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TMI Blog1971 (7) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... a and C.L. Devanathan (respondents Nos. 2 and 4 herein) in Suit No. 5502 of 1967 brought by the said Kanhiya Lal against respondents Nos. 2, 3 and 4 herein. In that suit a decree for Rs. 1,600 was passed along with costs amounting to Rs. 340. According to the petitioner in this court, Chellappa became a subscriber of chit No. 24 LTB and 23 LTB for Rs. 1,500 each. In accordance with the chit agreement Chellappa had to pay a monthly subscription of Rs. 50. On May 22, 1964, and July 29, 1964, Chellappa executed pronotes for the sum of Rs. 1,500 each in favour of Messrs. Victor Chit Fund (Pvt.) Ltd. These pronotes had two sureties, namely, N.K. Narayanan, respondent No. 3, and L.C. Devanathan, respondent No. 4. Chellappa is alleged to have won ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adings of the parties the following issues had been framed on September 28, 1970: 1.Whether the assignment of the two pronotes was for consideration, is valid and legal? 2.Whether ex-parte decree passed against respondents Nos. 2 and 4 for Rs. 1,600 with interest is liable to be set aside on the ground that the same has been obtained by fraud? 3.Whether the petition is maintainable against respondent No. 3? 4.Whether the petition is liable to be dismissed on the ground that it does not set out any particulars of the fraud? 5.Relief? Issue No. 1.: The burden of proving this issue was on Kanhiya Lal, respondent No. 1. Appearing as R 1 W 1 he had deposed that he had deposited approximately Rs. 2,100 or Rs. 2,200 with the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also done by him. He further deposed that he resigned his directorship in the company in July, 1966, and moved the petition for winding up of the company. The books of the company produced by M. P. Sharma, AWI, corroborated the transaction in favour of Kanhiya Lal. M.P. Singh Ahluwalia appearing as AW2 deposed that he was the managing director of the company till March 21, 1967, and admitted that he assigned the pronotes in favour of Kanhiya Lal in consideration of the amount due to him from the company. Mr. M. P. Singh Ahluwalia had appeared as a witness for the official liquidator. Chellappa appearing as AW3 also admitted having acknowledged the debt due on these pronotes but denied that he knew Kanhiya Lal. He, however, admitted that Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due preference to the son-in-law of the other director with whom he was not on very cordial terms. Section 531 of the Companies Act comes into play only if a fradulent preference has been shown in any transaction. Section 531A comes into play only if the transaction was not done in good faith and for variable consideration. Further, such a transaction must be one which is not made in the ordinary course of the company's business. I have already held that the assignment of prondtes in favour of Kanhiya Lal was for valid consideration and the type of business that the company was conducting was such in which assignment of pronotes would be in the normal course of business. Chellappa seems to be the prime-mover instigating the present petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfers. Observation was made by the learned single judge that payment to one creditor in preference to the other was violation of some rule but, respectfully, it must be said that the mere payment to one creditor in preference to the other would not amount to fraudulent preference. I am fortified in coming to this conclusion by a Bench decision of the Andhra Pradesh High Court in Official Liquidator, Eluru Motor Transport Ltd. v. Venkineni Rajagopala Venkataratnam [1966] 36 Comp. Cas. 888 ; AIR 1966 AP 157 . P. Chandra Reddy C. J., speaking for the court, observed that if a debtor prefers one creditor to another on account of pressure that is put upon him the payment cannot be regarded as fraudulent preference. It is the dominant motive ..... X X X X Extracts X X X X X X X X Extracts X X X X
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