Mr. Kuhad in support of his
submission that the interim order dated 15th April,
1987 has to be treated as a mandate of the Court,
has relied on J.K. (Bombay) (P) Ltd. Vs. New
Kaiser-I-Hind Spinning and Weaving Co. Ltd.(1969) 2 SCR 866
In the aforesaid judgment, undoubtedly it is held that
“no particular form of words is necessary to create a
charge and all that is necessary is that there must be
a clear intention to make a property security for
payment of money in praesenti.” The aforesaid
observations of this Court ought not to be read out of
context. The judgments of this Court are not to be
read as statutory instruments. The ratio of the
judgment has to be culled out, keeping in view the
facts and circumstances involved in a particular case.
The facts in that case are noticed in paragraph 26
from wherein the aforesaid three lines have been
extracted by Mr. Kuhad in support of his
submission. We quote the relevant part of paragraph
26 of the aforesaid judgment which is as under:
“26……. It was argued that where an
agreement specifies a property out of which a
debt is to be payable and is coupled with an
intention to subject such property to a
charge, the property becomes subject to a
charge in praesenti even though a regular
mortgage is to be executed at some future
date. Such an intention, the learned Attorney General
argued, was demonstrated by the
agreement that (1) the debts were to be paid
out of profits and (2) the engagement by the
company not to deal with its assets. The
distinction between a charge and a mortgage
is clear. While in the case of a charge there is
no transfer of property or any interest
therein, but only the creation of a right of
payment out of the specified property, a
mortgage effectuates transfer of property or
an interest therein. No particular form of
words is necessary to create a charge and all
that is necessary is that there must be a clear
intention to make a property security for
payment of money in praesenti.
………”
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1746 OF 2006
Oil and Natural Gas Corporation Ltd. …
Appellant
VERSUS
Official Liquidator of M/s. Ambica Mills
Company Ltd. & Ors.
...Respondents
SURINDER SINGH NIJJAR, J.
Citation;(2015) 5 SCC300
1. The appellant, Oil and Natural Gas Corporation Ltd. is a
statutory corporation constituted by and under the Oil
and Natural Gas Commission Act, (Central Act, 43 of
1959). In 1967, the appellant commenced supply of
natural gas to the industries in and around Vadodra.
The Federation of Gujarat Mills and Industries agreed to
purchase the gas supplied by ONGC at Rs.100/- per
unit.
2. The industries subscribing to the gas supplied by the
appellant formed an association in 1978 called “The
Association of Natural Gas Consuming Industries of
Gujarat” (hereinafter referred to as ‘Association’).
Respondent- Ambica Mills Co. Ltd. is one among the
members of the said Association. The supply of gas to
2Page 3
the member industries was based on individual
contracts entered into with each of the concerns. The
appellant and the members of the said Association
entered into an agreement for supply of natural gas.
The agreement provided the price payable for supply of
gas and the rate of interest in the event of failure to
pay the stipulated prices.
3. On 30th March, 1979, the contractual period of the
aforesaid contract expired. After the expiry of the
contract, a new contract stipulated prices for supply
that were prevalent at the time of the respective
contracts. The then levied price for supply of gas was
Rs.504/- per unit.
4. The Association formed a Society registered under the
Cooperative Societies Act. The Association filed Special
Civil Application No. 833 of 1979, before the Gujarat
High Court praying to issue appropriate writ directing
the directing the Respondent therein (Appellant herein)
3Page 4
to supply the break up and data on the basis of which
price structure was arrived at by ONGC, for supply of
the gas etc.
5. The Gujarat High Court by an interim order dated 30th
March, 1979 in the said Application, directed the
Appellant herein to continue supply of gas at the old
rate, i.e., Rs.504/- per 1000 cubic meter. On 29th
December, 1982, the High Court modified the aforesaid
interim order and directed the Appellant to supply gas
to the member industries of the Association at
Rs.1000/- per 1000 cubic meter.
6. On 30th July, 1983 the said Civil Application was partly
allowed by the Division Bench setting aside the price
demanded by the Appellant herein, leaving it open to
deal with the question of price fixation in any one of the
three modes suggested in Para 36 of the judgment in
the case of Association of Natural Gas Consuming
4Page 5
Industries of Gujarat & Ors. Vs. ONGC & Anr.
reported in 24 (2) GLR 1437.
7. The Appellant preferred an appeal being C.A. No. 8530-
8540 of 1983 against the aforesaid order. On 15th April,
1987, this Court passed an interim order directing that
the members of the Association including the
Respondent shall be supplied gas at the rate of
Rs.1000/- per 1000 cubic metres subject to an
undertaking that the respondent shall not charge,
encumber or alienate except with the leave of this
Court any of the immovable assets.
8. Pursuant to the order dated 15th April, 1987, an
undertaking was given by Ambica Mills Co. Ltd. thereby
making available their immovable assets for discharge
of its respective liability on 27th May, 1987.
5Page 6
9. Appellant filed Company Petition No. 66 of 1983
seeking winding up of Respondent No. 1- Ambica Mills
Co. Ltd.
10. C.A. No. 8530-8540 of 1983 was finally decided by
this Court and the judgment was delivered in the same
matter on 4th May, 1990 (reported in 1990 Suppl. SCC
397). This Court, as regards the price fixation, had set
aside the direction given by the High Court in Para 36 of
the judgment dated 30th July, 1983. It
was observed that the ONGC would be at liberty to take
immediate steps to recover the charges due from the
respondents therein, in the light of this judgment.
11. Soon after the aforesaid judgment, ONGC filed an
application for certain directions and modifications of
the aforesaid judgment. When the matter was taken up
for hearing on 8th December, 1992, learned senior
counsel appearing on behalf of the Association
submitted that the members of the Association will
make some more substantial payments to ONGC by the
6Page 7
end of the month, and particulars of payment so made
would be submitted in the Court on or before 8th
January, 1993. On 6th April, 1993, when the matter was
taken up again on an application filed by the ONGC
complaining of non-payment by the members of the
Association, this Court observed that the liability of the
members of the Association to make the payment of
amounts due from them to the ONGC was beyond
controversy and cannot be disputed. In the aforesaid
order, it was further observed that the principal amount
due from Ambica Mills Co. Ltd. as on 31st March, 1993 in
respect of period 1st April, 1979 to 21st January, 1987,
as shown in the statement furnished by ONGC, is Rs.
1.58 crores and interest thereon amounted to Rs.4.96
crores. Ambica Mills Co. Ltd. admitted the principal
amount. The interest calculated would be accepted
subject to verification. At the relevant time, reference
relating to Ambica Mills Co. Ltd. under the Sick
Industrial Companies (Special Provisions) Act, 1985
(SICA) was already pending before the Board for
7Page 8
Industrial and Financial Reconstruction (BIFR). Upon
consideration of the matter, this Court on 29th April,
1993 granted the prayer of ONGC that it would be
entitled to take steps for disconnecting the supply of
gas in case of non payment of the amounts due. This
Court directed that the principal amount must be paid
within a period of 5 years latest by 31st March, 1998. So
far as Ambica Mills is concerned, the statement was
made by the learned senior counsel appearing for them
that the respondent is prepared to sell the vacant land
at Vatwa in Ahmedabad in order to discharge the due of
ONGC in the present case. Ambica Mills was granted
liberty by this Court to make prayer to that effect
before the BIFR and to obtain suitable directions. It was
also observed that the entire dues of the ONGC shall be
first paid out of the total sale price and the balance, if
any, remaining thereafter shall be available for
utilisation in any other manner directed by the BIFR. It
appears that in the meantime BIFR recommended that
Ambica Mills be put into liquidation. This
8Page 9
recommendation of the BIFR came up before the
Gujarat High Court along with other winding up on 17th
October, 1997, when the High Court appointed a
provisional liquidator.
