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TMI Blog1993 (7) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of the provisions of sections 531 and 531A of the Act under which the transfers made are sought to be challenged. These provisions are reproduced hereunder for facility of reference: "53.1. (1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up which, had it been made, taken or done by or against an individual within three months before the presentation of an insolvency petition on which he is adjudged insolvent, would be deemed in his insolvency a fraudulent preference shall in the event of the company being wound up, be deemed a fraudulent preference of its creditors and be invalid accordingly: Provided that, in relation to things made, taken or done before the commencement of this Act, this sub-section shall have effect with the substitution, for the reference to six months, of a reference to three months. (2) For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the court, and the passing of a resolution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not presume a transaction to be a fraudulent preference merely because it was entered into within a period of six months prior to the commencement of winding up. Section 531A of the Act, on the other hand, would make a voluntary transfer of property immovable or movable void against the liquidator if ( i ) there is transfer of property or any delivery of goods made by the company ; ( ii ) such transfer or delivery has not been made in the ordinary course of its business or in favour of a purchaser or any encumbrancer in good faith and for valuable consideration ; and ( iii ) the transfer or delivery is made within a period of one year before the presentation of a petition for winding up. In other words, section 531A comes into play only if the transaction was not done in good faith and for valuable consideration. Again, if the transfer is made in the ordinary course of business, it would not attract the provisions of section 531A. Where a transaction is sought to be annulled under this provision or under section 531, the burden of proof is entirely on the official liquidator or the person who impugns the transaction of transfer. As held by their Lordships of the Supreme Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Government. Thereafter, by a notification issued under section 6 of the aforesaid Act, the Central Government directed the vesting of the undertakings of the company in Maruti Udyog Ltd., Gurgaon a Government company which with effect from such vesting became the owner in relation to the undertakings and all the rights and liabilities of the Central Government in relation to such undertakings. In other words, the company with all its assets but without liabilities was taken over by Maruti Udyog Ltd. which was then impleaded as petitioner No. 2 in all these petitions. Amended petitions were allowed to be filed. Parties in whose favour the goods had been transferred were impleaded as respondent No. 1 whereas the three ex-directors of the company were impleaded as respondents Nos. 2 to 4. Before the filing of the amended written statements, learned counsel for the respondents raised a preliminary objection to the effect that the amended petitions were not maintainable/triable in this court. The argument was that the company in liquidation had ceased to be the owner of the assets of the company and Maruti Udyog Ltd. having taken over its assets was not in liquidation and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent No. 1 which according to the official liquidator, amounts to a fraudulent preference within the meaning of section 531 of the Act and that the return/transfer is liable to be declared void. It has also been contended that the impugned transfer of goods was also liable to be annulled under section 531A of the Act. The pleadings of the parties gave rise to the following issues : 1.Whether the petitioners are entitled to recover the articles mentioned in the delivery notes (annexures "P-1" to "P-4") or in lieu thereof the price, amounting to Rs. 1,34,159.27? Opp. 2.Whether the petitioners are entitled to any rental charges for the said articles from respondent No.1? Opp. 3.Whether the petitioners are entitled to interest on the amount of articles and if so, at what rate? Opp. 4.Whether the petitioners are entitled to future interest at 12 per cent. per annum? Opp. 5.Is the petition not maintainable in the present form? Opp. 6.Was there any valid legal resolution passed by the board of directors for taking steps for the winding up of Maruti Limited? Opp. 7.Relief. There has been a serious controversy between the parties as to what was decided in the meetin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce led by the parties it can safely be held that a meeting of the board of directors of the company did take place in May, 1977, in which the financial position of the company was reviewed and may be, some decisions were also taken but the minutes of the meeting could not be recorded. However, in view of the legal position as discussed in the earlier part of the order, it is not necessary for me to record a finding as to whether the notes of the meeting exhibit "PW-3/2" were correctly recorded by the secretary and whether they truly represent the decisions taken by the board of directors. It is, however, clear that the directors were aware of the poor financial condition of the company and they were taking stock of the entire