MARUTI LTD Vs. LAXMI STEEL TRADERS

JUDGEMENT

(1.) THESE seven company petitions bearing Nos. 82, 84, 107, 109, 129, 138 and 140 of 1978 filed by the official liquidator and Maruti Udyog Ltd. can be conveniently disposed of by one order as the questions of law involved in them are common though some facts, as would be noticed in the later part of the judgment, are different. The primary question which arises for consideration in these proceedings is whether the impugned transactions of transferring goods by Maruti Ltd. , Gurgaon, to different parties which have been arrayed as respondent No. 1 in these petitions are void ab initio or liable to be annulled by this court under the provisions of Sections 531 and 531a of the Companies Act, 1956 (for short, "the Act" ).

(2.) BEFORE examining the merits of each case, I shall first refer to the 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 :

(3.) IN order to avoid a transfer of property by a debtor in favour of a creditor oh the ground of its being a fraudulent preference it has to be shown that the debtor has transferred the property with intent to prefer the creditor and that his act is free and volitional. It is, indeed, the state of mind of the debtor that has to be seen to determine whether he acted in a manner solely with a view to prefer the creditor to the exclusion of others. If the transfer takes place not with a view to prefer one of the creditors but to save the debtor's own skin either because of a threat of prosecution or to avoid prosecution or because of any other threat, actual or threatened, by the creditor concerned, the transfer or payment in such circumstances cannot be termed as a fraudulent preference. Fraudulent preference would mean preferring one creditor to another and that too fraudulently. To set aside a transaction under Section 531 of the Act fraud must be clearly alleged, proved and established and mere general allegations using statutory words or language but lacking in material particulars would not suffice. If the transaction of transfer amounts to a fraudulent preference under the bankruptcy law or insolvency law and is entered into within a period of six months prior to the commencement of the winding up then alone the transaction in question can be treated as void under Section 531 (1) of the Act and not otherwise. It cannot be said that every transaction of transfer of property effected within six months before the commencement of the winding up of the company without anything more must be treated as a fraudulent preference within the meaning of this section and nothing more need be enquired into. In other words, law does 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.