A secured creditor who fails to make a claim on the security in a suit for recovery of money waives its right as a secured creditor and ranks as an unsecured creditor.

( 1 ) BY this application under Rule 9 of the Company Court Rules, 1959, Syndicate Bank, who claims to be a secured creditor of Prashant Engineering Company (P) Ltd. , in liquidation, and has secured a simple money decree of Rs. 2,11,897-20 together with costs and future interest against the Company, prays that the Official Liquidator be directed to pay to the bank sale proceeds of Rs, 85,500. 00 in respect of a diesel generating set towards part satisfaction of the decree and to hand over the other hypothecated machines belonging to the Company that may be held by the Official Liquidator to the Bank on the allegations that all the machines installed in the factory of the Company, including the generating set aforesaid, were hypothecated by the Company in favour of the Bank as security for the money advanced by the Bank to the Company, which formed subject-matter of the Suit and the decree. It is claimed that the aforesaid generating set was disposed of by the Official Liquidator without notice to the Bank.

( 2 ) THE claim of the Bank is resisted by the Official Liquidator, who has denied any knowledge of the hypothecation. It is submitted that no diesel generating set was taken into possession or sold by the Official Liquidator. It is, however, admitted that certain items of machinery belonging to the Company were sold under the orders of this Court for. about Rs. 90,000. 00, It is further urged that the claims for the proceeds of sale of any assets of the Company is misconceived and untenable as the Bank obtained a simple money decree and could only rank as an unsecured creditor along with others and that the claim of the Bank against the Company under the decree would be dealt with in accordance with law. It is further claimed that the rights of the Bank under the alleged hypothecation could not be enforced against the proceeds of sale of the assets of the Company as the decree was obtained long after the sale and that the rights of the Bank, if any, under the hypothecation agreement merged in the decree and that the Bank could only prove its claim when claims are invited in the course of winding up. It is denied that the Official Liquidator was under any obligation to give notice to the Bank of the proposed sale of the assets of the Company, that came into the possession of the Official Liquidator in the course of winding up.

( 3 ) IN its rejoinder, the Bank, by and large, reiterated the allegations made in the application and alleged that the factum of hypothecation was mentioned by the Bank in the Suit, which led to the decree. It was further claimed that the official liquidator having sold the hypothecated assets of the Company, was bound to reimburse the sale proceeds to the Bank, who was a secured creditor, and that in the course of the proceedings of the Suit, a receiver was appointed to make an inventory of t various machines and the receiver had submitted his report to the Court seized of the Suit. The right of the Official Liquidator to dispose of the hypothecated assets of the Company was also challenged.

( 4 ) ON the pleadings of the parties, following issue was framed :

"is the petitioner entitled to payment of Rs. 90,500. 00"

( 5 ) IN support of their respective cases, parties were allowed to produce evidence by affidavits. On behalf of the Bank, affidavit of its Manager was filed and on behalf of the Company, the affidavit of the Official Liquidator was filed. The Bank also filed a copy of the agreement of hypothecation, a copy of the plaint in the suit, a copy of the judgment of this Court on the Original Side, decreeing the suit, and a copy of the Report of the Commissioner appointed in the proceedings of the suit. The two affidavits are, by and large, a re-affirmation of the respective cases of the parties as set out in the pleadings.

( 6 ) I have heard learned Counsel for the parties.

( 7 ) THE winding up order was made on September 26, 1980. Pursuant to the winding up order, the Official Li