situation. Since this issue is common in other petitions as well the finding as recorded herein will dispose of similar issues in those petitions. As regards issue No. 1, the petitioners would be entitled to recover the articles in the delivery notes or in lieu thereof the price of goods transferred only if it is held that the transfer of goods amounted to a fraudulent preference. It may be recalled that the goods in the present case which had been supplied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult, issue No. 1 is decided against the petitioners and in favour of the respondents. Consequently, issues Nos. 2 and 3 are also decided against the petitioners and in favour of the respondents. Company Petition No. 82 of 1978 : Goods to respondent No. 1 Delhi Automobiles Pvt. Ltd. were transferred on May 14, 1977, as per three delivery notes which are exhibits "PW-2/1", "PW-2/2" and "PW-2/3". These transfers have been impugned in the present petition. The case of the respondents, however, is that the company which was the contractor for body building for Haryana Roadways and D.T.C., Delhi, had its business dealings with respondent No. 1 which was a sub-contractor of the company. Respondent No. 1 also used to take contracts for the fabrication of bus bodies of Haryana Roadways and D.T.C., Delhi. Respondent No. 1 used to pass on surplus work of fabrication to the company. In other words, the company and respondent No. 1 were doing job work for each other while fabricating bus bodies for Haryana Roadways and D.T.C., Delhi and for this purpose, they used to give and take material from each other which was required for the job work (fabrication of bus bodies). The company issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n if the transfers are annulled, they cannot be fastened with any liability to pay the price of the goods merely on the basis of the statement of accounts, exhibits "PW-6/1A" to "PW-6/3A", as produced by the company. Reference in this connection was made to section 34 of the Evidence Act and some decided cases. Since I am holding that the impugned transfers are not liable to be annulled either under section 531 or under section 531A of the Act, it is not necessary to decide this question. Consequently, the issues which are almost identical with the issues framed in Company Petition No. 138 of 1978 are decided against the petitioners and in favour of the respondents. Company Petition No. 109 of 1978 : In this case, respondent No. 1 had been supplying foam rubber goods to the company from October 8, 1975, and the last supply is said to have been made on May '9, 1978. These goods were required by the company for its business of building bus bodies. Payment for the goods was received by the respondent through cheques. One of the cheques issued by the company in a sum of Rs. 10,000 was dishonoured. The respondent-firm threatened to take legal proceedings against the company for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the respondents. Company Petitions Nos. 84, 107, 129 and 140 of 1978 : In all these cases goods were transferred by the company to respondent No. 1 through different delivery notes. Since the official liquidator is impugning these transfers as fraudulent preferences under section 531 of the Act, the onus was on him to show that the company voluntarily transferred these goods to respondent No. 1 with a view to prefer it as against other creditors and that too fraudulently. It was also necessary for him to allege and prove the circumstances under which the goods were transferred and also the motive in transferring them. As already observed in the earlier part of the judgment a transaction cannot be impugned merely because the goods were transferred within six months prior to the commencement of the winding up. Material particulars of fraud and connivance between the company and the transferee have not only to be alleged but have also to be proved beyond reasonable doubt. While impugning the transactions under sections 531 and 531A of the Act all that the official liquidator has to say is stated in paragraph 5 of the petition which is almost identical in all the cases and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n May 7, 1977, the proceedings of which have been produced in the form of notes prepared by the company secretary which, as I have already held, are quite suspicious and not safe to be relied upon. Be that as it may, it can safely be held that the directors of the company were aware of its weak financial position but this by itself is not enough to lead to the conclusion that the transfers made by the company were in any way fraudulent or that they were made to prefer respondent No. 1 over the other creditors. The fact that bills were also prepared corresponding to the delivery notes and that those have not been signed by the directors of the company is of no consequence. This fact, to my mind, is not even relevant for determining the real issues in the case. In the absence of any cogent evidence, the official liquidator must fail. Consequently, all the issues are decided against the petitioners and in favour of the respondents. Before concluding, it may be pointed out that since in all these cases, I have held that either the transfer of goods did not amount to a fraudulent preference or the official liquidator has failed to plead and prove the facts necessary for annulling the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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