Indian Kanoon - Search engine for Indian Law

25. Thereafter, the affidavit dated 6th May 2010 by way of evidence of Mr. Mohd. Shah Alam, son of Mr. Mohd. Yamin, was filed. He was cross- examined on 19th October 2010. In view of the fact that issues were framed, CA No.1181 of 2006 did not survive and was disposed of as such. Subsequently, the OL filed CA No. 2385 of 2012 under Section 481 of the Act for dissolution of EHPL.

Submissions of Senior counsel for ETC

26. Mr. Raman Kapur, learned Senior counsel for ETC, reiterated the submissions made in CA No. 477 of 2005. He referred to Section 20 SGA and submitted that the property in the goods passed to ETC when the verbal contract was entered into on 14th November 2000, and in any event, when the written Agreement was executed on 7th February 2001. He submitted that without PICUP ever being in possession of the goods, it could not claim to have any charge on them. The Deed of Hypothecation ('DOH') relied upon by PICUP was to no effect. The charges registered with the Registrar of Companies ('ROC') did not create any enforceable right in the goods in favour of PICUP. He referred to Sections 172 to 179 ICA and submitted that only a pledge of movable assets was recognized and for a pledge to be effective there had to be possession of the goods, which obviously PICUP did not have. He submitted that the sale of the goods by PICUP was completed only after the winding up petition had been filed and was therefore subject to the orders of the Company Court.

32. On the same date, i.e., 24th January 1990, a common DOH was executed by EHPL in favour of PICUP. Inter alia, it was agreed under Clause 7 that EHPL would put up at appropriate and conspicuous places in its premises boards which would indicate that the goods were hypothecated to PICUP and "it shall be deemed whenever so required that the said property stands hypothecated with PICUP and UPFC." Clauses 8, 9 and 10 of the DOH read as under:

"8. That the PICUP and UPFC shall at all times be and is hereby authorised, as if in absolute possession and without notice to the Borrower by its servants and with or without workmen to enter any part of the said property may be lying or installed to inspect check and value the same at the expense of the Borrower and on any default of the Borrower in payment of any money hereby secured or in the performance of any obligation of the Borrower to the PICUP and UPFC hereunder or in the event of a distress execution attachment or other similar process being held out, levied or enforced against or upon any property of the Borrower or in the event of any winding up or insolvency petition being made or an effective resolution passed for the winding up of the Borrower or on the occurrence of any circumstances in the opinion of the PICUP and UPFC endangering this or any other security in their favour, the PICUP and UPFC on without notice to the Borrower shall be entitled at any time or times to take charge of and/or to sell and realise by public auction or private treaty at such price and on such terms as the PICUP and UPFC in its absolute discretion shall think fit the said property or any part thereof and for the said purposes the Borrower hereby authorises and empowers the PICUP and UPFC through its agents and officers to do and execute any of the above things and acts aforesaid as effectively as if the Borrower was itself doing the same.

"21. The Borrower shall not, without the written consent of the PICUP and UPFC create in any manner any charge, lien or other encumbrance on the security given to the PICUP and UPFC in respect of such advance or create any interest in such security in favour of any other party or person."

34. Clause 38 permitted PICUP and UPFC to take recourse to the provisions of U.P. Public Moneys (Recovery of Dues) Act, 1972, besides the SFC Act. The schedule to the DOH set out in detail the complete description of the entire assets in the factory of EHPL at Sikandarabad. On 7th February 1990, EHPL registered with the ROC, in Forms 8 and 13 under Sections 125 and 130 of the Act, the respective charges in favour of PICUP and UPFC of the moveable assets in terms of the DOH and the mortgage of immoveable assets by deposit of title deeds.

(5) Where the Financial Corporation has taken any action against an industrial concern under the provisions of sub- section (1), the Financial Corporation shall be deemed to be the owner of such concern, for the purposes of suits by or against the concern, and shall sue and sued in the name of the concern."

40. Consequently, it is futile for ETC to contend that only because hypothecation does not form part of a species of pledge under Sections 172 to 179 of the ICA, it cannot be legally enforced by PICUP. It is apparent on the facts of the present case that the DOH referred to above, makes it explicit that the constructive possession of the goods remained throughout with the PICUP; that EHPL was holding the goods only as an agent of PICUP; the effective control of the goods always remained with PICUP and the constructive possession could be converted into the actual possession by PICUP. More importantly, it is made explicit both in the CLA as well as DOH that prior permission of PICUP had to be taken if any attempt was made to sell any part of the goods at any time. That there was a charge created in favour of PICUP in respect of the goods is evident from the fact that EHPL itself registered the charge with ROC under Forms 8 and 13. Both the Agreement and the DOH made it clear that PICUP was a secured creditor and could enforce the hypothecation in its favour by bringing the said goods to sale. This answers Issues 1 to 4.