12. Soon thereafter, it appears that the Company
Application No.445 of 2000 in official liquidator report
No. 44 of 1999 in Company Petition No.121 of 1995 was
filed in the Gujarat High Court seeking directions for
payment of the amounts due to ONGC by the Ambica
Mills (company in liquidation). On 17th January, 1997,
the High Court ordered winding up of M/s. Ambica Mills
Co. Ltd. and the official liquidator was appointed as the
liquidator of the company. Thereafter the official
liquidator filed an application before this Court in
respect of the disposal of the properties of the company
in liquidation and disbursement of the amounts
realised. This Court by order dated 17th October, 1997
directed as follows :-
9Page 10
“That out of the assets of the company under
liquidation, the dues of ONGC Limited are
required to be paid off first and the question of
making any payment to any other creditor can
realise only out of the surplus if any remaining
after the fill dues of the ONGC Limited have
been paid off. The High Court is therefore, to
proceed with the matter in this manner.
I.As stand disposed off.”
13. It is the case of the ONGC that it is in receipt of a
letter dated 28th September, 1999 from the official
liquidator wherein it has been stated that Plot
No.307IPS-16 of Ambica Mills (in liquidation) property
was disposed of for Rs.90.11 lakhs and the initial
instalment of Rs.22.52 lakhs had already been
deposited by the purchaser of the said plot. A prayer
was made for release of the aforesaid amount to ONGC.
14. It appears that respondent No.10-Textile Labour
Association, Bhadra sought review of the order dated
17th October, 1997 by filing Review Petition Nos.1193-
1203 of 2001 in I.A.No.168-178/1997 in C.A.No.8530-40
of 1983. The aforesaid review petitions were decided by
10Page 11
this Court on 12th April, 2004 and it was directed that
claims of ONGC will have to be worked out in
accordance with Sections 529 and 529A of the
Companies Act as well. The submissions made on
behalf of ONGC that the mandamus issued by this Court
earlier that ONGC must be paid up first from any sale of
the assets of the company in liquidation, would prevail
even if the statutory provisions contained in Sections
529 and 529A of the Companies Act, were rejected.
The aforesaid judgment of this Court is reported at
2004 (9) SCC 741.
15. The record also shows that ONGC moved Company
Application No.445 of 2000 in Company Petition No.121
of 1995 by way of judges summons, in which directions
were sought that outstanding amounts of the ONGC be
paid by the company in liquidation. Further, an
injunction be issued restraining the company in
liquidation its agents, officers and servants from
making any payment/disbursement in any manner, of
11Page 12
any of the sale proceeds that are available from the
sale of assets of the company in liquidation. Further an
injunction was sought restraining Ambica Mills from
creating any charge alienation and discharging of the
immoveable assets of the company in liquidation. This
application was heard at length by the learned Single
Judge and dismissed with the following observations :-
“2.16A ONGC therefore cannot claim any
preferential right on the basis of
the order of 17.10.1997 in priority
to the secured creditors and the
workmen taking into consideration
the provisions of
Sections 529 and 529A of the Act.
Such preferential claim, if falling
under Section 530 of the Act would
follow the claims of Secured
Creditors and the Workmen under
Sections 529 & 529A of the Act. In
case the claim of ONGC is not
proved to be preferential under
Section 530 of the Act they would
therefore fall for consideration
along with all other claims of other
creditors as ONGC, on its own
saying, is a decree holder.
2.16B In view of what is stated hereinbefore
this application cannot be granted
at this stage, i.e. before claims of
Secured Creditors and workmen
12Page 13
are processed under
Sections 529 and 529A of the Act.
Despite categorical statement at
the Bar, under instructions, that
ONGC did not want to lodge any
claim before the Official Liquidator,
it will be open to ONGC to lodge its
claim in accordance with law and
seek its satisfaction when claims of
other Creditors of the Company in
liquidation are taken up for
consideration for distribution of the
funds which may be available at
that time. The application is
accordingly rejected. Notice is
discharged.”
16. Aggrieved by the aforesaid directions, ONGC filed
O.J. Appeal No.51 of 2004. On 18th October, 2004, the
Division Bench stayed the judgment of the learned
Single Judge subject to disbursement of the workers
at the rate of Rs.2500/- each worker as agreed by the
parties. The aforesaid appeal has been dismissed by
the High Court by the judgment dated 16th January,
2006 giving rise to the present appeal.
13Page 14
17. We have perused the entire record and heard the
learned senior counsel for the parties at length.
18. Mr. Paras Kuhad, appearing for the appellant
submitted that the High Court had committed an error
in concluding that the appellant cannot claim any
preferential right on the basis of the order passed on
17th October, 1997. According to Mr. Kuhad, the second
error committed by the High Court is that it has wrongly
concluded that no security was created in favour of the
appellant on the basis of the interim order passed by
this Court on 15th April, 1987 and the undertaking
furnished by the company in liquidation Ambica Mills
Co. Ltd. pursuant to the order of this Court. The third
error committed by the High Court, according to Mr.
Kuhad, is in holding that no security has been created
in favour of the appellant as no charges have been
registered under Section 125 of the Companies Act,
1956. Mr. Kuhad has submitted that the undertaking
dated 27th May, 1987 is a superimposition on the
14Page 15
priorities as given in Sections 529 and 529A of the
Companies Act. In support of his submission, learned
senior counsel has relied on a number of judgments
which we shall notice presently.
19. Learned counsel for the respondents has
submitted that the genesis of the civil appeal is the
interim order dated 15th April, 1987. It is
submitted that the aforesaid order is in the nature of an
injunctive order whereby the company in liquidation
was directed, not to charge encumber or alienate any
of its assets except with the leave of this Court,
including the assets listed in the respective
undertakings. The second part of the injunction was
that the respondents will make their immovable assets
available for discharging the respective liabilities to the
ONGC. The undertaking filed by Ambica Mills Co. Ltd.
was that “none of immovable assets of the company
will be further charged and encumbered hereinafter
with effect from 15th April, 1987, except with the leave
15Page 16
of this Court.” It is the submission of the respondents
that in the aforesaid undertaking no specific details and
particulars of any immovable assets were given or
provided. Therefore, the aforesaid undertaking does not
make the appellant a secured creditor of Ambica Mills
Co. Ltd. It is pointed out by the learned counsel that
even in the judgment dated 4th May, 1990 of this Court
in Oil and Natural Gas Commission & Anr. Vs.
