OILAND NATURAL GAS CORPORATION LTD.versusOFFICIAL LIQUIDATOR OF M/S.AMBICA MILLS COMPANY LTD. & ORS

                    [2014] 14 S.C.R. 343


      OILAND NATURAL GAS CORPORATION LTD.                       A
                              v.
     OFFICIAL LIQUIDATOR OF M/S.AMBICA MILLS
               COMPANY LTD. & ORS.
              (Civil Appeal No. 1746 of 2006)                   B
                      APRIL 17, 2014 .
   {SURINDER SH~GH NIJJAR AND A. K. SIKRI, JJ.]
     Companies Act, 1956:
                                                                c
       ss. 529 and 529A rlw s. 125 - Interim order dated
15.4.1987 passed by Supreme Court directing ONGC to
supply gas to respondent-company at the stated rate subject
to an undertaking that respondent would not charge,
encumber or alienate its immovable assets - Subsequently, D
company wound up - Application by appellant Corporation
in company petition for payments of its outstanding dues as
secured creditor on the strength of order dated 15.4. 1987 -
Rejecte(i by Company Judge as well as Division Bench of
High Court- Held:.Order dated 15.4.1987 was only in the E
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 -A perusal of the undertaking shows that
the Company has not identified any particular immovable
assets which would be made available in discharging the F
liabilities in favour of appellant - Therefore, it cannot be
said that interim order read with undertaking expressed an
intention to create an enforceable charge of any particular
asset of company in liquidation- No charge was created in
favour of ONGC by any of orders passed by the Court.
                                                                 G
         The respondent-company was recipient of gas
SL1pply from the appellant Corporation. In an appeal
arising 0L1t of a diSpL1te regarding Sllpply of gas, the

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                             343
344        SUPREME COURT REPORTS               [2014] 14 S.C.R.


A ·supreme Coilrt passed an interim order dated 15.4.1987
  directing that the respondent would be supplied gas at
  the rate of Rs. 1000/- per 1000 cubic metres subject to
  an undertaking.that~he respondent would ncit charge,
  encumber or alienate, except with the leave of the Court,
B any of its immovable assets. Subsequently, Company
  Petition No. 121 of 1995 was filed and by order dated
  17.01.1997, the High Court ordered winding up of the
  respondent-company. The appellant Corporation moved
  Applic.ation No. 445 of 2000 in Comp~ny Petition No. 121
c of 1995 seeking directions that outstanding amounts of
  the Corporation be paid by the Company in liquidation.
  Further an injunction was sought restraining the
   respondent-company from creating any charge
  alienation and discharging of its immovable assets. The
o application was rejected by the single Judge and
  appellant's appeal was dismissed by the Division Bench
  of the High Court.
            In the instant appeals, it was, inter alia, contended
      for the appellant that the High Court erred in holding that
E     no security was created in favour of the appellant on the
      basis ofthe interim order passed by the Supreme Court
      on 15.4.1987 and the undertaking furnished by the
      company in liquidation pursuant to the said order.
         . Dismissing the appeals, the Court
 F
        HELD :_1.1 Clearly the appellant is only entitled to
  recover the dues at par with other unsecured creditors.
  It cannot claim that the order dated 15.4.1987 created an
  enforceable· charge on the assets of the company in
G liquidation. The said order 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. [Para 20-21][355-A-B; 358-A-B]

 H
ONGC v. OFFICIAL LIQUIDATOR OF M/S. AM BICA MILLS          345
                  COMPANY LTD.

