Judgment D.R. DHANUKA, J.:---The Principal question which arises for consideration of the Court in these proceedings is as to whether the impugned transaction dated 18th February 1987 entered into by and between M/s. Kishco Mills Pvt. Ltd. (hereinafter referred to as `the company') and M/s. Monark Enterprises relating to transfer of leasehold rights in Plot No. 10, Government Industrial Estate, Kandivli, Bombay, and the structures thereon is liable to be treated as void ab initio or is liable to be annulled by the Company Court under one or the other provisions of the Companies Act I of 1956 (hereinafter referred to as `the Act'). 2. On 12th August, 1987, Shri Kisan Tulpule, Shri Ramakrishna Venkat, Shri Satyanarayan Ramourat Tripathi and Shri Ramtirath Sukhanarayan Kahar, in their capacity as representatives of Mill Mazdoor Sabha, an approved and recognised Union for textile processing industry, representing the workmen of the company, filed a winding up petition in this Court, being Company Petition No. 756 of 1987. The petitioners sought winding up order against the said company on the ground of non-compliance with the notice of demand of Rs.70.74,282.59, being notice of demand dated 13th July, 1987. The said petition was declared on 5th August, 1987 and was filed on 12th August, 1987. It was inter alia averred in the petition that the company had resorted to illegal lock-out in July 1986. The company employed about 423 workmen at the material time. 3. On 9th June, 1988, this Court passed an order for winding up of the company. The winding up order relates back to the date of presentation of the petition i.e., 12th August, 1987. By the said order, the Official Liquidator, High Court, Bombay, was directed to perform all the functions of Liquidator of the said company as contemplated under the Act. 4. At one stage, the company held two plots i.e., Plot No. 7-A and Plot No.10, situate at Government Industrial Estate, Kandivli, Bombay, on lease granted by the Additional Collector of Bombay for and on behalf of the Governor of the State. Prior to the commencement of the winding up proceedings, the company had already mortgaged its right, title and interest in Plot No. 7-A and hypothecated its plant , machinery and other moveables to the Central Bank of India in lieu of loan and other credit facilities availed of by the company from the said Bank. Prior to the commencement of the winding up proceedings, the company had already mortgaged its right, title and interest in Plot No. 7-A and hypothecated its plant , machinery and other moveables to the Central Bank of India in lieu of loan and other credit facilities availed of by the company from the said Bank. The said secured creditors have filed Suit No. 2200 of 1986 in this Court against the company and the guarantors for recovery of a sum of Rs. 3,97,34,819.90, further interest and for other reliefs. By an order dated 4th September, 1986 passed by this Court, the Court Receiver, High Court, Bombay was appointed Receiver of the said Plot No. 7-A and the structures thereon and also of the machinery and movables hypothected to the Bank. On 12th September, 1986, the Court Receiver took possession of the said properties. Pursuant to a subsequent order dated 20th November 1986, the Court Receiver disposed of the moveables of which the Receiver had taken charge, realising a sum of Rs. 13,50,000/-. In pursuance of the orders passed by this Court , a sum of Rs. 12,91,000/- has already been released to the Central Bank of India after setting aside the balance of the amount towards the costs, charges expenses and commission of the Court Receiver. Perhaps the workmen are entitled to pari passu charge over the said sale proceeds and other securities held by the Central Bank of India. 5. Prior to the commencement of the winding up proceedings i.e., on 18th February, 1987, the company had entered into the impugned transaction to transfer its right, title and interest in Plot No. 10 and the structures standing thereon to M/s. Monark Enterprises, a partnership firm, for consideration of Rs. 32,74,294/-. The said transaction was in nature of a firm commitment and concluded contract subject to various sanctions and approvals. On the same day, the company handed over possession of the said property to M/s Monark Enterprises. The said transaction was duly sanctioned by the Additional Collector of Bombay. The said transaction was duly implemented prior to the passing of the winding up order. The relevant facts in respect of the abovereferred impugned transaction shall be set out at some length in the later part of this order. 6. The said transaction was duly sanctioned by the Additional Collector of Bombay. The said transaction was duly implemented prior to the passing of the winding up order. The relevant facts in respect of the abovereferred impugned transaction shall be set out at some length in the later part of this order. 6. On 24th September, 1987, M/s. Monark Enterprises executed a deed of mortgage in respect of the same property i.e., Plot No. 10 and the structures thereon situate at Government Industrial Estate, Kandivli (leasehold rights) in favour of Bank of Maharashtra. It is the contention of M/s. Monark Enterprises and the Bank of Maharashtra that Plot No. 10 was not the asset of the company on the relevant date and the impugned transaction dated 18th February, 1987 and the abovereferred mortgage were arrived at in good faith and for valuable consideration and the said asset cannot be considered as the asset of the company on the relevant date. It is also the contention of M/s. Monark Enterprises that the said transaction dated 18th February, 1987 cannot be treated as `"disposal of property"' by the company after 12th Augus,t 1987 merely because the Collector of Bombay granted sanction thereto-on 14th September, 1991, the company having already exercised its disposing power on 18th February, 1987. It is the contention of the petitioners and the Official Liquidator that the impugned transaction dated 18th February, 1987 is liable to be treated as void ab initio and the lease hold Plot No. 10 referred to hereinabove along with the structures thereon is liable to be treated as an asset of the company available to all the creditors for distribution in accordance with the provisions of the Act. 7. Sometime prior to 6th September, 1988, the official Liquidator took possession of Plot No. 10 and the structures thereon on the assumption that the said leasehold plot was not the asset of M/s. Monark Enterprises but was the asset belonging to the company under liquidation. By their Advocates' letter dated 6th September, 1988, addressed to the Official Liquidator, M/s. Monark Enterprises protested against the said action of the Official Liquidator and called upon the Official Liquidator to unseal the premises and return back the possession thereof to M/s. Monark Enterprises. Correspondence ensued between the parties. 8. By their Advocates' letter dated 6th September, 1988, addressed to the Official Liquidator, M/s. Monark Enterprises protested against the said action of the Official Liquidator and called upon the Official Liquidator to unseal the premises and return back the possession thereof to M/s. Monark Enterprises. Correspondence ensued between the parties. 8. On 9th November, 1990, the Official Liquidator submitted his report to this Court for directions on the question as to whether the Official Liquidator may take out proceedings under section 531 (a) of the Act against the ex-directors and M/s. Monark Enterprises to declare the alleged transfer and sale of Plot No. 10 as void against the Official Liquidator. In paragraph 6 of the said report, the Official Liquidator referred to Summary Suit No. 2334 of 1986 filed by M/s. Monark Enterprises against the company for recovery of its outstandings and passing of the decree by this Court in this suit. In the said paragraph of the report, the Official Liquidator referred to the fact that the said decree was made payable by instalments of Rs. 1.50 lakhs per month. In paragraphs 6 and 7 of the said report, the Official Liquidator stated that the company had entered into an agreement dated 18th February, 1987 to sell its right, title and interest in leasehold Plot No. 10 situate at Government Industrial Estate, Kandivli, to M/s. Monark Enterprises for a total consideration of Rs. 32,74,294/-. In the said paragraphs of the report, the Official Liquidator stated that the decretal amount of about Rs. 20, 76,056.40 was adjusted against the stipulated consideration of Rs. 32,74,294/-. It was further stated in the abovereferred two paragraphs of the said report that M/s. Monark Enterprises had agreed to pay outstanding dues of the company payable to income-tax authorities, Collector of Bombay, Municipal Corporation of Greater Bombay etc., on behalf of the company and adjust such payments towards their obligation to pay the stipulated consideration on of Rs. 32,74,294/-. It was further stated in paragraph 7 of the said report that M/s. Monark Enterprises had obtained certificate under section 230-A and 269(UL) of the Income-tax Act and had also applied for transfer of leasehold rights in their favour to Collector of Bombay. 