Association of Natural Gas Consuming Industries
of Gujarat & Ors. reported at 1990 (Supp) SCC 397
did not hold that the order dated 15th April, 1987 or the
undertaking dated 27th May, 1987 have conferred upon
the appellant status of a secured creditor. This Court
only directed that the ONGC will be at liberty to take
immediate steps to recover the dues from the
respondent in the light of the judgment. Similarly no
charge was created by this Court while passing the
order dated 6th April, 1993. Explaining the order dated
17th October, 1987, it is submitted by the learned
counsel for the respondent that the order only directed
16Page 17
that in case of sale of the assets of the company in
liquidation, the dues of the ONGC shall be paid off first.
But this order was subsequently reviewed on 12th April,
2004 directing that the order dated 17th October, 1997
would have to be read subject to the provisions of
Sections 529 and 529A of the Companies Act.
Therefore, the secured creditors had two options, either
to realise its securities outside the winding up
proceedings or to relinquish its security for the general
benefit of all and prove its claim by participating in the
liquidation proceedings. The appellant never gave any
option knowing perfectly well it was not a secured
creditor. The judgments relied upon by the appellants
have been sought to be distinguished by the learned
counsel for the respondents.
20. We have considered the submissions made by the
learned counsel for the parties. In our opinion, the
appellant cannot claim that the order dated 15th April,
1987 created an enforceable charge on the assets of
17Page 18
the company in liquidation. We are of the opinion that
the learned counsel for the respondents are quite right
in their submissions that an injunction was issued only
to ensure that the company in liquidation does not
further encumber or create charges in favour of third
parties over the assets of the company in liquidation. In
our opinion, neither the interim order dated 15th April,
1987 nor the undertaking given pursuant thereto can
be said to be a charge on the assets of the company in
liquidation. This Court in the case of Indian Bank Vs.
Official Liquidator, Chemmeens Exports (P) Ltd. &
Ors.1
whilst considering the provisions contained in
Section 125 of the Companies Act has observed as
follows :-
“6. Since the preliminary decree is assailed
as being void under Section 125 of the Act, it
would be useful to read here the said
provision, insofar as it is relevant for our
purposes. It reads:
“125. Certain charges to be void
against liquidator or creditors unless
registered.—(1) Subject to the
1
(1998) 5 SCC 401
18Page 19
provisions of this Part, every charge
created on or after the Ist day of April,
1914, by a company and being a
charge to which this section applies
shall, so far as any security on the
company’s property or undertaking is
conferred thereby, be void against
the liquidator and any creditor of the
company, unless the prescribed
particulars of the charge, together
with the instrument, if any, by which
the charge is created or evidenced, or
a copy thereof verified in the
prescribed manner, are filed with the
Registrar for registration in the
manner required by this Act within
thirty days after the date of its
creation:
Provided that the Registrar may allow the
particulars and instrument of copy as
aforesaid to be filed within thirty days next
following the expiry of the said period of
thirty days on payment of such additional fee
not exceeding ten times the amount of fee
specified in Schedule X as the Registrar may
determine, if the company satisfies the
Registrar that it had sufficient cause for not
filing the particulars and instrument or copy
within that period.
(2) Nothing in sub-section (1) shall prejudice
any contract or obligation for the repayment
of the money secured by the charge.
(3) When a charge becomes void under this
section, the money secured thereby shall
immediately become payable.
19Page 20
(4) This section applies to the following
charges:
(a) a charge for the purpose of
securing any issue of debentures;
(b) a charge on uncalled share capital
of the company;
(c) a charge on any immovable
property, wherever situate, or any
interest therein;
(d) a charge on any book debts of the
company;
(e) a charge, not being a pledge, on
any moveable property of the
company;
(f) a floating charge on the
undertaking or any property of the
company including stock-in-trade;
(g) a charge on calls made but not
paid;
(h) a charge on a ship or any share in
a ship;
(i) a charge on goodwill, on a patent
or a licence under a patent, on a
trade mark, or on a copyright or a
licence under a copyright.
(5) to (8)* * *”
7. On a plain reading of sub-section (1) it
becomes clear that if a company creates a
charge of the nature enumerated in subsection
(4), after 1-4-1914 on its properties,
and fails to have the charge together with
instrument, if any, by which the charge is
created, registered with the Registrar of the
Companies within thirty days, it shall be void
20Page 21
against the liquidator and any creditor of the
company. This, however, is subject to the
provisions of Part V of the Act. The proviso
enables the Registrar to relax the period of
limitation of thirty days on payment of
specified additional fees, on being satisfied
that there has been sufficient cause for not
filing the particulars and instrument or a copy
thereof within the specified period. Subsections
(2) and (3) deal with repayment of
money secured by the charge. Sub-section
(2) provides that the provision of sub-section
(1) shall not prejudice the contract or
obligation for repayment of money secured
by the charge and sub-section (3) says that
when a charge becomes void under that
section, the money secured shall become
payable immediately. Though as a
consequence of non-registration of charge
under Part V of the Act, a creditor may not be
able to enforce the charge against the
properties of the company as a secured
creditor in the event of liquidation of the
company as the charge becomes void against
the liquidator and the creditor, yet he will be
entitled to recover the debt due by the
company on a par with other unsecured
creditors. It is also evident that Section 125
applies to every charge created by the
company on or after 1-4-1914. But where the
charge is by operation of law or is created by
an order or decree of the court, Section 125
has no application.”
21. The observations made in paragraph 7, in our
opinion, is a complete answer to the submission
made by Mr. Paras Kuhad. Clearly the appellant is
21Page 22
only entitled to recover the dues at par with other
unsecured creditors. In our opinion, the order dated
15th April, 1987, was only in the nature of restraint on
the Company in liquidation not to further encumber
any of its assets. It did not have the effect of
creating a charge. Mr. Kuhad in support of his
submission that the interim order dated 15th April,
1987 has to be treated as a mandate of the Court,
has relied on J.K. (Bombay) (P) Ltd. Vs. New
Kaiser-I-Hind Spinning and Weaving Co. Ltd.2
In the aforesaid judgment, undoubtedly it is held that
“no particular form of words is necessary to create a
charge and all that is necessary is that there must be
a clear intention to make a property security for
payment of money in praesenti.” The aforesaid
observations of this Court ought not to be read out of
context. The judgments of this Court are not to be
read as statutory instruments. The ratio of the
judgment has to be culled out, keeping in view the
2
(1969) 2 SCR 866
22Page 23
facts and circumstances involved in a particular case.
