1931 (10) TMI 15 - Commissioner - Companies Law

Court dismisses application to set aside payment in winding up proceedings, emphasizes lack of summary remedy for fraudulent preference.

The court dismissed the application seeking to set aside a payment made within three months of winding up proceedings under sections 234 of the Indian ... Winding up – Fraudulent preference Issues:1. Application under section 234 of the Indian Companies Act read with section 56 of the Presidency Towns Insolvency Act for setting aside a payment made within three months of the commencement of winding up.2. Objection raised regarding the appropriate section for the application - section 231 discussed.3. Comparison with previous case law regarding recovery of moneys paid by way of fraudulent preference.4. Reference to English rulings on the procedure for recovering money paid as fraudulent preference.Analysis:1. The judgment involves an application brought under section 234 of the Indian Companies Act along with section 56 of the Presidency Towns Insolvency Act. The application sought to set aside a payment made within three months of the initiation of winding up proceedings, alleging that the payment was made with the intention of providing a preference to a specific creditor over others. The Official Liquidators of the Karachi Bank, Ltd. sought the recovery of the amount along with interest from the recipient of the payment.2. An initial objection was raised regarding the appropriate section under which the application should have been brought. The opponent contended that section 231 of the Indian Companies Act, which defines fraudulent preference, should have been the basis of the application instead of section 234. Citing a previous case law, it was argued that section 231 does not provide for a summary method of recovering moneys paid as fraudulent preference. The opponent relied on the case of Dr. Tarachand Jeramdas v. Official Liquidators of the Peoples Bank of India, Ltd., which established the necessity of filing a regular suit for recovering amounts realized by a creditor as fraudulent preference.3. The judgment also delves into the comparison with previous case law, specifically referencing the ruling in Dr. Tarachand Jeramdas v. Official Liquidators of the Peoples Bank of India, Ltd. The case highlighted that under the Act of 1882, there was no provision for a summary order to refund moneys realized by a creditor before the winding up order was passed. It emphasized the requirement for a regular suit for such recovery, indicating a lack of summary remedy for creditors in cases of fraudulent preference.4. Furthermore, the judgment makes a comparison with English rulings on the procedure for recovering money paid as fraudulent preference. While the applicants relied on English cases showing a procedure by summons, the court noted that the Indian Companies Act does not provide for a summary method of recovering money paid as fraudulent preference to a creditor. Section 231 defines fraudulent preference, while section 185 pertains to a summary remedy for specific persons like contributories, trustees, receivers, bankers, agents, or officers of the company, excluding creditors who received payments as fraudulent preference.In conclusion, the court dismissed the application, holding that the present application does not lie under the specified sections. No order was given regarding costs.