32,74,294/-. It was further stated in paragraph 7 of the said report that M/s. Monark Enterprises had obtained certificate under section 230-A and 269(UL) of the Income-tax Act and had also applied for transfer of leasehold rights in their favour to Collector of Bombay. It was further stated in paragraph 7 of the said report that M/s. Monark Enterprises had subsequently mortgaged the said Plot No. 10 to Bank of Maharashtra by Deed of Mortgage dated 24th September 1987. 9. I have carefully gone through the said report with the assistance of the learned Counsel. It is clear from the said report that the Official Liquidator did not dispute the validity of the decree passed by this Court in Summary Suit No. 2334 of 1986 at the stage of making the said report or the fact that M/s. Monark Enterprises were bona fide creditors of the company for large amount prior to 18th February, 1987 or that the company had defaulted to payment of stipulated instalments. It is clear from the said report that the Official Liquidator did not dispute the fact that M/s. Monark Enterprises had already paid a total sum of Rs. 32,74,294/- to the company partly by adjusting the decretal amount and partly by making payments to various third parties as well as to the company by cheques and Bank drafts. 10. In paragraphs 8 of the said report, the Official Liquidator set out the only ground on which he impugned the said transaction dated 18th February, 1987 and the said ground must therefore be properly understood and summarised. Section 531 (a) of the Companies Act I of 1956 provides for "avoidance of voluntary transfers" made by a company within a period of one year before the presentation of a petition for winding up (1) if such transfer was not made in the ordinary course of its business or (2) if such transfer was not made in good faith and for valuable consideration. If the Court comes to the ocnclusion that such transfer though made within a period of one year before representation of the petition was mad eeihte rin ordinary course of business or in good faith and for valuable consideration, such transfer would not be annulled. If the Court comes to the ocnclusion that such transfer though made within a period of one year before representation of the petition was mad eeihte rin ordinary course of business or in good faith and for valuable consideration, such transfer would not be annulled. The burden of proving the impugned transaction was not entered into in ordinary course of business or in good faith and for valuable consideration would be on the Official Liquidator or the creditors impugning the transaction. After referring to section 531(a) of the Act in his report, the Official Liquidator stated in paragraph 8 of his report that the impugned transfer dated 18th February, 1987 was liable to be annulled or treated as void on the ground that the transaction was not made in ordinary course of business. It was also vaguely stated in paragraph 8 of the said report that the impugned transfer was fraudulent and void against the Official Liquidator pursuant to provisions of section 531(a) of the Act. By this report, the impugned transfer was not challenged in terms as fraudulent preference, but was challenged on the ground of the same being not in ordinary course of business. It was not stated in the said report that the impugned transaction was not made in good faith and for valuable consideration. 11. In paragraph 9 of his report, the Official Liquidator stated that from the sale proceeds received by the company from M/s. Monark Enterprises, the company had made payments of Rs. 1,20,000/- and Rs. 1,95,000/- to M/s. Kishinchand Co., in which the directors of the company under liquidation had an interest and Rs. 80,000/- to one Mr. Wadhoo Sakhrani. The Official Liquidator observed in paragraph 9 of his report that the said payments, according to him, amounted to preferential retrament over other creditors. The Official Liquidator sought directions from this Court on this aspect of the matter also by posing the question as to whether the Official Liquidator may take out proceedings under section 531 of the Act against the ex-directors and M/s. Kishinchand Co. and against Mr. Wadhoo Sakhrani to declare the alleged preferential payment made to them as mentioned in paragraph 9 of the report. 12. Before setting out the gist of Company Applications Nos. and against Mr. Wadhoo Sakhrani to declare the alleged preferential payment made to them as mentioned in paragraph 9 of the report. 12. Before setting out the gist of Company Applications Nos. 136 and 137 of 1991, which are being heard along with the abovereferred report, I consider it proper to grant leave to the Official Liquidator to take out separate proceedings against the ex-directors, M/s. Kishinchand Co. and Mr. Wadhoo Sakhrani in respect of his alleged grievance regarding the alleged preferential treatment of payments referred to in paragraph 9 of the said report. This question is incapable of being decided in the present proceeding and must be decided in a separate proceeding to be taken out by the Official Liquidator, of which due notice shall have to be given to M/s. Kishinchand Co. (I) and Mr. Wadhoo Sakhrani and the ex-directors. 13. On 22nd April, 1991, M/s. Monark Enterprises made an application to this Court, numbered as Company Application No. 136 of 1991, for a direction to the Official Liquidator to remove the seal put on Plot No. 10 ABCD, Government Industrial Estate, and the buildings and structures standing thereon. By prayer (b) of the said application, the applicants sought a direction against the Official Liquidator to pay to the applicants M/s. Monark Enterprises a sum of Rs. 65,000/- as monthly compensation for preventing the use of the said property by the applicants from the date of sealing thereof till the seal thereon was removed. By my order dated 22nd April, 1991, I granted leave to the applicants to take out Judge's Summons numbered as Company Application No. 136 of 1991 and granted liberty to the parties including the applicants to use the affidavits already filed in response to the report of the Official Liquidator dated 9th November, 1991. By my order dated 22nd April, 1991, I also directed that the said Application No. 136 of 1991 shall be heard along with the report of the Official Liquidator. The Official Liquidator is exhaustively heard on this application. 14. M/s. Monark Enterprises made the said application on the footing that the impugned transaction was valid and was binding on the Official Liquidator and the petitioners-workmen. 15. The Official Liquidator is exhaustively heard on this application. 14. M/s. Monark Enterprises made the said application on the footing that the impugned transaction was valid and was binding on the Official Liquidator and the petitioners-workmen. 15. On 22nd April, 1991, the petitioners-workmen made Company Application No. 137 of 1991 for a declaration that the impugned transfer of the property dated 18th February, 1987 amounted to "fraudulent transfer" within the meaning of section 531 and section 531A of the Act. By the said application, the petitioners also sought a declaration that agreement dated 18th February, 1987 entered into between the company and M/s Monark Enterprises was void ab initio. By prayer (c) of the said application, the petitioner sought a further declaration to the effect that the workmen were entitled to their legal dues as per provisions contained to the effect that the workmen were entitled to their legal dues as per provisions contained in section 529-A of the Act. By my order dated 22nd April, 1991, I granted leave to the petitioners to take out the said chamber summons and directed that the same shall also be heard along with the report of the Official Liquidator. By the said order, I granted liberty to the parties to use the affidavits already filed in response to the report of the Official Liquidator dated 9th November, 1990. 