The facts in that case are noticed in paragraph 26
from wherein the aforesaid three lines have been
extracted by Mr. Kuhad in support of his
submission. We quote the relevant part of paragraph
26 of the aforesaid judgment which is as under:
“26……. It was argued that where an
agreement specifies a property out of which a
debt is to be payable and is coupled with an
intention to subject such property to a
charge, the property becomes subject to a
charge in praesenti even though a regular
mortgage is to be executed at some future
date. Such an intention, the learned Attorney General
argued, was demonstrated by the
agreement that (1) the debts were to be paid
out of profits and (2) the engagement by the
company not to deal with its assets. The
distinction between a charge and a mortgage
is clear. While in the case of a charge there is
no transfer of property or any interest
therein, but only the creation of a right of
payment out of the specified property, a
mortgage effectuates transfer of property or
an interest therein. No particular form of
words is necessary to create a charge and all
that is necessary is that there must be a clear
intention to make a property security for
payment of money in praesenti. In Jewan Lal
Daga v. Nilmani Chaudhuri, a case relied on
by him, the question was one relating to an
agreement to mortgage. Following on the
agreement, a draft mortgage was prepared
which was approved by the respondent's
solicitors, the mortgage deed was engrossed
and even the stamp for it was paid by the
respondent. The question was whether
specific performance of the agreement
compelling the respondent to execute the
mortgage could be granted before accounts
between the parties were made up and the
amount due thereunder was ascertained. The
Privy Council disagreeing with the High Court
held that that could be done and observed
that " there was a valid agreement charging
the property with whatever sum was actually
due......and that a proper mortgage ought to
be executed to carry out these terms." In
Khajeh Suleman Quadir v. Salimullah certain
deeds were executed purporting to make
wakfs of certain properties in favour of the
members of a Mahomedan family and then
for charitable purposes. Later on, agreements
were executed, under one of which the
members of the family agreed that
allowances fixed under the wakfs should be
paid out of the income to named persons of
the family and upon their death to their heirs,
and under the other agreement the mutawalli
agreed that he and the future mutawallis
would pay the said allowances. The wakfs
were held invalid as creating a perpetual
succession of estates. The question was
whether the agreements to pay allowances
also fell along with them. The Privy Council
held that they did not, that they were valid
and enforceable and that the direction in the
agreements to pay the allowances out of the
income of the settled properties showed an
intention to create a charge. In both these
decisions the Board came to the conclusion
that there was a clear intention on the part of
24Page 25
the parties to create a charge in praesenti.
The argument of the learned AttorneyGeneral
was that if an agreement indicated a
property out of which a debt is to be paid and
an intention to subject it to a charge in
praesenti, the court must find the charge.
Certain other decisions were also brought to
our notice but it is not necessary to burden
this judgment with them because in each
case the question which the court would have
to decide would be whether the agreement in
question creates a charge in praesenti.:
………”
22. The aforesaid observations would indicate that the
court was examining the submissions made by the
learned Attorney General. The effort of the Attorney
General was to persuade this Court, on the cases
mentioned in the aforesaid paragraph that there was
an agreement which established an intention to
create a charge. A reading of the order dated 15th
April, 1987 clearly shows that it firstly gives the
direction to the ONGC to continue the supply of gas
at the rate of Rs.1000/- for 1000 cubic meter. Such a
direction would be implemented only upon an
undertaking given by the respondents that they will
25Page 26
not charge encumber or alienate any asset except
with the leave of this Court. A further direction was
that the immoveable assets included in the
respective undertaking will be made available for
discharging the respective liabilities of the
respondent company. The undertaking given by the
company in liquidation in this case was as under :
“3. I state that Respondent No.10 Company
undertakes that none of immovable assets of
the company will be further charged and
encumbered hereafter with effect from
15.04.1987, i.e. from the date of order of this
Hon’ble Court except with the leave of this
Hon’ble Court.
4. I state that Respondent NO.10 Company
further undertakes not to alienate any of its
immovable assets hereinafter with effect
from 15.04.1987 except with the leave of this
Hon’ble Court. The Respondent No.10
Company further undertakes to make
available all its immovable assets in the
event of discharging the liabilities which may
arise on account of the difference between
26Page 27
the price at which all the Gas being supplied
to the company during the pendency of the
proceedings in this connection and the price
which may be determined by this Hon’ble
court while disposing of the present Appeals
finally.
23. A perusal of the aforesaid undertaking shows that
Ambica Mills has not identified any particular
immovable assets which would be made available in
discharging the liabilities in favour of the appellant.
Therefore, we have no hesitation in rejecting the
submission of Mr.Kuhad that the interim order read
with the undertaking expressed an intention to
create an enforceable charge of any particular asset
of the company in liquidation.
24. We are of the opinion that the judgment in the
case of Praga Tools Ltd. Vs. Official Liquidator of
Bengal Engineering Company (P) Ltd. (1984) 56
Comp. Cas.214 (Cal) would also not be applicable to
27Page 28
the facts and circumstances of this case. Mr. Kuhad
has relied on the following observations:
“The fallacy in the argument of Mr.
Mookherjee, in my view, is that after the
passing of the order of S.K. Roy Chowdhury J.
(as his Lordship then was), dated August 1,
1978, the position with regard to the security
assumed a completely different complexion.
By that order, as I have already indicated, the
claim of the petitioning-creditor was settled
at a certain amount. A mode for payment of
that money was indicated. Then there is a
default clause. That default clause contained
a twin option either of initiating a fresh
winding up proceeding or of executing the
balance as a decree of court. It is only in the
event of an option being exercised in favour
of the last contingency, viz., in the event of
the execution as a decree of court, that the
security which was furnished pursuant to the
order of R.M. Dutta J. would be a security for
the applicant company for the satisfaction of
the decree and would be the security for the
decree until the decretal dues were paid.
Thus, the benefit of the security in so far as
the applicant company is concerned is
entirely the creature of the order of Roy
Chowdhury J. dated August 1, 1978. This can,
in my view, by no stretch of imagination, be
called a charge created "by a company"
within the meaning of Section 125 of the
Companies Act, 1956, requiring registration
under the above section.
It would follow, therefore, from what I have
said that the question as to whether the
28Page 29
security as originally furnished was registered
under Section125 of the Companies Act,
1956, or not, would be totally irrelevant for
the purpose of determining the right of the
applicant company after the order of Roy
Chowdhury J., dated August 1, 1978.”
25. The aforesaid observations, in our opinion, would
not be applicable on the facts and circumstances of
this case, as no charge have been created in favour
of ONGC by any of the orders passed by this Court.
26. Mr. Kuhad has submitted that the respondents
have specifically agreed to make the assets available
for discharging the liability of the ONGC, this,
according to Mr. Paras Kuhad, was tantamount to
creating an enforceable charge. We are unable to
accept the aforesaid submission. In the face of the
directions given by this Court in the case of Oil and
Natural Gas (supra) wherein this Court had
directed that the ONGC is at liberty to take
immediate steps to recover the charges due from the
respondents in the light of the judgment. This Court
29Page 30
did not direct that in view of the undertaking dated
27th May, 1987 the respondents have created
enforceable charge in favour of ONGC. Furthermore,
it is a matter of record that even the ONGC did not
consider itself to be a secured creditor. At the time
when the Ambica Mills Co. Ltd. came under the
jurisdiction of the Official Liquidator, none of the two
options adverted to earlier was exercised by ONGC.
The plea of being a secured creditor is clearly an
afterthought. Therefore, in our opinion, the
judgments rendered by the learned Single Judge and
the Division Bench of the Gujarat High Court do not
call for any interference. The civil appeals are
accordingly dismissed.
……………………………….J.
[Surinder Singh Nijjar]
………………………………..J.
