Fraudulent Transfer under Companies Act 1956 voids pre-winding disposals; properties annulled and returned to liquidator.

Transfers executed shortly before commencement of winding up were examined under the Companies Act 1956 provisions rendering pre-winding dispositions void if not in the ordinary course of business or not made in good faith for valuable consideration; the court found the deeds were within the relevant pre-winding period, lacked consideration, lacked required corporate formalities, and evidenced an intention to prefer certain creditors. Applying the burden of proof and avoidance principles, the court concluded absence of bona fides and preferential intent, annulled the sale deeds, and directed the official liquidator to take possession of the properties.

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Issues: Whether the sale deeds dated December 3 and December 5, 1990 transferring movable and immovable property of the company are fraudulent transfers/void under Section 531 and Section 531A of the Companies Act, 1956 and whether those sales should be annulled and the properties taken into possession by the official liquidator.

Analysis: The Court examined Sections 531 and 531A (and related provisions) which render transfers made shortly before commencement of winding up void if not in the ordinary course of business or not in good faith for valuable consideration. The Court considered evidence that the sale deeds were executed within the relevant pre-winding up period, that no consideration had passed, that procedural formalities (resolution, common seal) were not complied with, and that an agreement and surrounding circumstances indicated an intention to prefer certain creditors to the exclusion of others. The Court evaluated authorities on the burden of proof and on what constitutes avoidance under the statutory provisions, and found the facts here showed absence of bona fides and a preference to select creditors despite no payment being made.

Conclusion: The sale deeds dated December 3, 1990 and December 5, 1990 are annulled as fraudulent transfers under Section 531 and Section 531A of the Companies Act, 1956; the official liquidator is directed to take possession of the movable and immovable property and deal with them in accordance with law.

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