     Indian Bank vs. Official Liquidator, Chemmeens        A
     Exports (P) Ltd. & Ors, 1998 (5) SCC 401 : 1998
     (3) SCR 255- relied on.
     J.K. (Bombay) (P) Ltd. Vs. New Kaiser-I-Hind
   · Spinning and Weaving Co. Ltd. 1969 (2) SCR 866
     -held inapplicable.                                   B
      1.2 A reading of the order dated 15.-4-1987 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 di.rection would be c
implemented only upon an undertaking given by the
respondents that they will 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 0
available for discharging the respective liabilities of the
respondent company. A perusal of the undertaking
shows that the Company has not identified any particular
immovable assets which would be made available in
discharging the liabilities in favour of the appellant. E
Therefore, it cannot be said 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. No charges have been created
in favour of ONGC by any of the orders passed by this
Court. [Paras 22, 23 and 25)(360-E-F; 361-D; 362-F]         F
     Praga Tools Ltd. v. Official Liquidator of Bengal
     Engineering Company (P) Ltd. 1984 (56) Comp.
     Cas.214 (Cal)- held inapplicable,
      1.3 In the face of the directions given by this Court G
in the case of Oil and Natural Gas wherein this Court had
directed that the ONGC is at liberty to take immediate
steps to recover the charges d.ue from the respondents
in the light ·of the judgment, this Court did not direct that
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346         SUPREME COURT REPORTS                  [2014) 14 S.C.R.


A     in view of the undertaking dated 27.5.1987 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 Company came under the
Ei    jurisdiction of the Official Liquidator, none of the two
      options available to a secured creditor...; 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
c     proceedings - was exercised by ONGC. The plea of
      being a secured creditor is clearly an afterthought.
      Therefore, the judgments rendered by the single Judge
      and the Division Bench of the High Court do not call for
      any interference. [Para .19 and 26][362-F-H; 363-A-C]
D          Association of Natural Gas Consuming Industries
           of Gujarat& Ors. v. ONGC&Anr. 24(2) GLR 1437
           -cited.
                           Case Law Reference:
 E 1998 (3) SCR 255                    relied on           Para 20
      1969 (2) SCR 866             I   held inapplicable Para 21
      1984 (56) Comp. Cas.214 (<;:al)held inapplicable Para 24
      24 (2) GLR 1437                  cited                Para 6
 F        CIVIL APPELLATE JURISDICTION: Civil Appeal No.
      1746of2006.
           From the Judgment and Order dated 16.01.2006 of the
      High Court of Gujarat atAtimedabad in O.J. Appeal No. 51 of
      2004.                                              .
 G                                 WITH
           C. A. Nos. 1747, 1748, 1749, 1750 & 1751 of 2006.
        Paras Kuhad, ASG, Prateek Jalan, Somiran Sharma,
   Vishnu Sharma, Jitin Chaturvedi, Ms. Pranita Shekhar, K. R.
 H Sasiprabhu, Advs., for the Appellant.
ONGC v. OFFICIAL LIQUIDATOR OF MIS. AM BICA MILLS                  34 7
                  COMPANY LTD.

      Jitendra Kumar, Abhijeet Kumar, Ms. Jyoti Mendiratta,        A
Vipin Kumar Jai, Vipul Jai, S. Mahendran, Rajiv Mehta, Sanjay
Bhatt, Dushyant Kumar, Rabin Majumdar, Naveen Kumar, Advs.
for the Respondents.
     The Judgment of the Court was delivered by
                                                                   B
     SURINDER SINGH NIJJAR, J. 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 tp the industries in and           c
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 D
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 the member industries was
based on individual contracts entered into with each of the E
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.                                             F
      3. On 30'h 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                         G
       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      H
348         SUPREME COURT REPORTS                 f2014] 14 S.C.R.