[A.K.Sikri]
New Delhi;
30Page 31
April 17, 2014.
31
Print Page
submission that the interim order dated 15th April,
1987 has to be treated as a mandate of the Court,
has relied on J.K. (Bombay) (P) Ltd. Vs. New
Kaiser-I-Hind Spinning and Weaving Co. Ltd.(1969) 2 SCR 866
In the aforesaid judgment, undoubtedly it is held that
“no particular form of words is necessary to create a
charge and all that is necessary is that there must be
a clear intention to make a property security for
payment of money in praesenti.” The aforesaid
observations of this Court ought not to be read out of
context. The judgments of this Court are not to be
read as statutory instruments. The ratio of the
judgment has to be culled out, keeping in view the
facts and circumstances involved in a particular case.
The facts in that case are noticed in paragraph 26
from wherein the aforesaid three lines have been
extracted by Mr. Kuhad in support of his
submission. We quote the relevant part of paragraph
26 of the aforesaid judgment which is as under:
“26……. It was argued that where an
agreement specifies a property out of which a
debt is to be payable and is coupled with an
intention to subject such property to a
charge, the property becomes subject to a
charge in praesenti even though a regular
mortgage is to be executed at some future
date. Such an intention, the learned Attorney General
argued, was demonstrated by the
agreement that (1) the debts were to be paid
out of profits and (2) the engagement by the
company not to deal with its assets. The
distinction between a charge and a mortgage
is clear. While in the case of a charge there is
no transfer of property or any interest
therein, but only the creation of a right of
payment out of the specified property, a
mortgage effectuates transfer of property or
an interest therein. No particular form of
words is necessary to create a charge and all
that is necessary is that there must be a clear
intention to make a property security for
payment of money in praesenti.
………”
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1746 OF 2006
Oil and Natural Gas Corporation Ltd. …
Appellant
VERSUS
Official Liquidator of M/s. Ambica Mills
Company Ltd. & Ors.
...Respondents
SURINDER SINGH NIJJAR, J.
Citation;(2015) 5 SCC300
statutory corporation constituted by and under the Oil
and Natural Gas Commission Act, (Central Act, 43 of
1959). In 1967, the appellant commenced supply of
natural gas to the industries in and around Vadodra.
The Federation of Gujarat Mills and Industries agreed to
purchase the gas supplied by ONGC at Rs.100/- per
unit.
2. The industries subscribing to the gas supplied by the
appellant formed an association in 1978 called “The
Association of Natural Gas Consuming Industries of
Gujarat” (hereinafter referred to as ‘Association’).
Respondent- Ambica Mills Co. Ltd. is one among the
members of the said Association. The supply of gas to
2Page 3
the member industries was based on individual
contracts entered into with each of the concerns. The
appellant and the members of the said Association
entered into an agreement for supply of natural gas.
The agreement provided the price payable for supply of
gas and the rate of interest in the event of failure to
pay the stipulated prices.
3. On 30th March, 1979, the contractual period of the
aforesaid contract expired. After the expiry of the
contract, a new contract stipulated prices for supply
that were prevalent at the time of the respective
contracts. The then levied price for supply of gas was
Rs.504/- per unit.
4. The Association formed a Society registered under the
Cooperative Societies Act. The Association filed Special
Civil Application No. 833 of 1979, before the Gujarat
High Court praying to issue appropriate writ directing
the directing the Respondent therein (Appellant herein)
3Page 4
to supply the break up and data on the basis of which
price structure was arrived at by ONGC, for supply of
the gas etc.
5. The Gujarat High Court by an interim order dated 30th
March, 1979 in the said Application, directed the
Appellant herein to continue supply of gas at the old
rate, i.e., Rs.504/- per 1000 cubic meter. On 29th
December, 1982, the High Court modified the aforesaid
interim order and directed the Appellant to supply gas
to the member industries of the Association at
Rs.1000/- per 1000 cubic meter.
6. On 30th July, 1983 the said Civil Application was partly
allowed by the Division Bench setting aside the price
demanded by the Appellant herein, leaving it open to
deal with the question of price fixation in any one of the
three modes suggested in Para 36 of the judgment in
the case of Association of Natural Gas Consuming
4Page 5
Industries of Gujarat & Ors. Vs. ONGC & Anr.
reported in 24 (2) GLR 1437.
7. The Appellant preferred an appeal being C.A. No. 8530-
8540 of 1983 against the aforesaid order. On 15th April,
1987, this Court passed an interim order directing that
the members of the Association including the
Respondent shall be supplied gas at the rate of
Rs.1000/- per 1000 cubic metres subject to an
undertaking that the respondent shall not charge,
encumber or alienate except with the leave of this
Court any of the immovable assets.
8. Pursuant to the order dated 15th April, 1987, an
undertaking was given by Ambica Mills Co. Ltd. thereby
making available their immovable assets for discharge
of its respective liability on 27th May, 1987.
5Page 6
9. Appellant filed Company Petition No. 66 of 1983
seeking winding up of Respondent No. 1- Ambica Mills
Co. Ltd.
10. C.A. No. 8530-8540 of 1983 was finally decided by
this Court and the judgment was delivered in the same
matter on 4th May, 1990 (reported in 1990 Suppl. SCC
397). This Court, as regards the price fixation, had set
aside the direction given by the High Court in Para 36 of
the judgment dated 30th July, 1983. It
was observed that the ONGC would be at liberty to take
immediate steps to recover the charges due from the
respondents therein, in the light of this judgment.
11. Soon after the aforesaid judgment, ONGC filed an
application for certain directions and modifications of
the aforesaid judgment. When the matter was taken up
for hearing on 8th December, 1992, learned senior
counsel appearing on behalf of the Association
submitted that the members of the Association will
make some more substantial payments to ONGC by the
6Page 7
end of the month, and particulars of payment so made
would be submitted in the Court on or before 8th
January, 1993. On 6th April, 1993, when the matter was
taken up again on an application filed by the ONGC
complaining of non-payment by the members of the
Association, this Court observed that the liability of the
members of the Association to make the payment of
amounts due from them to the ONGC was beyond
controversy and cannot be disputed. In the aforesaid
order, it was further observed that the principal amount
due from Ambica Mills Co. Ltd. as on 31st March, 1993 in
respect of period 1st April, 1979 to 21st January, 1987,
as shown in the statement furnished by ONGC, is Rs.
1.58 crores and interest thereon amounted to Rs.4.96
crores. Ambica Mills Co. Ltd. admitted the principal
amount. The interest calculated would be accepted
subject to verification. At the relevant time, reference
relating to Ambica Mills Co. Ltd. under the Sick
Industrial Companies (Special Provisions) Act, 1985
(SICA) was already pending before the Board for
7Page 8
Industrial and Financial Reconstruction (BIFR). Upon
consideration of the matter, this Court on 29th April,
1993 granted the prayer of ONGC that it would be
entitled to take steps for disconnecting the supply of
gas in case of non payment of the amounts due. This
Court directed that the principal amount must be paid
within a period of 5 years latest by 31st March, 1998. So
far as Ambica Mills is concerned, the statement was
made by the learned senior counsel appearing for them
that the respondent is prepared to sell the vacant land
at Vatwa in Ahmedabad in order to discharge the due of
ONGC in the present case. Ambica Mills was granted
liberty by this Court to make prayer to that effect
before the BIFR and to obtain suitable directions. It was
also observed that the entire dues of the ONGC shall be
first paid out of the total sale price and the balance, if
any, remaining thereafter shall be available for
utilisation in any other manner directed by the BIFR. It
appears that in the meantime BIFR recommended that
Ambica Mills be put into liquidation. This
8Page 9
recommendation of the BIFR came up before the
Gujarat High Court along with other winding up on 17th
October, 1997, when the High Court appointed a
provisional liquidator.