16. The Official Liquidator is heard by the Court not merely on the report dated 9th November 1990 but also on the two applications, being Company Applications Nos. 136 and 137 of 1991. All the questions of fact and law arising from these two applications and the report of the Official Liquidator pertaining to the transaction dated 18th February, 1987 are being adjudicated upon by this order except the claim for damages/compensation made by M/s Monark Enterprises. It would be an exercise in futility to grant leave to the Official Liquidator to take out one more judge summon's to impugn the transaction dated 18th February 1987. 17. In the affidavit in support of Company Application No. 137 of 1991, Shri Ramkrishna Venket, representing the workmen, impugned the said transaction dated 18th February, 1987 on various grounds. It would be an exercise in futility to grant leave to the Official Liquidator to take out one more judge summon's to impugn the transaction dated 18th February 1987. 17. In the affidavit in support of Company Application No. 137 of 1991, Shri Ramkrishna Venket, representing the workmen, impugned the said transaction dated 18th February, 1987 on various grounds. The said grounds are briefly summarised as under : (a) The impugned transaction amounted to "fraudulent preference" of one creditor in preference to other creditor within the meaning of section 531 of the Act and the same was liable to be treated as void or annulled. (b) The impugned transaction was void also under section 531-A of the Act. (c) The impugned transaction was arrived at by the company with M/s Monark Enterprises in collusion and intentionally with a view to defeat and frustrate the claim of the workmen of the company. (d) The impugned transaction was entered into by and between the company and M/s Monark Enterprises with a view to defeat the provisions of section 25FF of the Industrial Disputes Act, 1947. (e) In any event, M/s. Monark Enterprises were liable to be considered in law as a successor-in-interest of the company under liquidation and were liable to pay the dues of the workmen. The petitioners-workmen also contended that the company had no power to dispose of the asset as the workmen were liable to be treated as co-owners thereof along with the company. 18. During the course of arguments, the learned Counsel for the Official Liquidator as well as the learned Counsel for the petitioner-workmen raised additional ground to impugn the transaction in question by invoking section 537 of the Act. The applicability or non-applicability of section 536(2) of the Act shall have to be examined by the Court in due course as the said provision is an inter-connected provision of the Act. 19. Shri Mohanlal Sharma, the Official Liquidator, has filed his affidavit dated 20th August, 1991. In paragraph 20 of his affidavit, the Official Liquidator stated as under:--- I say that the entire alleged transaction of sale of goods is fraudulent. No goods appears to have been actually delivered but the entire transaction appears to be a Hawala transaction only". This stand of the Official Liquidator was in direct conflict with the limited challenge to the impugned transaction in his report dated 9th November, 1990. No goods appears to have been actually delivered but the entire transaction appears to be a Hawala transaction only". This stand of the Official Liquidator was in direct conflict with the limited challenge to the impugned transaction in his report dated 9th November, 1990. During the course of arguments, learned Counsel for the Official Liquidator also orally applied for leave of this Court to file a separate suit to impugn the decree dated 5th September, 1986 passed in favour of M/s. Monark Enterprises and against the company in Summary Suit No. 2334 of 1986. 20. The Bank of Maharashtra has supported the impugned transaction dated 18th February, 1987. The learned Counsel for the Bank of Maharashtra has also contended that the Bank of Maharashtra has acted in good faith and has obtained mortgage of the property in question from M/s Monark Enterprises for valuable consideration. 21. I have heard the learned Counsel for all the parties at some length. Written submissions have been filed. Compilations have also been filed. Some of the affidavits were taken on record subject to objection. All the affidavits filed by the parties are duly considered. I shall have to consider the various grounds of challenge to the impugned transaction while deciding a Company Applications Nos. 136 and 137 of 1991 and the connected aspect of challenge contained in the report of the Official Liquidator and his affidavit. While deciding the said proceedings which are being decided after hearing the Official Liquidator, the Court shall record its findings on the question as to whether the impugned transaction is liable to be treated as void ab initio or is liable to be annulled under sections 531, 531A 537 or 536(2) of the Act. Since these questions are being adjudicated upon on merits after hearing the Official Liquidator, while disposingof the two Judge's Summonses after hearing the Official Liquidator, the question of granting leave to the Official Liquidator to take out separate proceedings under section 531- A of the Act for annullment of the suit transaction does not arise. 22. The first question which arises for consideration of the Court is as to whether on the relevant date M/s. Monark Enterprises were bona fide creditors of the company or not. It emerges from the columinous record before the Court that during September 1984 and March 1985, M/s. Monark Enterprises supplied yarn to the company worth about Rs. 22. The first question which arises for consideration of the Court is as to whether on the relevant date M/s. Monark Enterprises were bona fide creditors of the company or not. It emerges from the columinous record before the Court that during September 1984 and March 1985, M/s. Monark Enterprises supplied yarn to the company worth about Rs. 35 lakhs. It has been proved with reference to documentary evidence before me that on several occasions, M/s. Monark Enterprises used to purchase yarn from M/s. Petrofils Co-operative Ltd. and at their instance at least in 13 cases, goods were directly delivered by M/s. Petrofils Co-operative Ltd. to the company under liquidation. The company was engaged in the business of manufacturing suitings and shirting. M/s. Monark Enterprises used to supply goods to the company on credit and had a bill discounting facility from Bank of Maharashtra as well as Dena Bank. The company used to accept bills of exchange/Hundies drawn by M/s. Monark Enterprises for purchase of goods sold and delivered payable to the Bank on expiry of the credit period of 60 days. It emerges from the record that the company had honoured several such Hundies and had made payment of Rs. 17,48,762.95 to M/s. Monark Enterprises during the period from September 1984 to 20th March, 1985. M/s. Monark Enterprises have offered to produced their audited books of accounts. The company made part payment of Rs. 2,84,047.95 to M/s. Monark Enterprises by varius cheques in respect of balance of the bills supported by Hundies, which were duly encashed by the company. M/s. Monark Enterprises have not merely produce copies of the invoices, delivery challans and bills of exchange duly accepted by the company during the course of years and copies of their audited profit and loss account and balance-sheet for the period ended 30th September, 1985, and 30th September, 1986, but have also have also produced other unimpeachable evidence on this aspect. Messrs Monark Enterprises have filed a compilation of documents to prove that they were bona fide lawful creditors for the amounts claimed by them in the abovereferred Summary suit in which the decree was passed by this Court. Messrs Monark Enterprises have filed a compilation of documents to prove that they were bona fide lawful creditors for the amounts claimed by them in the abovereferred Summary suit in which the decree was passed by this Court. Since the Official Liquidator has taken courage to describe the transactions as Hawala transaction and "probably collusive transaction", to use his own words from his affidavit, detailed reference will have to be made to the documentary evidence produced by M/s. Monark Enterprises at least to some extent. 