1964 (11) TMI 44 - HC - Companies Law

Summary

Issues:
1. Appeal against dismissal of petition to set aside sale of buses.
2. Determination of fraudulent preference in the sale transaction.
3. Applicability of section 531 of the Indian Companies Act.
4. Finality of the order of the liquidator.
5. Power of the official liquidator to declare a transaction as fraudulent preference.

Analysis:

The appeal was filed by the official liquidator of a company against the dismissal of a petition seeking to set aside the sale of three buses to a respondent. The sale was part of a compromise decree in a lawsuit where the respondent was a creditor pressing for repayment. The primary issue was whether the sale constituted a fraudulent preference, which would trigger the application of section 531 of the Indian Companies Act. The court emphasized that the transfer could not be considered a fraudulent preference if the debt was genuine and the sale was a result of pressure from the creditor. The burden of proving fraudulent preference lay on the appellant, who failed to demonstrate that the company did not owe the claimed amount to the respondent.

The judgment also addressed the finality of the liquidator's order and the power of the official liquidator to declare a transaction as a fraudulent preference. It was highlighted that the official liquidator's decision lacked the necessary court sanction and, therefore, could not be relied upon to challenge the sale. The court concluded that the order under appeal should be confirmed, dismissing the appeal and upholding the sale of the buses to the respondent. Additionally, in a related appeal, the appellant was granted the right to withdraw a security amount due to the decision in the main appeal, with no opposition or costs involved.

In summary, the judgment delved into the intricacies of fraudulent preference in company transactions, the legal framework under the Indian Companies Act, and the authority of the official liquidator in such matters. The court's decision hinged on the genuineness of the debt, the circumstances leading to the sale, and the absence of court-sanctioned actions by the liquidator. Ultimately, the appeal was dismissed, affirming the validity of the sale of buses to the respondent.