12. Soon thereafter, it appears that the Company
Application No.445 of 2000 in official liquidator report
No. 44 of 1999 in Company Petition No.121 of 1995 was
filed in the Gujarat High Court seeking directions for
payment of the amounts due to ONGC by the Ambica
Mills (company in liquidation). On 17th January, 1997,
the High Court ordered winding up of M/s. Ambica Mills
Co. Ltd. and the official liquidator was appointed as the
liquidator of the company. Thereafter the official
liquidator filed an application before this Court in
respect of the disposal of the properties of the company
in liquidation and disbursement of the amounts
realised. This Court by order dated 17th October, 1997
directed as follows :-
9Page 10
“That out of the assets of the company under
liquidation, the dues of ONGC Limited are
required to be paid off first and the question of
making any payment to any other creditor can
realise only out of the surplus if any remaining
after the fill dues of the ONGC Limited have
been paid off. The High Court is therefore, to
proceed with the matter in this manner.
I.As stand disposed off.”
13. It is the case of the ONGC that it is in receipt of a
letter dated 28th September, 1999 from the official
liquidator wherein it has been stated that Plot
No.307IPS-16 of Ambica Mills (in liquidation) property
was disposed of for Rs.90.11 lakhs and the initial
instalment of Rs.22.52 lakhs had already been
deposited by the purchaser of the said plot. A prayer
was made for release of the aforesaid amount to ONGC.
14. It appears that respondent No.10-Textile Labour
Association, Bhadra sought review of the order dated
17th October, 1997 by filing Review Petition Nos.1193-
1203 of 2001 in I.A.No.168-178/1997 in C.A.No.8530-40
of 1983. The aforesaid review petitions were decided by
10Page 11
this Court on 12th April, 2004 and it was directed that
claims of ONGC will have to be worked out in
accordance with Sections 529 and 529A of the
Companies Act as well. The submissions made on
behalf of ONGC that the mandamus issued by this Court
earlier that ONGC must be paid up first from any sale of
the assets of the company in liquidation, would prevail
even if the statutory provisions contained in Sections
529 and 529A of the Companies Act, were rejected.
The aforesaid judgment of this Court is reported at
2004 (9) SCC 741.
15. The record also shows that ONGC moved Company
Application No.445 of 2000 in Company Petition No.121
of 1995 by way of judges summons, in which directions
were sought that outstanding amounts of the ONGC be
paid by the company in liquidation. Further, an
injunction be issued restraining the company in
liquidation its agents, officers and servants from
making any payment/disbursement in any manner, of
11Page 12
any of the sale proceeds that are available from the
sale of assets of the company in liquidation. Further an
injunction was sought restraining Ambica Mills from
creating any charge alienation and discharging of the
immoveable assets of the company in liquidation. This
application was heard at length by the learned Single
Judge and dismissed with the following observations :-
“2.16A ONGC therefore cannot claim any
preferential right on the basis of
the order of 17.10.1997 in priority
to the secured creditors and the
workmen taking into consideration
the provisions of
Sections 529 and 529A of the Act.
Such preferential claim, if falling
under Section 530 of the Act would
follow the claims of Secured
Creditors and the Workmen under
Sections 529 & 529A of the Act. In
case the claim of ONGC is not
proved to be preferential under
Section 530 of the Act they would
therefore fall for consideration
along with all other claims of other
creditors as ONGC, on its own
saying, is a decree holder.
2.16B In view of what is stated hereinbefore
this application cannot be granted
at this stage, i.e. before claims of
Secured Creditors and workmen
12Page 13
are processed under
Sections 529 and 529A of the Act.
Despite categorical statement at
the Bar, under instructions, that
ONGC did not want to lodge any
claim before the Official Liquidator,
it will be open to ONGC to lodge its
claim in accordance with law and
seek its satisfaction when claims of
other Creditors of the Company in
liquidation are taken up for
consideration for distribution of the
funds which may be available at
that time. The application is
accordingly rejected. Notice is
discharged.”
16. Aggrieved by the aforesaid directions, ONGC filed
O.J. Appeal No.51 of 2004. On 18th October, 2004, the
Division Bench stayed the judgment of the learned
Single Judge subject to disbursement of the workers
at the rate of Rs.2500/- each worker as agreed by the
parties. The aforesaid appeal has been dismissed by
the High Court by the judgment dated 16th January,
2006 giving rise to the present appeal.
13Page 14
17. We have perused the entire record and heard the
learned senior counsel for the parties at length.
18. Mr. Paras Kuhad, appearing for the appellant
submitted that the High Court had committed an error
in concluding that the appellant cannot claim any
preferential right on the basis of the order passed on
17th October, 1997. According to Mr. Kuhad, the second
error committed by the High Court is that it has wrongly
concluded that no security was created in favour of the
appellant on the basis of the interim order passed by
this Court on 15th April, 1987 and the undertaking
furnished by the company in liquidation Ambica Mills
Co. Ltd. pursuant to the order of this Court. The third
error committed by the High Court, according to Mr.
Kuhad, is in holding that no security has been created
in favour of the appellant as no charges have been
registered under Section 125 of the Companies Act,
1956. Mr. Kuhad has submitted that the undertaking
dated 27th May, 1987 is a superimposition on the
14Page 15
priorities as given in Sections 529 and 529A of the
Companies Act. In support of his submission, learned
senior counsel has relied on a number of judgments
which we shall notice presently.
19. Learned counsel for the respondents has
submitted that the genesis of the civil appeal is the
interim order dated 15th April, 1987. It is
submitted that the aforesaid order is in the nature of an
injunctive order whereby the company in liquidation
was directed, not to charge encumber or alienate any
of its assets except with the leave of this Court,
including the assets listed in the respective
undertakings. The second part of the injunction was
that the respondents will make their immovable assets
available for discharging the respective liabilities to the
ONGC. The undertaking filed by Ambica Mills Co. Ltd.
was that “none of immovable assets of the company
will be further charged and encumbered hereinafter
with effect from 15th April, 1987, except with the leave
15Page 16
of this Court.” It is the submission of the respondents
that in the aforesaid undertaking no specific details and
particulars of any immovable assets were given or
provided. Therefore, the aforesaid undertaking does not
make the appellant a secured creditor of Ambica Mills
Co. Ltd. It is pointed out by the learned counsel that
even in the judgment dated 4th May, 1990 of this Court
in Oil and Natural Gas Commission & Anr. Vs.
