2007 (12) TMI 286 - HC - Companies Law

Winding up - Fraudulent preference - bona fide purchaser - Held that - So far as the present case is concerned, neither the Official Liquidator nor any of the creditors have come forward and pointed out that the transaction in question was not entered into in the ordinary course of business or in good faith and for valuable consideration. On the contrary, the applicant has proved beyond reasonable doubt by producing necessary evidence and established that the transaction in question was valid and genuine. Taking overall view of the matter and considering the relevant statutory provisions as well as decided case law on the subject, the Court is fully convinced with the submissions made on behalf of the applicant and hence, the declaration sought for in the present judge s summons is granted. The transaction in question cannot be hit by the provisions contained in sections 531 and 531A of the Companies Act, 1956. The Official Liquidator is, therefore, directed not to take possession of the properties in question.Application allowed.

Summary

Issues:
Declaration sought for by the applicant regarding being a bona fide purchaser, fraudulent transaction under Companies Act, 1956, direction to Official Liquidator not to take possession of the property.

Analysis:
The applicant, M/s. Hawa Controls, sought a declaration from the High Court of Gujarat that they are the bona fide purchaser of certain properties and that the transaction is not fraudulent or void under the Companies Act, 1956. The applicant claimed to have purchased the properties from a company in liquidation, Tirupati Foundry Private Ltd., without knowledge of winding up proceedings. The Official Liquidator had requested documents supporting the ownership claim, leading to a legal dispute. The Court examined the transactions and resolutions passed by the company before the sale, finding no evidence of fraud or inadequate consideration.

The Court considered the provisions of sections 531 and 531A of the Companies Act, 1956, which deal with fraudulent transfers and preferences. It analyzed the evidence presented, including resolutions authorizing the sale and the registration of sale deeds. The Court highlighted that the burden of proving fraudulent intent lies with the Official Liquidator or creditors, which was not established in this case. Referring to a Bombay High Court case, the Court emphasized that transactions within a certain period before winding up must be proven as fraudulent to be annulled. Since no evidence of fraud or lack of good faith was found, the Court granted the declaration sought by the applicant.

In conclusion, the Court ruled in favor of the applicant, M/s. Hawa Controls, stating that the transaction in question was valid and genuine, not falling under the provisions of sections 531 and 531A of the Companies Act, 1956. The Official Liquidator was directed not to take possession of the properties, and the application was allowed without costs. The judgment emphasized the importance of proving fraudulent intent in transactions involving companies in liquidation, as per the relevant statutory provisions and case law on the subject.