23. By a letter dated 3rd August, 1985, Bank of Maharashtra informed M/s. Monark Enterprises that a sum of Rs. 14.63 lakhs was overdue for payment since February 1985. It was stated in the said letter that if the said amount was not paid within a short time, the Bank will be constrained to proceed legally against M/s. Monark Enterprises as well as against M/s. Kishco Mills Pvt. Ltd. M/s. Kichco Mills Pvt. Ltd. had accepted the Hundies. The Bank of Maharashtra discounted the said Hundies. Some of these Hundies were honoured and some were not honoured. Thus it is clear from the said letter dated 3rd August, 1985 that both M/s Monark Enterprises as well as M/s. Kishco Mills Pvt. Ltd. were jointly and severally liable to pay the above referred amount to Bank of Maharashtra. It is also clear from the said letter that M/s. Monark Enterprises were also entitled to recover the amount for price of goods sold and delivered from M/s. Kishco Mills Pvt. Ltd. 24. M/s. Monark Enterprises have also produced copies of three certificates to noting and protest dated 21st July, 1986 issued by M/s. Phadke Co. certifying that some of the relevant Hundies were not honoured by the company which is now under liquidation. From the audited accounts (profit and loss account as well as balance-sheet) of M/s. Monark Enterprises for the period ended 30th September, 1985, it appears that a sum of Rs. 18,01, 101.50 is shown to be due and payable by "Sundry Debtors" to M/s. Monark Enterprises and a sum of Rs. 16,76,937.50 was obtained by the said firm from the Bank on account of Bill discounting facility. Similar picture emerges from the audited balance sheet and profit and loss account of M/s Monark Enterprises for the period ended 30th September, 1986. 16,76,937.50 was obtained by the said firm from the Bank on account of Bill discounting facility. Similar picture emerges from the audited balance sheet and profit and loss account of M/s Monark Enterprises for the period ended 30th September, 1986. From the said balance-sheet it also appears that M/s Monark Enterprises had a turn over of Rs. 1,22,22,254.16 on account of sales for the period ended 30th September, 1985 and it had purchased goods from various parties valued at Rs.1,18,90,897.36. The balance-sheets of the said firm for the period ended 30th September, 1986 shows that the said firm had dealings with Orkay Silk Mills, Morarji Mills, Simplex Mills and various other parties. The Bank of Maharashtra has by its letter dated 25th February, 1987 addressed to M/s. Monark Enterprises confirmed that as on 15th February, 1987, the bills of exchange returned unpaid by the "company" i.e., Kishco Mills Pvt. Ltd. were for Rs. 13,47,773.50 and the company was also liable to pay interest from the respective due dates for the period upto 15th February, 1987 in sum of Rs. 4,95,105.55. It has also been averred in the affidavits filed on behalf of M/s. Monark Enterprises that sales tax was duly paid on all these transactions. The question which I have to ask myself is as to whether there is any material whatsoever are hard to justify the extreme contention raised by the Official Liquidator in paragraph 20 of his affidavit to the effect that no goods were delivered at all by M/s. Monark Enterprises to the company under liquidation and the transactions appeared to him to be Hawala transactions. 25. It has been pointed out by the learned Counsel on behalf of the Official Liquidator that the duplicate of the invoices forming part of the compilation do not show the order members. It has been pointed out by the learned Counsel for the Official Liquidator that some of the delivery challans show that the goods in question are supposed to have been delivered on Sunday. It has been pointed out by the learned Counsel that Shri Ravi Nariman, Executive Director/Managing Director of Kishco Mills, himself is supposed to have signed on the duplicate of the invoices and delivery challans which would create suspicion in the mind of any reasonable person as more than 400 employees were on the pay roll of the company at the relevant time. It has also been pointed out that in some of the delivery challans the address given is not the factory address. The alleged discrepancies have been well replied in the affidavits filed on behalf of M/s. Monark Enterprises. Since every single Hundi/Bill of Exchange was to be discounted by M/s. Monark Enterprises with Bank of Maharashtra or with Dena Bank, as the case may be, it was a condition stipulated by the bankers that the basic documents like duplicate of the invoices and delivery challans should be signed by the Executive Director of the company. In my judgement, the submissions made on behalf of the Official Liquidator and the petitioning workmen can be reasonably described as speculative arguments having no legal foundation for the submission that the goods in question must not have been delivered by M/s. Monark Enterprises to the company and the decretal claim was a ficititious claim. The company did receive goods from Petrofils Corporation Ltd. The company did honour large number of Hundies. M/s. Monark Enterprises did pay sales tax of all these goods. Audited accounts of the firm for the period ended 30th September, 1985 and 30th September, 1986 clearly prove the case of M/s. Monark Enterprises and the company. Even the ledger book of the company for the year 1985 supports the transaction. The company has not produced all the books of accounts and all the records for reasons which may or may not be satisfactory. It does not follow therefrom that very large number of documents and audited accounts of M/s. Monark Enterprises duly supported by nationalised Banks should be disregarded by the Court. Having regard to the overwhelming documentary evidence produced by M/s. Monark Enterprises duly supported by the Bank of Maharashtra and also the ledger book of the company though not all the books, it is not possible to accept the ipse dixit of the Official Liquidator and hold that no goods might have been supplied by M/s Monark Enterprises to the company under liquidation. Supplies were made by M/s Monark Enterprises to the company from the month of September 1984 when no one contemplated that the company would wound up at a subsequent date. The factory of the company did work at least upto July 1986. Supplies were made by M/s Monark Enterprises to the company from the month of September 1984 when no one contemplated that the company would wound up at a subsequent date. The factory of the company did work at least upto July 1986. Even if M/s. Monark Enterprise would not have taken any legal action against the company under liquidation, the Bank of Maharashtra would have been entitled to take action against the company under liquidation for recovery of almost the same amount as the company had already accepted each one of the bills of exchange/Hundies in question and had dishonoured the same. The Negotiable Instruments Act raises statutory presumption of consideraion in respect of such instruments and such presumption is required to be rebutted by the party assailing the same by producing cogent evidence and not merely by attempting to create some sort of suspicion with the help of so-called minor discrepancies. In any event, the alleged discrepancies lose significance when viewed in context of overwhelming documentary evidence produced by M/s. Monark Enterprises to prove their bona fides. 