Association of Natural Gas Consuming Industries
of Gujarat & Ors. reported at 1990 (Supp) SCC 397
did not hold that the order dated 15th April, 1987 or the
undertaking dated 27th May, 1987 have conferred upon
the appellant status of a secured creditor. This Court
only directed that the ONGC will be at liberty to take
immediate steps to recover the dues from the
respondent in the light of the judgment. Similarly no
charge was created by this Court while passing the
order dated 6th April, 1993. Explaining the order dated
17th October, 1987, it is submitted by the learned
counsel for the respondent that the order only directed
16Page 17
that in case of sale of the assets of the company in
liquidation, the dues of the ONGC shall be paid off first.
But this order was subsequently reviewed on 12th April,
2004 directing that the order dated 17th October, 1997
would have to be read subject to the provisions of
Sections 529 and 529A of the Companies Act.
Therefore, the secured creditors had two options, either
to realise its securities outside the winding up
proceedings or to relinquish its security for the general
benefit of all and prove its claim by participating in the
liquidation proceedings. The appellant never gave any
option knowing perfectly well it was not a secured
creditor. The judgments relied upon by the appellants
have been sought to be distinguished by the learned
counsel for the respondents.
20. We have considered the submissions made by the
learned counsel for the parties. In our opinion, the
appellant cannot claim that the order dated 15th April,
1987 created an enforceable charge on the assets of
17Page 18
the company in liquidation. We are of the opinion that
the learned counsel for the respondents are quite right
in their submissions that an injunction was issued only
to ensure that the company in liquidation does not
further encumber or create charges in favour of third
parties over the assets of the company in liquidation. In
our opinion, neither the interim order dated 15th April,
1987 nor the undertaking given pursuant thereto can
be said to be a charge on the assets of the company in
liquidation. This Court in the case of Indian Bank Vs.
Official Liquidator, Chemmeens Exports (P) Ltd. &
Ors.1
whilst considering the provisions contained in
Section 125 of the Companies Act has observed as
follows :-
“6. Since the preliminary decree is assailed
as being void under Section 125 of the Act, it
would be useful to read here the said
provision, insofar as it is relevant for our
purposes. It reads:
“125. Certain charges to be void
against liquidator or creditors unless
registered.—(1) Subject to the
1
(1998) 5 SCC 401
18Page 19
provisions of this Part, every charge
created on or after the Ist day of April,
1914, by a company and being a
charge to which this section applies
shall, so far as any security on the
company’s property or undertaking is
conferred thereby, be void against
the liquidator and any creditor of the
company, unless the prescribed
particulars of the charge, together
with the instrument, if any, by which
the charge is created or evidenced, or
a copy thereof verified in the
prescribed manner, are filed with the
Registrar for registration in the
manner required by this Act within
thirty days after the date of its
creation:
Provided that the Registrar may allow the
particulars and instrument of copy as
aforesaid to be filed within thirty days next
following the expiry of the said period of
thirty days on payment of such additional fee
not exceeding ten times the amount of fee
specified in Schedule X as the Registrar may
determine, if the company satisfies the
Registrar that it had sufficient cause for not
filing the particulars and instrument or copy
within that period.
(2) Nothing in sub-section (1) shall prejudice
any contract or obligation for the repayment
of the money secured by the charge.
(3) When a charge becomes void under this
section, the money secured thereby shall
immediately become payable.
19Page 20
(4) This section applies to the following
charges:
(a) a charge for the purpose of
securing any issue of debentures;
(b) a charge on uncalled share capital
of the company;
(c) a charge on any immovable
property, wherever situate, or any
interest therein;
(d) a charge on any book debts of the
company;
(e) a charge, not being a pledge, on
any moveable property of the
company;
(f) a floating charge on the
undertaking or any property of the
company including stock-in-trade;
(g) a charge on calls made but not
paid;
(h) a charge on a ship or any share in
a ship;
(i) a charge on goodwill, on a patent
or a licence under a patent, on a
trade mark, or on a copyright or a
licence under a copyright.
(5) to (8)* * *”
7. On a plain reading of sub-section (1) it
becomes clear that if a company creates a
charge of the nature enumerated in subsection
(4), after 1-4-1914 on its properties,
and fails to have the charge together with
instrument, if any, by which the charge is
created, registered with the Registrar of the
Companies within thirty days, it shall be void
20Page 21
against the liquidator and any creditor of the
company. This, however, is subject to the
provisions of Part V of the Act. The proviso
enables the Registrar to relax the period of
limitation of thirty days on payment of
specified additional fees, on being satisfied
that there has been sufficient cause for not
filing the particulars and instrument or a copy
thereof within the specified period. Subsections
(2) and (3) deal with repayment of
money secured by the charge. Sub-section
(2) provides that the provision of sub-section
(1) shall not prejudice the contract or
obligation for repayment of money secured
by the charge and sub-section (3) says that
when a charge becomes void under that
section, the money secured shall become
payable immediately. Though as a
consequence of non-registration of charge
under Part V of the Act, a creditor may not be
able to enforce the charge against the
properties of the company as a secured
creditor in the event of liquidation of the
company as the charge becomes void against
the liquidator and the creditor, yet he will be
entitled to recover the debt due by the
company on a par with other unsecured
creditors. It is also evident that Section 125
applies to every charge created by the
company on or after 1-4-1914. But where the
charge is by operation of law or is created by
an order or decree of the court, Section 125
has no application.”
21. The observations made in paragraph 7, in our
opinion, is a complete answer to the submission
made by Mr. Paras Kuhad. Clearly the appellant is
21Page 22
only entitled to recover the dues at par with other
unsecured creditors. In our opinion, the order dated
15th April, 1987, was only in the nature of restraint on
the Company in liquidation not to further encumber
any of its assets. It did not have the effect of
creating a charge. Mr. Kuhad in support of his
submission that the interim order dated 15th April,
1987 has to be treated as a mandate of the Court,
has relied on J.K. (Bombay) (P) Ltd. Vs. New
Kaiser-I-Hind Spinning and Weaving Co. Ltd.2
In the aforesaid judgment, undoubtedly it is held that
“no particular form of words is necessary to create a
charge and all that is necessary is that there must be
a clear intention to make a property security for
payment of money in praesenti.” The aforesaid
observations of this Court ought not to be read out of
context. The judgments of this Court are not to be
read as statutory instruments. The ratio of the
judgment has to be culled out, keeping in view the
2
(1969) 2 SCR 866
22Page 23
facts and circumstances involved in a particular case.
