1993 (7) TMI 313 - HC - Companies Law

Issues Involved:

1. Whether the impugned transactions of transferring goods by Maruti Ltd., Gurgaon, to different parties are void ab initio or liable to be annulled under sections 531 and 531A of the Companies Act, 1956.
2. Whether the petitioners are entitled to recover the articles mentioned in the delivery notes or in lieu thereof the price.
3. Whether the petitioners are entitled to any rental charges for the said articles.
4. Whether the petitioners are entitled to interest on the amount of articles and if so, at what rate.
5. Whether the petitioners are entitled to future interest at 12 per cent. per annum.
6. Is the petition not maintainable in the present form.
7. Was there any valid legal resolution passed by the board of directors for taking steps for the winding up of Maruti Limited.

Detailed Analysis:

1. Validity of Transactions Under Sections 531 and 531A of the Companies Act, 1956:

The primary question was whether the transactions of transferring goods by Maruti Ltd. to different parties were void ab initio or liable to be annulled under sections 531 and 531A of the Companies Act, 1956. Section 531 deals with transactions made within six months before the commencement of winding up, which would be deemed a fraudulent preference in insolvency and thus invalid. Section 531A addresses transfers not made in the ordinary course of business or not in good faith and for valuable consideration within one year before the winding up petition.

The court emphasized that to annul a transaction under section 531, it must be shown that the debtor intended to prefer one creditor over others fraudulently. For section 531A, the transaction must not be in good faith or for valuable consideration. The burden of proof lies on the official liquidator or the person challenging the transaction.

2. Entitlement to Recover Articles or Price:

In Company Petition No. 138 of 1978, the court found that the goods were returned to the supplier because the company could not pay for them, which was not a fraudulent preference. The return of goods was an act of good management to reduce liabilities, not a preference of one creditor over others. The court held that the petitioners were not entitled to recover the articles or their price.

In Company Petition No. 82 of 1978, the court concluded that goods were transferred in the ordinary course of business and under pressure from the creditor who had filed a winding up petition. Thus, the transfer was not a fraudulent preference or void under section 531A.

In Company Petition No. 109 of 1978, the court found that the goods were sold under pressure due to a dishonored cheque and the need for future supplies. The transfer was not voluntary or fraudulent, and thus not void under sections 531 and 531A.

In Company Petitions Nos. 84, 107, 129, and 140 of 1978, the court held that the official liquidator failed to prove fraudulent preference or connivance between the company and the transferees. The transfers were not shown to be fraudulent or made to prefer one creditor over others.

3. Entitlement to Rental Charges:

Since the court held that the transfers were not fraudulent preferences, the petitioners were not entitled to any rental charges for the articles.

4. Entitlement to Interest on the Amount of Articles:

The court decided that the petitioners were not entitled to interest on the amount of articles since the transfers were not annulled.

5. Entitlement to Future Interest at 12% per Annum:

Similarly, the court held that the petitioners were not entitled to future interest at 12% per annum.

6. Maintainability of the Petition:

The court addressed a preliminary objection regarding the maintainability of the amended petitions, which was overruled by a Division Bench. The petitions were deemed maintainable.

7. Valid Legal Resolution for Winding Up:

The court found that a meeting of the board of directors took place in May 1977, where the financial position was reviewed, but the minutes were not recorded. The directors were aware of the company's financial issues, but this did not imply fraudulent transfers.

Conclusion:

The court dismissed all the petitions, finding no merit in the allegations of fraudulent preference or invalid transfers. The official liquidator's allegations were vague and insufficient, leading to the dismissal of the petitions with costs assessed at Rs. 5,000 in each case.

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