A      Respondent therein {Appellant herein) 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 3Q1h
      March, 1979 in the said Application, directed the Appellant
8     herein to continue supply of gas at the old rate, i.e., Rs.504/-
      per 1000 cubic meter. On 29tii December, 1982, the High Court
      modified the aforesaid interim order and directed the Appellant
      to supply gas to the member industries of ttie Association at
      Rs.1000/- per 1000 cubic meter.
c
        . 6. On 30th July, 1983 the said Civil Application was partly
 ·· allowed by the Division Bench setting aside the price
    demanded by theAppellant herein, leaving it open to deal with
    the question of price fixation in any one of the three modes
D suggested in Para 36 of the judgment in the case of
    Association of Natural Gas Consuming Industries of
    Gujarat & Ors. Vs. ONGC & Anr. reported in 24 (2) GLR
    1437.                         .
           7. The Appellant preferred an appeal being C.A. No.
 E . 8530-8540of1983 againstthe aforesaid order. On 151hApril,
     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 tliat the respondent shall not charge,
 F encumber or alienate except with the leave of this Court any of
     the immovable assets.
          8. Pursuant to the order dated 151" April, 1987, an
    undertaking was given by Ambica Mills Co. Ltd. thereby making
   .available their immovable assets' for discharge of its respective
 G liability on 27'h May, 1987.
           9. Appellant filed Compahy Petition No. 66 of 1983
      seeking winding up of Respondent No. 1-Ambica, Mills Co.
      Ltd.
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 ONGC v. OFFICIAL LIQUIDATOR OF MIS. AMBICA MILLS              349
    COMPANY LTD. [SURINDER SINGH NIJJAR, J.]

      10. C.A. No. 8530-8540of1983 was finally decided by A
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 30t" July, 1983. It was observed that the ONGC would B
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 C
  on at" 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 end of the month, and particulars of payment so
  made would be submitted in the Court on or before 8th January, D
  1993. On 6"' 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 E
  was beyond controversy and cannot be disputed. In the
  aforesaid order, it was further observed that the principal
  amountduefromAmbica 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 byONGC, is Rs. 1.58 crores F
  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) · G
  was already pending before the Board for Industrial and
  Financial Reconstruction (BIFR). Upon consideration of the
  matter, this Court on 29tii April, 1993 granted the prayer of
· ONGC that it would be entitled to take steps for disconnecting
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350         SUPREME COURT REPORTS                    [2014] 14 S.C.R.


A  the supply of gas in case ofnon 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
B 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 eritire dues of the ONGC shall.be
c   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.
    Thisre'commendation of the BIFR came up before the Gujarat
D 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
 E    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. Ud. and the official
      liquidator was appointed as'the liquidator of the company.
 F    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 1?th October, 1997 directed
      as follows :-
 G           "That out of the assets of the company under liquidation,
            'the dues of ONGC.Limited are required to be paid off
            first and the questionof making any payment to any either
             creditor can realise only out of the surplus if any remaining
             after the fill dues of the ONGC Limited have been paid
 H
ONGC v. OFFICIAL LIQUIDATOR OF M/S. AM BICA MILLS                351
   COMPANY LTD. [SURINDER SINGH NIJJAR, J.]

     off. The High Court is therefore, to proceed with the matter A
     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 281h September, 1999 from the official liquidator 8
wherein it has been stated that Plot No.3071PS-16 of Ambica
Mills (in liquidation) property was disposed of for Rs.90.11
lakhs and the in.itial 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.           c
       14 .. It appears that respondent No.10-Textile Labour
Association, Bhadra sought review of the order dated 17'h
October, 1997 by filing Review Petition Nos.1193-1203 of 2001
 in l.A.No.168-178/1997 in C.A.No.8530-40 of 1983. The
aforesaid review petitions were decided by this Court on 121h D
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 submissionsmade 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 E
 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 F
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 G
servants from making any payment/disbursement in any
manner, of any of the sale proceeds that are available from
the sale of assets of the company in liquidation. Further an
injunction was sought restrainingAmbica Mills from creating
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352         SUPREME COURT REPORTS                  (2014] 14 S.C.R.