26. On or about 20th August, 1986, M/s. Monark Enterprises filed against Kishco Mills Pvt. Ltd. Suit. No. 2334 of 1986 for recovery of Rs. 20,76,056.40 and interest at 19 1/2% per annum on the principal amount of Rs. 16,17,223,55 from the date of filing of the suit and cost of the suit. I have gone through copy of the plaint in the said suit. It appears from the detailed annexures to the plaint that the company was liable to pay amount of suit claim to the plaintiffs therein on account of the unpaid bills of exchange i.e., a sum of---Rs. 16,47,566.45 in respect of unpaid Hundies drawn in favour of Bank of Maharashtra in consideration of the goods supplied by M/s. Monark Enterprises to the company. It appears that the company was also liable to pay a sum of Rs.2,39,899.65 in respect of unpaid Hundies drawn in favour of Dena Bank and a further sum of Rs. 1,88,590.30 to M/s. Monark Enterprises in respect of transactions referred to in the plaint. It appears from the plaint that the plaintiffs had filed to enforce unpaid hundies but was filed the said suit on the basis of confirmation of accounts and confirmation of liability duly signed by Shri Ravi Nariman, Executive Director of the company under liquidation. 1,88,590.30 to M/s. Monark Enterprises in respect of transactions referred to in the plaint. It appears from the plaint that the plaintiffs had filed to enforce unpaid hundies but was filed the said suit on the basis of confirmation of accounts and confirmation of liability duly signed by Shri Ravi Nariman, Executive Director of the company under liquidation. It has been contended by the learned Counsel for the Official Liquidator that the said suit was not filed for price of goods sold and delivered. Each of the unpaid Hundies was discounted by M/s. Monark Enterprises. M/s. Monark Enterprises were entitled in law to recover the said amount from M/s. Kishco Mills Ltd. The Banks concerned were also entitled in law to recover the said amount from M/s. Kishco Mills Pvt. Ltd. and M/s. Monark Enterprises jointly and severally. There could not be double recovery of the said amounts and there has been none. Parties obtained consent decree in the said suit and provided for payment of decretal dues by instalmets. 27. The impugned transaction is of 18th February, 1987. By a letter dated 3rd August, 1985, much prior to the impugned transaction,The Bank of Maharashtra had already called upon M/s. Monark Enterprises to pay Rs. 14.63 lakhs with overdue interest threatening to take legal proceedings both against M/s. Monark Enterprises as well as against M/s. Kishco Mill Pvt. Ltd. If such an undisputed and indisputable liability was acknowledged by the company and a Summary Suit was filed by M/s. Monark Enterprises on 20th of August, 1986 on the basis thereof, I cannot infer any dishonesty or collusion on the part of M/s. Monark Enterprises or on the part of the company merely because a consent decree was obtained by the parties in the said suit on 5th September, 1986 in respect of a claim which, is shown to be bona fide and legitimate. Under the said consent decree dated 5th September, 1986, the amount was made payable by the company by instalments of Rs. 1.50 lakhs per month. In absence of the said consent arrangement, the entire amount would have been recovered perhaps at one stretch without any facility of instalment. If the Banks concerned would have filed suits against the company to recover the amounts payable in respect of unpaid Hundies, the company would have no valid defence to the claim. 28. 1.50 lakhs per month. In absence of the said consent arrangement, the entire amount would have been recovered perhaps at one stretch without any facility of instalment. If the Banks concerned would have filed suits against the company to recover the amounts payable in respect of unpaid Hundies, the company would have no valid defence to the claim. 28. It has come on record that at one stage the company was intending to mortgage Plot No. 10 and the structures situate at Government Industrial Estate in favour of Bank of Maharashtra and it had even applied for requisite permission to the Collector of Bombay for the said purpose. In respect of the same very transaction, the company was liable to pay the amount of the claim to the Banks concerned and to M/s. Monark Enterprises and either of the creditors could take legal steps against the company to-recover the amount. At all material times, the Bank of Maharashtra and M/s. Monark Enterprises were jointly and severally entitled to recover large amounts from M/s. Kishco Mills Pvt. Ltd. and all these creditors were exerting lawful pressure on the company for payment of the amounts as was lawfully due and payable by the company to them. In this view of the matter, I have no hesitation in holding that M/s. Monark Enterprises were bona fide lawful creditors of the company under liquidation under the decree dated 5th September, 1986 until 18th February, 1987. No prima facie case is made out for assailing the decree itself or to justify the contention that the decree was obtained by M/s. Monark Enterprises against the company in respect of a ficitious claim. There are two more aspects which deserve to be dealt with before I wind up the discussion on this question. 29. The learned Counsel for the Official Liquidator has rightly commented on the books of accounts of the company under liquidation. The learned Counsel for the Official Liquidator has also tendered a copy of the statement of affairs filed by Shri Ravi Nariman as ex-director with the Official Liquidator. It has been pointed out from the said statement of affairs that the company is still supposed to continue to be liable to pay a sum exceeding Rs. The learned Counsel for the Official Liquidator has also tendered a copy of the statement of affairs filed by Shri Ravi Nariman as ex-director with the Official Liquidator. It has been pointed out from the said statement of affairs that the company is still supposed to continue to be liable to pay a sum exceeding Rs. 10 lakhs form Messers Monark Enterprises, when according to M/s. Monark Enterprises, no amount is outstanding in view of the adjustment made of the decretal claim against the sale price fixed under the agreement dated 18th February, 1987. It appears to me that the conduct of Shri Ravi Nariman, Managing Director or Executive Director of the company under liquidation is blameworthy. The question which I have to ask myself is as to whether my finding on the question as to whether adverse inference should be drawn against M/s. Monark Enterprises for non-production of all the books of accounts or unsatisfactory books of account by the company under liquidation or for filing of a suspicious statement of affairs by Shri Ravi Nariman with the Official Liquidator. I am afraid I cannot do so unless I can discover collusion, cospiracy or fraud on the part of M/s. Monark Enterprises. 30. The next question which arises for consideration of the Court is as to whether the impugned transaction is liable to be treated as a "fradulent preference" within meaning of section 531(1) of the Act. Shri S.D. Puri, the learned Counsel for the petitioners, submitted that every transaction of transfer of property effected within six months before the commencement of the winding up of the company without anything more is liable to be treated as fradulent preference within the meaning of section 531(1) and nothing more need be investigated once it is shown that the impugned transaction was effected within six months prior to 12th August, 1987 when the winding up petition herein was filed. Shri Puri submitted that admittedly the date of the impugned transaction was 18th February, 1987 i.e., within six months prior to filling of the winding up petition and this fact by itself was sufficient to nullify the transaction. It is not possible to accept this interpretation of section 531 (1) of the Act. Shri Puri submitted that admittedly the date of the impugned transaction was 18th February, 1987 i.e., within six months prior to filling of the winding up petition and this fact by itself was sufficient to nullify the transaction. It is not possible to accept this interpretation of section 531 (1) of the Act. If the transaction of transfer amounts to a fraudulent preference under the Bankruptcy Law or Insolvency Law and if it is entered into within a period of six months prior to the commencement of winding up, then alone the transaction in question can be treated as void under section 531(1) of the Act or otherwise. It appears to me to be well settled that the Law does not presume the transaction to be a fraudulent preference merely because it was entered into within a period of six months prior to the commencement of winding up. In my humble view, no authority is required to support the above proposition of law. 31. The next question which arises is as to whether the company had entered into the transaction dated 18th February, 1987 with M/s. Monark Enterprises with a view to preferring one creditor to another creditor and that too fraudulently. The question which arises for consideration of the Court is as to whether the company entered into the said transaction as a result of lawful pressure exercised by M/s. Monark Enterprises to recover its legitimate dues forthwith. It is well settled that if the transaction was entered into as a result of lawful pressure of a bona fide creditor to recover his dues, the transaction of transfer could not be treated as fraudulent preference. Another connected aspect of the same question is as to whether the company entered into the said transaction to save its own skin for its own benefit in the circumstances then prevailing or whether the dominant motive of the company in effecting the said transaction was to favour one creditor to another. 