Court finds transaction void under Companies Act for fraudulent preference, orders payment of mesne profits and appropriation from sale proceeds.

The court held that the transaction under the memorandum of understanding dated 1-9-1999 was void as it constituted fraudulent preference under sections 531 and 531A of the Companies Act, 1956. The respondents were directed to pay mesne profits at the rate of Rs. 5 per sq. ft. per month from 1-9-1999 to March 2006, with Rs. 5 lakhs recovered from the sale of the premises to be appropriated towards this liability. Both applications were disposed of accordingly.

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Issues Involved:
1. Validity of the transaction under the memorandum of understanding dated 1-9-1999.
2. Applicability of sections 531, 531A, and 536 of the Companies Act, 1956.
3. Entitlement to mesne profits and/or compensation.
4. Determination of possession and ownership of office premises Nos. 102 to 106.

Issue-wise Detailed Analysis:

1. Validity of the Transaction under the Memorandum of Understanding Dated 1-9-1999:
The Official Liquidator argued that the transaction between the company in liquidation (PFSL) and the respondents was void under sections 531 and 531A of the Companies Act, 1956, as it was executed within one year preceding the winding-up petition. The respondents contended that they were creditors of PFSL and the transaction was a legitimate settlement of dues. The court noted that the memorandum of understanding was executed on 1-9-1999, within six months before the winding-up petition filed on 18-10-1999. The court concluded that the transaction amounted to fraudulent preference, as it was executed to prefer certain creditors over others, violating sections 531 and 531A.

2. Applicability of Sections 531, 531A, and 536 of the Companies Act, 1956:
The court examined whether the transaction was hit by sections 531, 531A, and 536. Section 531 deals with fraudulent preference, and section 531A extends this to a period of one year preceding the winding-up petition. The court found that the transaction was executed within this period and was intended to prefer certain creditors, thus constituting fraudulent preference. The court also considered section 536, which voids any disposition of property after the commencement of winding-up unless the court orders otherwise. The court held that the transaction was void under these provisions.

3. Entitlement to Mesne Profits and/or Compensation:
The Official Liquidator sought mesne profits from the respondents for the use of office premises Nos. 102 to 106. The court had previously directed the respondents to pay mesne profits at the rate of Rs. 5 per sq. ft. per month. The court reiterated this rate and directed the respondents to pay mesne profits from 1-9-1999 to March 2006. The court noted that Ms. Shefali Doshi had recovered Rs. 5 lakhs from the sale of the premises and directed that this amount be appropriated towards mesne profits.

4. Determination of Possession and Ownership of Office Premises Nos. 102 to 106:
The respondents claimed ownership of the premises based on the memorandum of understanding. The court found that the premises were transferred to the respondents without a registered deed of conveyance, making the transaction invalid. The court noted that the Official Liquidator had taken possession of the premises from a third party (Shri Jayantibhai Somabhai Patel) in March 2006. The court concluded that the respondents were in possession of the premises from 1-9-1999 to March 2006 and were liable to pay mesne profits for this period.

Conclusion:
The court held that the transaction under the memorandum of understanding dated 1-9-1999 was void as it constituted fraudulent preference under sections 531 and 531A of the Companies Act, 1956. The respondents were directed to pay mesne profits at the rate of Rs. 5 per sq. ft. per month from 1-9-1999 to March 2006, with Rs. 5 lakhs recovered from the sale of the premises to be appropriated towards this liability. Both applications were disposed of accordingly.

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