A     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
B               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 oftheAct. Such preferential
                claim, iffalling under Section 530 of the Act would
c               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 COf"!Sideration along with all other
D               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
 E
                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
 F
                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
G
                discharged."
           16. Aggrieved by the aforesaid directions, ONGC filed
      O.J.Appeal No.51 of2004. On 18th October, 2004, the Division
      Bench stayed the judgment of the learned Single Judge subject
H
ONGC v. OFFICIAL LIQUIDATOR OF MIS. AM BICA MILLS                353
   COMPANY LTD. [SURINDER SINGH NIJJAR, J.]

to disbursement of the workers atthe rate of Rs.2500/-each A
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.
     17. We have perused the entire record and heard the
learned senior counsel for the parties at lengt~.                B
       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 17'" October, 1997. c
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 15'" April, 1987 and the
undertaking furnished by the company in liquidation Ambica D
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 E
that the undertaking dated 27th May, 1987 is a superimposition
on the 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.
                                                                 F
        19. Learned counsel for the respondents has submitted
that the genesis of the civil appeal is the interim order
dated 15'" April, 1987. It is submitted that the aforesaid order
is in the nature of an injunctive orderwhereby the company in
liquidation was directed, not to charge encumber or alienate G
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
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354       SUPREME COURT REPORTS                  [2014] 14 S.C.R.


A liabilities to the ONGC. The undertaking filed byAmbica Mills
  Co. Ltd. was that "none of immovable assets of the company
  will be further charged and encu'mbered hereinafter with effect
  from 15'hApril, 1987, except with the leave of this Court." ltis
  the submission of the respondents that in the aforesaid
8 undertaking no specific details and particulars of any
  immovable assets were given or providea. Therefore, the
  aforesaid undertaking does not make the appellant a secured
  creditor ofAmbica Mills Co. Ltd. It is pointed out by the learned
  counsel that even in the judgment dated 4th May, 199P of this
C 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 15'h April, 1987 or the undertaking
  dated 27"' May, 1987 have conferred upon the appellant status
o·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
  6'hApril, 1993. Explainingtheorderdated 17'h0ctober, 1987,
E it is submitted by the learned counsel for the respondent that
  the order only directed 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 12"' April,
  2004 directing that the order dated 1?'h October, 1997 would
F have to be read subject to the provisions of Sections 529 and
  529Aofthe 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
G 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 soughtto
  be distinguished by the learned counsel fqr the respondents.


 H
  ONGC v. OFFICIAL LIQUIDATOR OF MIS. AM BICA MILLS                  355
    . COMPANY LTD. [SURINDER SINGH NIJJAR, J.]

         20. We have considered the submissions made by the A
· learned counsel for the parties. In our opinion, the appellant
  cannot claim that the order dated 151h April, 1987 created an
  enforceable charge on the assets of the company in liquidation.
  We are of the opinion that the learned counsel for the
  respondents are quite right in their submissions that an B
  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, neith~r the interim order dated 15th
  April, 1987 nor the undertaking given pursuant thereto can be c
  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 (Pl Ltd. & Ors. 1 whilst considering
  the provisions contained in Section 125 of the Companies Act
  has observed as follows :-                                        D
       "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:
                                                                     E
          "125. Certain charges to be void against liquidator
          or creditors unless registered.-(1) Subject to the
          provisions of this Part, every charge created on or after
          the 1st day of April, 1914, by a company and being a
          charge to which this section applies shall, so far as F
          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 G
          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:
 '(1998)5SCC401
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356   SUPREME COURT REPORTS                     (2014] 14 S.C.R.


A     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
B     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
c     the charge.
      (3) When a charge becomes void under this section, the
      money secured thereby,shall immediately become
      payable.
D     (4) This section applies to the f~llowing charges: .
         (a) a charge for the purpose of securing any issue. of
            debentures;
         (b) a charge on uncalled share capital of the company;
 E       (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
 F          property of the company;
         (fJ 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;
G        (h) a charge on a ship or any share in a ship;
         (1) 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.

 H    (5) to (8)       •       •      ...
ONGC v. OFFICIAL LIQUIDATOR OF M/S. AM BICA MILLS                      357
   COMPANY LTD. [SURINDER SINGH NIJJAR, J.]