32. By its letter dated 3rd August, 1985, Bank of Maharashtra had already threatened in writing to the effect that it would adopt legal proceedings both against M/s. Monark Enterprises as well as against "the company" if the sum of Rs. 14.63 lakhs with overdue interest remaine unpaid. The threat of legal proceedings was an imminent threat. 32. By its letter dated 3rd August, 1985, Bank of Maharashtra had already threatened in writing to the effect that it would adopt legal proceedings both against M/s. Monark Enterprises as well as against "the company" if the sum of Rs. 14.63 lakhs with overdue interest remaine unpaid. The threat of legal proceedings was an imminent threat. It is an admitted fact that the company did not pay the decretal instalment which had fallen due from 1st November, 1986. By reason of the default clause provided in the consent terms, M/s. Monark Enterprises were entitled to execute the decree or present a winding up petition against the company or resort to such other legal remedies as were available to them under the law. The prospect of further legal proceedings by M/s. Monark Enterprises against the company to recover the decretal dues was too obvious. Reasonable inferences can be easily drawn if required. The Court must endeavour to take a view cosistent with common sense and ordinary course of human conduct. It is obvious to me that the impugned transaction dated 18th February, 1987 was entered into by and between the company with M/s. Monark Enterprises after hard bargaining not with a view to preferring one creditor to another creditor but in view of lawful pressure exercised by M/s. Monark Enterprises on the company. The learned Counsel for M/s. Monark Enterprises filed a compilation of judments and passages from various text books on the subject. I do not propose to deal with all the cases included in the compilation though I have considered all the cases cited by the learned Counsel for all the parties. I propose to refer to only one case to justify the approach of the Court to the problem under consideration. (In re Maneck chowk and Ahmedabad Mfg. Ltd.)1, (1970) 40 Company Cases, 819 at 847, D.A. Desai, J. (as, His Lordship then was) of High Court of Gujarat summed up the legal principal applicable in such situation in his inimitable style, after referring to the judgement of the House of Lords in (Sharp Official Liquidator v. Jackson)2, (1899) A.C. 419. The High Court of Gujarat observed that if the transaction was done not with a view to prefer one of the creditors but to save one's own skin, the transfer could not in such circumstances be treated as a fraudulent preference. The High Court of Gujarat observed that if the transaction was done not with a view to prefer one of the creditors but to save one's own skin, the transfer could not in such circumstances be treated as a fraudulent preference. After referring to a passage from Buckley on the Companies Act, 13th Edition (1957), the learned Judge observed that the expression 'preference' implied selection and selection implied freedom of choice. The learned Judge observed that a payment, in order to constitute a preference, must be voluntarily made, and that payment made under pressure e.g. in context of proceedings actual or threatened by the creditor concerned, or fear of such proceedings, could not be considered as a fraudulent preference under the company law. In the instant case, the facts are quite eloquent. The learned Counsel for Official Liquidator and the petitioners have submitted that M/s. Monark Enterprises had not issued any notice to the company to the effect that it would execute the decree in view of the default committed. No such notice need be actually issued. Since M/s. Monark Enterprises were receiving threatening letters from the Bank of Maharashtra, M/s. Monark Enterprises must have threatened the company to pay its dues as the primary liability in respect of unpaid Hundies executed by the company for the price of goods sold and delivered by M/s. Enterprises to the company was of the company and M/s. Monark Enterprises were facing threats from the Bank of Maharashtra mainly because of the company having defaulted in respect of its obligation to discharge its liability to pay the amount in question. 33. Paragraphs 908, 909, 913, 914, 915, 918 and 920 of Halsbury's Laws of England, Volume 2, 4th Edition, set out the statement of law on the subject of fraudulent preference neatly and clearly. The principles of law operating in the field of bankruptcy/insolvency law are imported into the Companies Act. In order that a transaction may be set aside as a fraudulent preference it is necessary to prove that it was carried out with the view, that is to say, the principal or dominant view, of giving the creditor, a preference over the other creditors. Paragraph 914 of the said volume formulates the statement of law on the subject of test to be applied in following words. 914. Paragraph 914 of the said volume formulates the statement of law on the subject of test to be applied in following words. 914. Test to be applied---In order to ascertain whether the giving of a preference was the principal or dominant view in the debtor's mind, the test to be applied is: was the act done voluntarily?..." Paragraph 915 of the said volume summarises the statement of law to the effect that the pressure by the creditor negatived fraudulent preference; that the pressure must be real, the debtor must have some genuine apprehension, the transaction must have been entered into by reason of it. The said paragraph further states as under :--- "The pressure need not be a threat of legal proceedings; there need not even be an immediate power of taking proceedings, but where proceedings have been threatened or where the debtor believes, even erroneously, that proceedings are about to be taken, the case in favour of the validity of the transaction is all the stronger. ...." I am satisfied that in the instant case the possibility of immediate execution of decree by M/s. Monark Enterprises coupled with the lawful pressure by the Bank of Maharashtra constituted the immediate cause of the settlement culminating into transaction dated 17th February, 1987 and the intention of the company to enter into the said transaction was to salvage the situation as far as possible and not to preferring one creditor over another. 