Fraudulent preference in company property transfer led to void mutation entries and restoration of land records.

A purported transfer of company immovable property to promoters, recorded through resolutions and mutation entries without a registered conveyance, was treated as falling within fraudulent preference where winding-up proceedings were already in motion. The analysis emphasised that Section 531(1) of the Companies Act, 1956 protects creditors, and a shareholder-controlled attempt to appropriate company assets without proven consideration, disclosure, or good faith attracts the mischief of that provision. Applying the preponderance of probability standard, the transaction was stated to be void and the mutation entries reversible, with the company's name to be restored in the land records.

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Issues: Whether the purported transfer of the company's immovable property to its promoters, effected through resolutions and mutation entries without a registered conveyance and in the shadow of winding-up proceedings, amounted to a fraudulent preference under Section 531(1) of the Companies Act, 1956 and was liable to be declared void, with consequential reversal of the mutation entries.

Analysis: The transfer was recorded in the land records after presentation of the winding-up petition and without any executed instrument of transfer or disclosure of genuine consideration. The promoters' case rested on a shareholder resolution and an asserted but unquantified past indebtedness, while the company was under their control. The statutory protection under Section 531(1) is directed to the interests of creditors, and a transaction that allows shareholders to appropriate company assets, particularly on no stated or proven consideration, falls within the mischief of fraudulent preference. The standard is preponderance of probability, and on the facts, the absence of good faith and the attempt to keep the property beyond the reach of creditors were established.

Conclusion: The transaction was held to be a fraudulent preference and void, and the mutation entries were directed to be reversed with the company's name restored in the land records.

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