Case Law- CHAPTER 5

CHAPTER 5 - CHARGES

Official Liquidator v. Sri Krishna Deo, (1959) 29 Com Cases 476:

AIR 1959 All 247 and Roy & Bros. v. Ramnath Das, (1945) 15 Com Cases 69, 75 (Cal)].

The plant and machinery of a company embedded in the earth or permanently fastened to

things attached to the earth became a part of the company’s immovable property and there-

fore apart from the registration under the Companies Act, registration under the Indian Reg-

istration Act would also be necessary to make the charge valid and effective.

Cosslett (Contractors) Ltd., Re, (1996) 1 BCLC 407 (Ch D)

A construction company’s washing machine which was in use at the site was declared under

the terms of the contract to be the employer’s property during the period of construction.

This was held to have created a fixed charge and not a floating charge on the machine be-

cause the machine was only one fixed item and was not likely to change.

In Lord Macnaghten in Government Stock Investment Company Ltd. v. Manila Rly. Com-

pany Ltd., (1897) A.C. 81,

It was observed “it is an equitable charge on the assets for the time being of a going con-

cern. It attaches to the subject charged in the varying condition in which it happens to be

from time to time. It is the essence of such a charge that it remains dormant until the un-

dertaking charged ceases to be a going concern, or until the person in whose favour the

charge is created intervenes”.

Illingworth & Another v. Holdsworth & Another, (ibid)

“A floating charge is ambulatory and shifting in its nature hovering over and so to speak

floating with the property which it is intended to affect until some event occurs or act is

done which causes it to settle and fasten on the subject of the charge within its reach and

grasp.

Maturi U. Rao v. Pendyala A.I.R. 1970 A.P. 225

When the floating charge crystallizes it becomes fixed and the assets comprised therein are

subject to the same restrictions as the fixed charge.

In Smith v. Bridgend County Borougn Council (2002) 1 BCLC 77 (HC)

The agreement was held to constitute a floating charge, in so far as it allowed the employer,

in various situations of default by the contractor, to sell the contractor’s plant and equip-

ment and apply the proceeds in discharge of its obligations. A right to sell an asset belong-

ing to a debtor and appropriate the proceeds to payment of the debt could not be anything

other than a charge. It was a floating charge because the property in question was a fluctu-

ating body of assets which could be consumed or removed from the site in the ordinary

course of the contractor’s business.

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