not avail himself of the charge since it was unregistered. The learned Chief Justice in delivering judgment, with which Tyabji J. agreed, said "This objection was taken by the liquidator in the earlier case and was overruled by the District Judge, now Oldfield J. It was again expressly taken in the lower Court in this case, but was apparently not argued in view of Mr. Oldfields decision at an earlier stage. It is not expressly mentioned in the grounds of appeal to us, but as the facts are such as to bring the case prima facie within the terms of the statutory provision, we think we ought to enforce the provisions of the section if they are applicable.” After referring to the English authorities, the Chief Justice said that the explanation appeared to be intended to reproduce the ruling of James L. J. in Ex parte Valpy & Chaplin (( 1872) L. R. 7 Ch. 289.), adding the passage with regard to the words "as such" which appears in their Lordships judgment.

1919. Nov. 3, 5. Kenworthy Brown for the appellant. The appellant was entitled to enforce his charge against the uncalled capital. The words " as such " in the explanation to s. 68 of the Indian Companies Act, 1882, indicate that the disability of an officer of a company to avail himself of an unregistered charge upon its property continues only so long as he is an officer. But under s. 137 of the Act the appointment of an official liquidator discharged all the officers of the company. It should not be assumed that the explanation was intended to enact the principle laid down by James L.J. in Ex parte Valpy & Chaplin. (( 1872) L. R. 7 Ch. 289.) Th