34. In this view of the matter, I hold that the impugned transaction is not vitiated under section 531 of the Act. 35. Before I consider the next ground of challenge to the impugned transaction based on section 531-A of the Act, it is necessary to state some more facts in respect of the indenture of lease pertaining to Plot No. 10 between the Collector of Bombay and Kishco Mills Co. Pvt. Ltd., and also the correspondence which followed on execution of the agreement dated 18th February, 1987:- (a) On 11th January, 1983, the Additional Collector of Bombay had executed an indenture of lease in respect of plot No.10, Government Industrial Estate Kandivli, in favour of the company for the term of 30 years ending on 22nd October, 1991. The period of the lease has now expired. The period of the lease has now expired. It is beyond my comprehension as to how the creditors would be able to auction the leasehold rights which have come to an end particularly when the Collector has recognised M/s. Monark Enterprises as a lessee of the property since 18th February, 1987 in view of his letter of sanction dated 14th September, 1987 after according No objection, approval or sanction of several other statutory authorities. The said indenture of lease imposed an obligation on the company to pay the amount of stipulated rent regularly and in advance. The said indenture of lease provided for revision of rent. Clause X of the said indenture of lease provided that the lessee shall not at any time assign or underlet the said plot or any part thereof or transfer his rights or interest therein to anybody without the previous consent in writing of the Collector. Clause X of the said indenture of lease permitted the Collector to impose condition while granting sanction requiring the lessee to pay to the Government half of the unearned increment etc. Clause XI of the said indenture of lease empowered the Government to issue forfeiture notices on the lessee in case the lessee failed to observe any of the conditions of the lease or failed to pay the rent. The said clause provided that on such forfeiture notices being served, it shall be lawful to the Collector to enter by the lessee. Clause XII provided for renewal of the said lease in discretion of the Government , provided the lease was not forfeited under the preceding clauses of the said indenture of lease. (b) By the impugned agreement dated 18th February, 1987, the company had agreed to assign its leasehold rights in the said plot and structures to M/s. Monark Enterprises for an aggregate consideration of Rs. 32,74,294/-. The said agreement clearly provides as to how the said amount was to be paid and/or adjusted. The said agreement provided that the decretal claim of a sum of Rs. 22,29,847.70 was adjusted as part payment against the obligation of M/s. Monark Enterprises to pay the above amount. 32,74,294/-. The said agreement clearly provides as to how the said amount was to be paid and/or adjusted. The said agreement provided that the decretal claim of a sum of Rs. 22,29,847.70 was adjusted as part payment against the obligation of M/s. Monark Enterprises to pay the above amount. Under the said agreement, M/s. Monark Enterprises agreed to discharges various liabilities on account of the company, like income tax liabilities, liability to pay various amounts to the Collector of Bombay, increment arrears of rent, occupancy charges, liability to Bombay Suburban Electric Supply Ltd. etc. The said agreement provided that M/s. Monark Enterprises shall pay the balance of the amount to the company. By Clause 6 of the said agreement, it was provided that all the outgoings by way of lease rent, municipal taxes in respect of the said plot and the structures thereon from the date thereof i.e., from 18th February, 1987 shall be borne and paid by M/s. Monark Enterprises from the date of the said agreement. Prior to entering into the said transaction dated 18th February, 1987, the Additional Collector of Bombay and the Tahsildar had issued several notices of demand to the company on account of arrears, including forfeiture notices, as a result whereof, in all probability, the company had incurred liability to forfeiture of the plot and structures unless the forfeiture notices were waived. (c) Prior to execution of the said agreement, the company had executed a solemn declaration before a Notary Public i.e. Shri Diwanji, It has been stated on affidavit, and it is believable, that M/s. Monark Enterprises had caused search to be taken in respect of the title of the company to the plot by engaging services of professional experts. By a letter dated 18th February, 1987, the company had recorded that M/s. Monark Enterprises were placed in actual possession of the said property on that very day. Joint application was made on the same day both by the transferor and transferee to the Additional Collector, Bombay Suburban District, for his sanction and/or permission to the said transaction. By a letter dated 3rd March, 1987, the Additional Collector of Bombay made a reference to the Director of Industries in that behalf. Correspondence ensued. In the meanwhile, M/s. Monark Enterprises discharged certain liabilities and made certain payments on account of the said transaction. By a letter dated 3rd March, 1987, the Additional Collector of Bombay made a reference to the Director of Industries in that behalf. Correspondence ensued. In the meanwhile, M/s. Monark Enterprises discharged certain liabilities and made certain payments on account of the said transaction. M/s. Monark Enterprises obtained some of the Bank drafts from the Bank of Maharashtra for purpose of implementation of the said transaction. (d) On 24th July, 1987, a meeting was held of the Secretaries of the Government at which the said transaction was discussed. (e) By letter dated 3rd September, 1987, the Director of Industries informed his views to the Additional Collector to the effect that the Directorate will be in a position to grant No Objection Certificate to M/s. Monark Enterprises, provided the leasehold rights in respect of the said plot were transferred in the name of M/s. Monark Enterprises by the Collector of Bombay. (f) Ultimately on 14th September, 1987, the Additional Collector of Bombay, informed the company that the company was allowed to transfer the said leasehold right in respect of the said plot and the structures on the condition set out therein. On 24th September, 1987. M/s. Monark Enterprises deposited a sum of Rs. 3,38,000/- with the Additional Collector of Bombay as required by him, by a pay order obtained from the Bank of Maharashtra. By a letter dated 19th October, 1987, the Additional Collector informed M/s. Monark Enterprises that in view of the said deposit having been made and in view of compliance with conditions Nos. 5 and 8 of letter dated 14th September, 1987, the leasehold rights in respect of the said plot along with the factory building constructed thereon were transferred to the name of M/s Monark Enterprises. It was stated in the said letter that the Sanad will have to executed in due course and till the Sanad was executed the conditions prescribed by the lease agreement shall bind M/s. Monark Enterprises. M/s. Monark Enterprises have given breakup of the amounts paid by it to the various authorities and the company under liquidation the after adjusting the decretal amount so as to show that it has already paid the consideration amount to the transferor. M/s. Monark Enterprises also executed undertaking in favour of the Additional Collector to the effect that if any additional amount was payable, it would pay the same. M/s. Monark Enterprises also executed undertaking in favour of the Additional Collector to the effect that if any additional amount was payable, it would pay the same. If the lessor recognizes the proposed transferee as a lessee, the transaction of transfer of lease is not invalidated merely because of registered conveyance having not been executed by the original lessor. At any rate, this aspect is not germane for the purpose of considering the question of "good faith" and "valuable consideration" in respect of the impugned transaction. 36. The net picture which emerges from the narration of the above facts is as under :--- (a) On 18th February, 1987, the company had made a firm commitment and had entered into a binding contract to transfer the said plot along with structures in favour of M/s. Monark Enterprises for valuable consideration and the said transaction was entered into by and between the parties thereto in good faith. The said transaction could be finally implemented only after the necessary permission was obtained from the Additional Collector of Bombay in respect of the said transaction and only after No objection Certificate was issued by the Appropriate Authority under the relevant provision of the Income-tax Act, 1961. 