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Chennakesava Aiyangar Vs. the Official Liquidator, the Coimbatore Mahalakshmi Bank, Limited - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtChennai
Decided On
Reported inAIR1943Mad54; (1942)2MLJ583
AppellantChennakesava Aiyangar
RespondentThe Official Liquidator, the Coimbatore Mahalakshmi Bank, Limited
Excerpt:
- - in the present case, there was an extraordinary resolution for the voluntary winding up of the company on 20th april, 1939. if this date is to be taken as the crucial date for the determination of the period of three months, then the assignment in question will undoubtedly be within the section provided of course the other conditions are satisfied. but the section does not clearly say which is to be deemed to be the crucial date where a voluntary winding up is followed by a petition for the winding up of the company by or subject to the supervision of the court. this is precisely what has happened in the present case, for the resolution for the voluntary winding up of the company passed on 20th april, 1939, was followed by a petition for the compulsory winding up of the company..........bank, limited, now in liquidation, was a fraudulent preference. the question was considered by the learned judge under two heads and on two different dates. first, he considered the question whether the assignment which has been impugned was within three months of the act of insolvency. section 231 of the indian companies act which applies the principle of fraudulent preference enacted by section 54 of the provincial insolvency act to companies states as follows:(1) any transfer, delivery of goods, payment, execution or other act relating to property which would, if made or done by or against an individual, be deemed in his insolvency a fraudulent preference, shall, if made or done by or against a company, be deemed, in the event of its being wound up, a fraudulent preference of its.....
Judgment:

Krishnaswami Ayyangar, J.

1. This is an appeal from an order of the District Judge of Coimbatore holding that an assignment in favour of the appellant made on 2nd March, 1939, by the Mahalakshmi Bank, Limited, now in liquidation, was a fraudulent preference. The question was considered by the learned Judge under two heads and on two different dates. First, he considered the question whether the assignment which has been impugned was within three months of the act of insolvency. Section 231 of the Indian Companies Act which applies the principle of fraudulent preference enacted by Section 54 of the Provincial Insolvency Act to companies states as follows:

(1) Any transfer, delivery of goods, payment, execution or other act relating to property which would, if made or done by or against an individual, be deemed in his insolvency a fraudulent preference, shall, if made or done by or against a company, be deemed, in the event of its being wound up, a fraudulent preference of its creditors, and be invalid accordingly.

(2) For the purposes of this section the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court and a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond with the act of insolvency in the case of an individual.

In the present case, there was an extraordinary resolution for the voluntary winding up of the company on 20th April, 1939. If this date is to be taken as the crucial date for the determination of the period of three months, then the assignment in question will undoubtedly be within the section provided of course the other conditions are satisfied. According to the learned Judge in the Court below it is that date, namely, 20th April, 1939, the date of the voluntary winding up that should be taken as the crucial date.

2. Clause (2) of Section 231 refers to two methods by which a company may be wound up:

(1) by the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the Court, and

(2) by a resolution for winding up in the case of a voluntary winding up.

But the section does not clearly say which is to be deemed to be the crucial date where a voluntary winding up is followed by a petition for the winding up of the company by or subject to the supervision of the Court. This is precisely what has happened in the present case, for the resolution for the voluntary winding up of the company passed on 20th April, 1939, was followed by a petition for the compulsory winding up of the company subject to the supervision of the Court, presented on 17th June, 1939. If the latter date is to be regarded as the date from which the period of three months is to be calculated, then the assignment would be beyond the time contemplated by the section.

3. Whatever doubt there might appear to be on the language of Clause (2) of Section 231 it has been resolved by a decision of Swinfen Eady, J., in In re Russell Hunting Record Co., Ltd. (1910) 2 Ch.D. 78. This decision proceeded upon the language of Section 164 of the English Companies Act of 1862 which appears to be almost word for word the same as Section 231 (2) of our Act. What happened in that case was, first there was a resolution for the voluntary winding up of the company followed subsequently by a compulsory winding up ordered by the Court. The learned Judge held that the determining date was not the date of the resolution for the voluntary winding up but the date of the presentation of the petition on which the Court directed its compulsory winding up. Referring to the decision in In re Taurine Co. (1883) 25 Ch.D. 118. , the learned Judge explained the position by stating that the provisions of the Act left no room for doubt that when the voluntary winding up is followed by a compulsory winding up by the Court, the former is superseded altogether on account of the inconsistency between the provisions which relate to the two forms of winding up. In our opinion this decision is clear authority against the view which, has been accepted by the learned District Judge. The learned Judge, it is apparent, came to make the order, which we now find to be erroneous, on account of the fact that the English decisions were not made available to him. For the reasons explained, we must hold that the assignment being more than three months before the petition for the compulsory winding up by the Court, that is, before 17th June, 1939, it cannot be held to be a fraudulent preference avoidable under Section 54 of the Provincial Insolvency Act.

4. The learned advocate for the appellant contended that the decision of the Court below is erroneous also on the merits. He argued that the evidence does not warrant the finding that the Bank had the intention to prefer the appellant. But we are not prepared to differ from the view taken by the learned Judge. The evidence leaves no room for doubt that there were a number of creditors of whom two at least were left unheeded while the appellant and certain other creditors were satisfied by the assignment of promissory notes or other valuable securities. This is sufficient to justify the finding that there was on the part of the bank an intent to prefer.

5. In the result the appeal is allowed with costs here and in the Court below.


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