Court upholds transaction validity, allows action against ex-directors, and grants relief in company applications.

The court rejected the application to impugn the transaction dated February 18, 1987, between Kishco Mills Pvt. Ltd. and Monark Enterprises, finding it valid. The court granted the official liquidator leave to pursue proceedings against ex-directors for alleged preferential payments. Additionally, the court partially granted Company Application No. 136 of 1991, directing the removal of the seal on plot No. 10. Company Application No. 137 of 1991 was dismissed, and the Central Bank of India was ordered to pay Rs. 2,000 towards the petitioners-workmen's litigation costs, with the official liquidator's costs to be covered by the company's assets in liquidation.

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Issues Involved:
1. Validity of the transaction dated February 18, 1987, between Kishco Mills Pvt. Ltd. and Monark Enterprises.
2. Whether the transaction constitutes a fraudulent preference under Section 531 of the Companies Act, 1956.
3. Applicability of Section 531A concerning avoidance of voluntary transfers.
4. Applicability of Section 536(2) and Section 537 of the Companies Act, 1956.
5. The rights of workmen under Section 529A of the Companies Act, 1956.
6. Alleged preferential payments and misfeasance by company directors.

Detailed Analysis:

1. Validity of the Transaction Dated February 18, 1987
The principal question was whether the transaction dated February 18, 1987, transferring leasehold rights in plot No. 10 from Kishco Mills Pvt. Ltd. to Monark Enterprises was void ab initio or liable to be annulled under the Companies Act, 1956. The court found that Monark Enterprises were bona fide creditors of the company, having supplied yarn worth about Rs. 35 lakhs and having received partial payments and discounted bills. The transaction was entered into after hard bargaining and lawful pressure from Monark Enterprises, who were facing threats from the Bank of Maharashtra due to unpaid hundis by the company. The court held that the transaction was entered into in good faith and for valuable consideration.

2. Fraudulent Preference under Section 531
The court examined whether the transaction was a "fraudulent preference" under Section 531. It was determined that the transaction did not constitute a fraudulent preference as it was not entered into with the intent to prefer one creditor over another but was a result of lawful pressure from Monark Enterprises. The court referenced legal principles stating that a transaction made under pressure cannot be considered a fraudulent preference.

3. Applicability of Section 531A
Section 531A concerns the avoidance of voluntary transfers made within one year before the presentation of a winding-up petition if not made in the ordinary course of business or not in good faith and for valuable consideration. The court concluded that the transaction was entered into in good faith and for valuable consideration, despite not being in the ordinary course of business. The transaction involved several statutory approvals and was implemented before the winding-up order.

4. Applicability of Section 536(2) and Section 537
Section 536(2) deals with voluntary dispositions after the commencement of winding up, while Section 537 invalidates sales held in pursuance of attachment, distress, or execution without court leave. The court found that the transaction was a voluntary one, completed before the winding-up order, and not in pursuance of any attachment or execution. Thus, Sections 536(2) and 537 were not applicable.

5. Rights of Workmen under Section 529A
The court acknowledged the workmen's pari passu charge over the assets of the company under Section 529A. The official liquidator was directed to take necessary steps to protect the workmen's interests, including applying for permission to adopt proceedings for the sale of plot No. 7A.

6. Alleged Preferential Payments and Misfeasance by Company Directors
The official liquidator was granted leave to take out separate proceedings against the ex-directors and others regarding alleged preferential payments. The court noted that the conduct of Shri Ravi Nariman, the managing director, appeared blameworthy and directed the official liquidator to probe into the matter and report to the company judge.

Orders:
1. The official liquidator is granted leave to take out proceedings against ex-directors for alleged preferential payments.
2. Application to impugn the transaction of February 18, 1987, is rejected.
3. Company Application No. 136 of 1991 is granted in part, with the official liquidator directed to remove the seal on plot No. 10.
4. Company Application No. 137 of 1991 is dismissed.
5. The Central Bank of India is directed to pay Rs. 2,000 to the petitioners-workmen towards litigation costs.
6. Costs of the official liquidator to come out of the company's assets in liquidation.

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