Fraudulent preference requires proof of collusion and dishonest intent; pre-winding-up asset sale was not invalidated.

A transfer of company assets was not shown to be a fraudulent preference or otherwise void against the official liquidator because the evidence did not prove inadequate consideration, collusion, or a dishonest intent to prefer one creditor over others. The assets were subject to mortgage and hypothecation, the company was in financial distress, and the secured creditor was entitled to exercise its statutory powers. Section 537 was held inapplicable because the sale occurred before commencement of winding up. Mere relationship with a connected person was insufficient, without reliable evidence of fraud, to invalidate the transfer.

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Issues: Whether the transfer of the company's assets in favour of the purchaser was liable to be declared void as a fraudulent preference or otherwise invalid against the official liquidator.

Analysis: The application was founded on allegations that the assets were transferred without proper valuation, at an inadequate price, and in collusion with the purchaser so as to prefer the secured creditor. The evidence, however, did not establish that the assets were sold for inadequate consideration or that the transaction was tainted by a common intention to defraud creditors. The company's assets were under mortgage and hypothecation with the secured creditor, the company was in financial distress, and the secured creditor was entitled to proceed under its statutory powers. Section 537 was held inapplicable because the sale took place before commencement of winding up proceedings. Mere relationship between the purchaser and a connected person was held insufficient, by itself, to prove fraudulent preference.

Conclusion: The transfer was not proved to be a fraudulent transaction or a void preference against the company's creditors.

Final Conclusion: The official liquidator did not establish grounds to invalidate the transfer or to recover the assets on the basis pleaded, and the application was therefore dismissed.

Ratio Decidendi: A transfer made before commencement of winding up cannot be struck down under section 537, and fraudulent preference is not made out unless the party challenging the transaction proves collusion, dishonest intent, and preference of one creditor over others on reliable evidence.

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