The facts in that case are noticed in paragraph 26
from wherein the aforesaid three lines have been
extracted by Mr. Kuhad in support of his
submission. We quote the relevant part of paragraph
26 of the aforesaid judgment which is as under:
“26……. It was argued that where an
agreement specifies a property out of which a
debt is to be payable and is coupled with an
intention to subject such property to a
charge, the property becomes subject to a
charge in praesenti even though a regular
mortgage is to be executed at some future
date. Such an intention, the learned Attorney General
argued, was demonstrated by the
agreement that (1) the debts were to be paid
out of profits and (2) the engagement by the
company not to deal with its assets. The
distinction between a charge and a mortgage
is clear. While in the case of a charge there is
no transfer of property or any interest
therein, but only the creation of a right of
payment out of the specified property, a
mortgage effectuates transfer of property or
an interest therein. No particular form of
words is necessary to create a charge and all
that is necessary is that there must be a clear
intention to make a property security for
payment of money in praesenti. In Jewan Lal
Daga v. Nilmani Chaudhuri, a case relied on
by him, the question was one relating to an
agreement to mortgage. Following on the
agreement, a draft mortgage was prepared
which was approved by the respondent's
solicitors, the mortgage deed was engrossed
and even the stamp for it was paid by the
respondent. The question was whether
specific performance of the agreement
compelling the respondent to execute the
mortgage could be granted before accounts
between the parties were made up and the
amount due thereunder was ascertained. The
Privy Council disagreeing with the High Court
held that that could be done and observed
that " there was a valid agreement charging
the property with whatever sum was actually
due......and that a proper mortgage ought to
be executed to carry out these terms." In
Khajeh Suleman Quadir v. Salimullah certain
deeds were executed purporting to make
wakfs of certain properties in favour of the
members of a Mahomedan family and then
for charitable purposes. Later on, agreements
were executed, under one of which the
members of the family agreed that
allowances fixed under the wakfs should be
paid out of the income to named persons of
the family and upon their death to their heirs,
and under the other agreement the mutawalli
agreed that he and the future mutawallis
would pay the said allowances. The wakfs
were held invalid as creating a perpetual
succession of estates. The question was
whether the agreements to pay allowances
also fell along with them. The Privy Council
held that they did not, that they were valid
and enforceable and that the direction in the
agreements to pay the allowances out of the
income of the settled properties showed an
intention to create a charge. In both these
decisions the Board came to the conclusion
that there was a clear intention on the part of
24Page 25
the parties to create a charge in praesenti.
The argument of the learned AttorneyGeneral
was that if an agreement indicated a
property out of which a debt is to be paid and
an intention to subject it to a charge in
praesenti, the court must find the charge.
Certain other decisions were also brought to
our notice but it is not necessary to burden
this judgment with them because in each
case the question which the court would have
to decide would be whether the agreement in
question creates a charge in praesenti.:
………”
22. The aforesaid observations would indicate that the
court was examining the submissions made by the
learned Attorney General. The effort of the Attorney
General was to persuade this Court, on the cases
mentioned in the aforesaid paragraph that there was
an agreement which established an intention to
create a charge. A reading of the order dated 15th
April, 1987 clearly shows that it firstly gives the
direction to the ONGC to continue the supply of gas
at the rate of Rs.1000/- for 1000 cubic meter. Such a
direction would be implemented only upon an
undertaking given by the respondents that they will
25Page 26
not charge encumber or alienate any asset except
with the leave of this Court. A further direction was
that the immoveable assets included in the
respective undertaking will be made available for
discharging the respective liabilities of the
respondent company. The undertaking given by the
company in liquidation in this case was as under :
“3. I state that Respondent No.10 Company
undertakes that none of immovable assets of
the company will be further charged and
encumbered hereafter with effect from
15.04.1987, i.e. from the date of order of this
Hon’ble Court except with the leave of this
Hon’ble Court.
4. I state that Respondent NO.10 Company
further undertakes not to alienate any of its
immovable assets hereinafter with effect
from 15.04.1987 except with the leave of this
Hon’ble Court. The Respondent No.10
Company further undertakes to make
available all its immovable assets in the
event of discharging the liabilities which may
arise on account of the difference between
26Page 27
the price at which all the Gas being supplied
to the company during the pendency of the
proceedings in this connection and the price
which may be determined by this Hon’ble
court while disposing of the present Appeals
finally.
23. A perusal of the aforesaid undertaking shows that
Ambica Mills has not identified any particular
immovable assets which would be made available in
discharging the liabilities in favour of the appellant.
Therefore, we have no hesitation in rejecting the
submission of Mr.Kuhad that the interim order read
with the undertaking expressed an intention to
create an enforceable charge of any particular asset
of the company in liquidation.
24. We are of the opinion that the judgment in the
case of Praga Tools Ltd. Vs. Official Liquidator of
Bengal Engineering Company (P) Ltd. (1984) 56
Comp. Cas.214 (Cal) would also not be applicable to
27Page 28
the facts and circumstances of this case. Mr. Kuhad
has relied on the following observations:
“The fallacy in the argument of Mr.
Mookherjee, in my view, is that after the
passing of the order of S.K. Roy Chowdhury J.
(as his Lordship then was), dated August 1,
1978, the position with regard to the security
assumed a completely different complexion.
By that order, as I have already indicated, the
claim of the petitioning-creditor was settled
at a certain amount. A mode for payment of
that money was indicated. Then there is a
default clause. That default clause contained
a twin option either of initiating a fresh
winding up proceeding or of executing the
balance as a decree of court. It is only in the
event of an option being exercised in favour
of the last contingency, viz., in the event of
the execution as a decree of court, that the
security which was furnished pursuant to the
order of R.M. Dutta J. would be a security for
the applicant company for the satisfaction of
the decree and would be the security for the
decree until the decretal dues were paid.
Thus, the benefit of the security in so far as
the applicant company is concerned is
entirely the creature of the order of Roy
Chowdhury J. dated August 1, 1978. This can,
in my view, by no stretch of imagination, be
called a charge created "by a company"
within the meaning of Section 125 of the
Companies Act, 1956, requiring registration
under the above section.
It would follow, therefore, from what I have
said that the question as to whether the
28Page 29
security as originally furnished was registered
under Section125 of the Companies Act,
1956, or not, would be totally irrelevant for
the purpose of determining the right of the
applicant company after the order of Roy
Chowdhury J., dated August 1, 1978.”
25. The aforesaid observations, in our opinion, would
not be applicable on the facts and circumstances of
this case, as no charge have been created in favour
of ONGC by any of the orders passed by this Court.
26. Mr. Kuhad has submitted that the respondents
have specifically agreed to make the assets available
for discharging the liability of the ONGC, this,
according to Mr. Paras Kuhad, was tantamount to
creating an enforceable charge. We are unable to
accept the aforesaid submission. In the face of the
directions given by this Court in the case of Oil and
Natural Gas (supra) wherein this Court had
directed that the ONGC is at liberty to take
immediate steps to recover the charges due from the
respondents in the light of the judgment. This Court
29Page 30
did not direct that in view of the undertaking dated
27th May, 1987 the respondents have created
enforceable charge in favour of ONGC. Furthermore,
it is a matter of record that even the ONGC did not
consider itself to be a secured creditor. At the time
when the Ambica Mills Co. Ltd. came under the
jurisdiction of the Official Liquidator, none of the two
options adverted to earlier was exercised by ONGC.
The plea of being a secured creditor is clearly an
afterthought. Therefore, in our opinion, the
judgments rendered by the learned Single Judge and
the Division Bench of the Gujarat High Court do not
call for any interference. The civil appeals are
accordingly dismissed.
……………………………….J.
[Surinder Singh Nijjar]
………………………………..J.
[A.K.Sikri]
New Delhi;
30Page 31
April 17, 2014.
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