Debenture - If a company borrows money, it will give its creditor a document confirming the existence and terms of the loan. This document is called a debenture. The execution of debentures & creation of charges over land by borrowers in favour of banks to secure banking facilities/loans is a common practice. Typically such debentures empower the banks to appoint receivers & managers to act on behalf of the borrowers to sell charged land by private treaty. (Teo & Khaw) Question: in order to recover the sum due by the company borrowers, can the receivers and managers appointed under the debenture proceed to sell the property charged under the NLC by way of private treaty? (without having to follow procedure in NLC) Kimlin case facts:
A (borrower company) executed 2 legal charges over the lands in favour of 1st R (the bank) subsequently executed a deed of debenture in favour of 1st R to secure various banking facilities granted by 1st R debenture duly registered pursuant to s.108 of companies Act Debenture provided for the bank to appoint receivers & managers (R&M) who have certain powers ** no express provision in the debenture appointing them attorneys of the A Subsequently the bank appointed 2nd & 4th R as R&M of the appellant wanted to sell the lands without resorting to proceedings under NLC to obtain OFS – R&M applied to HC for a leave to sell lands Later on, A went into liquidation – R&M’s application for leave to sell lands opposed by liquidator HC allowed their application liquidator dissatisfied appealed Issue: whether R&M by virtue of powers conferred upon them by the debenture entitled to sell the charged lands without taking proceedings under the NLC to obtain a judicial sale Held: NO - Sale by debenture of land charged under the Code is nowhere provided for by statute. The relevant provisions of the Code as to the rights of chargors (s.254-265) are designed for their protection (e.g: service of 1-month...
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