     7. On a plain reading of sub-section (1) it becomes clear         A
     that if a company creates a charge of the nature
     enumerated in sub-section (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             B
     thirty days, it shall be void 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          c
     that there has been sufficient cause for not filing the
     particulars and instrument or a copy thereof within the
     specified period. Sub-sections (2) and (3) deal with
     repayment of money secured by the charge. Sub-section
     (2) provides that the provision of sub-section (1) shall          o
     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 ttiat section,
     the money secured shall become payable immediately.
     Though as a consequence of non-registration of charge             E
     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 again.st the
     liquidator and the creditor, yet he will be entitled to recover   F
     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 ord.er or decree of the court,            G
     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 Ku had. Clearly the appellant is only entitled to recover
                                                                       H
358           SUPREME COURT REPORTS                    [2014] 14 S.C.R.


A ·the dues at par with other unsecured creditors. In our opinion,
   the order dated 15'h 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
B dated 15'h April, 1987 has to be treated as a mandate of the
    Court, has relied on J.K. (Bombay) (Pl Ltd.Vs. New Kaiser-
    1-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
c   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,
D 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
E 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
 F            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
 G            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
 H    2
          (1969)2 SCR 866
ONGC v. OFFICIAL LIQUIDATOR OF M/S. AM BICA MILLS                 359 .
   COMPANY LTD. [SURINDERSINGH NIJJAR, J.]

     property, a mortgage effectuates.transfer of property or     A
    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       B
    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     C
     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     D
     Court held that ttiat 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         -E
     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     F
     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       G
     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       H
360        SUPREME COURT REPORTS                     [2014) 14 S.C.R.

                    .         .
A         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
          the parties to create a charge in praesenti. The argument ·
          of the learned Attorney-General was that if ari agreement
B         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
C         question which the court would have to decide would be
          whether the agreement in question creates a charge in
          praesen t .t.:-........ ."
           22. The aforesaid observations would indicate that the
    court was examining the submissions made by the learned
.D 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. Areading of the order dated 15'h
    April, 1987 clearly shows that it fir.stly gives the direction to the
 E ·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 not charge encumber or alienate any asset except with the
    leave of this Court. A further direction was that the immoveable
.F assets included in the respective undertaking will be made
    available for discharging the respective Ii.abilities of the
    respondent company. The undertaking given by the company
    in liquidation in th is case was as under:
          "3. I state that Respondent No.10 Company undertakes
G
          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.

H
ONGC v. OFFICIAL LIQUIDATOR OF M/S. AM BICA MILLS                361
   COMPANY LTD. [SURINDER SINGH NIJJAR, J.)

     4. I state that Respondent N0.10 Company further A
     undertakes not to alienate any of its immovable assets
     hereinafter with effect from 15. 04.1,987 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 B
     liabilities which may arise on account of the difference
     between 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 C
     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    D
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.
                                                                 E
      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 the facts a.nd
circumstances of this case. Mr. Kuhad has relied on the          F
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 G
     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
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362         SUPREME COURT REPORTS                  [2014] 14 S.C.R.


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
B          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 sati$faction of the
           decree and would be the security forthe decree until the
         · decretal dues were paid. Thus, the benefit of the security
c          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
 b         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 security as originally furnished
           was registered under Section 125 of the Companies Act,
 E         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
 F    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
 G    discharging the liability of the ONGC, this, according to Mr.
      Paras Kuhad, was tantamount to creating an enforceable
      charge. We are unable to acceptthe aforesaid submission. In
      the face of the directions given by this Court inthe case of Oil
      and Natural Gas (supra) wherein this Court had directed that
 H
 ONGC v. OFFICIAL LIQUIDATOR OF MIS. AMBICAMILLS                    363
    COMPANY LTD. [SURINDER SINGH NIJJAR, J.]

the ONGC is at liberty to take immediate steps to recover the A
charges due from the respondents in the light of the judgment.
This Court did not direct that in view of the undertaking dated
27'" 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 B
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 afterthbught. Therefore,
 in our opinion, the judgments rendered by the learned Single c
 Judge and the Division Bench of the Gujarat High Court do
 not call for any interference. The civil appeals are accordingly
dismissed.


· Rajendra Prasad                              Appeals dismissed.