'No Objection Certificate' was issued by the appropriate authority under the Income-tax Act, 1961 on 5th May, 1991. The Income-Tax Act, 1961. Permission or No Objection Certificate was also obtained by the parties from the Directorate of Industries and the authority under the Urban Land (Ceiling and Regulation) Act. The transaction was entered into with aid of Advocate after taking search, investigating title and executing of declaration and was implemented after several statutory authorities approved and/or sanctioned the same, much before the passing of winding up order. (b) The said transaction was finally completed on 14th September, 1987 on issue of letter of sanction by the Collector of Bombay or on issue of letter dated 19th October, 1987 by the Collector after all the amounts required to be deposited were deposited by M/s. Monark Enterprises and necessary undertakings to further amounts what ever payable were filed. The Additional Collector of Bombay has sanctioned the transfer of leasehold rights in land and structures both presumably because the forfeiture notices were also issued to the company by the Collector and in absence of waiver thereof, the Collector would have taken charge of Plot No. 10 along with the structures thereon. The Additional Collector of Bombay has sanctioned the transfer of leasehold rights in land and structures both presumably because the forfeiture notices were also issued to the company by the Collector and in absence of waiver thereof, the Collector would have taken charge of Plot No. 10 along with the structures thereon. Such a transaction could be completed also by obtaining a letter of sanction from the Collector of Bombay approving the transaction and treated M/s. Monark Enterprises as lessee in place of the company and his promise to execute 'Sanad' in due course. (c) In its letter dated 12th August, 1985 addressed to the Additional Collector, the company stated that the company was entitled to recover very large amount of dues from its upcountry customers in Punjab and it was only in temporary financial difficulties. The company has shown in its last balance sheet that it had to recover more than Rs.1 crore from its creditors. All these statements made by Shri Ravi Nariman on behalf of the company may be true of false but the third party like M/s. Monark Enterprises or the Bank of Maharashtra cannot be affected in respect of transactions entered into in good faith and for valuable consideration. In matters of this kind, the Court has to address itself also to the question as to whether the conduct of the transferee was proved to be blameworthy, so as to vitiate the transaction. (d) On 16th October, 1987, M/s. Monark Enterprises made an application to the Additional Collector of Bombay for permission to create a mortgage in respect of the same plot and structures in favour of the Bank of Maharashtra. An application was also made by the parties concerned to the Collector of Bombay to cancel the permission which was already granted the Collector which was already granted to the company on 2nd February, 1987 to create mortgage of the said plot and structures by the company in favour of the Bank of Maharashtra. A deed of mortgage was executed by M/s. Monark Enterprises in favour of the Bank of Maharashtra on 24th September, 1987. The Additional Collector of Bombay granted his permission to create the said mortgage by his letter dated 19th October, 1987. The said permission cures the alleged defect, if any, in creation of the mortgage in favour of the Bank of Maharashtra on 24th September, 1987. The Additional Collector of Bombay granted his permission to create the said mortgage by his letter dated 19th October, 1987. The said permission cures the alleged defect, if any, in creation of the mortgage in favour of the Bank of Maharashtra on 24th September, 1987. and the said mortgage binds the Collector of Bombay and all the parties to the deed of mortgage. (e) Till 16th October, 1987, Shri Ravi Nariman of the company was a consenting party to the transaction dated 18th February, 1987. The company had received the amounts stipulated under the contract dated 18th February, 1987. As a matter of fact, joint application was made to the Collector of Bombay to effect transfer of the leasehold rights in favour of M/s. Monark Enterprises as far back as on 18th February, 1987. It is unfortunate that Shri Ravi Nariman developed an afterthought and tried to back out of the transaction. By its letters dated 16th October, 1987 and 12th November, 1987, the company wrote to the Collector that no transfer should be effected in the record of the Collector in favour of M/s. Monark Enterprises in respect of the said Plot No.10 and structures thereon unless a no objection letter was issued by the company thereafter. Several allegations were made in these letters. To my mind, it was improper on the part of Shri Ravi Nariman to do so. The Additional Collector of Bombay by his letter dated 4th November, 1987 informed the company and its Executive Director Shri Ravi Nariman that the transfer in question was already effected by the Collector and it was lawfully effected in pursuance of the request received from the original lessor itself. By the said letter, the Additional Collector of Bombay informed the company that the decision to effect the transfer was taken by the Collector as far back as on 14th September, 1987 and the said decision was already communicated to M/s. Monark Enterprises. It shall have therefore to be held that Shri Ravi Nariman acted unreasonably and illegally by attempting to back out from the transaction duly executed, completed implemented after receiving all the benefits thereunder. It shall have therefore to be held that Shri Ravi Nariman acted unreasonably and illegally by attempting to back out from the transaction duly executed, completed implemented after receiving all the benefits thereunder. When the Official Liquidator called upon the company to give an explanation in respect of the transaction dated 18th February, 1987 propounded by M/s. Monark Enterprises on 16th January, 1989 the company under the signature of Shri Ravi Nariman informed the Official Liquidator that merely an agreement was entered into between the company and M/s. Monark Enterprises and the said agreement was entered into subject to an understanding that M/s. Monark Enterprises will be liable to pay all the dues of the workmen. The ex-Directors of the company have given up the stand taken in the said letter dated 16th January, 1989 and the above referred letters to the Addl. Collector Bombay. In my opinion, the said letter dated 16th January, 1989 does not represent the truth and is in conflict with plain provisions of written agreement dated 18th February, 1987 which was duly acted upon by the parties at the material time. I can attach no conflict with plain provisions of written agreement dated 18th February, 1987 which was duly acted upon by the parties at the material time. I can attach no importance to the letter dated 16th January, 1989 addressed by the company to the Official Liquidator or to letters dated 16th October, 1987 and 12th November, 1987 addressed by the company to the Additional Collector of Bombay as the said letters are in nature of an afterthought and are in conflict with reliable documentary evidence executed between the parties at the relevant time. 37. It has been contended by Mr. Puri that the properties are worth crores of rupees. Prima facie, there is no material of any nature whatsoever to indicate that the transaction is undervalued. The impugned transaction was cleared by Income Tax Department. In absence of any reliable material and it, view of the detailed particulars set out in the affidavit dated 7th September, 1991 and reference to the book value of the asset reflected in balance sheet of the company, I hold that this allegation is not at all proved. Prima facie, the transaction was entered into in good faith and for valuable consideration. 38. Prima facie, the transaction was entered into in good faith and for valuable consideration. 38. It has been argued by the learned Counsel for the Official Liquidator as well as by the learned Counsel for the petitioners-workmen that M/s. Monark Enterprises must have been aware of the circumstances indicating virtual bankruptcy of the company on the date of transaction and the impugned transaction shall have to be scrutinised in context of insolvent position of the company on the date of the transaction to the knowledge of M/s. Monark Enterprises M/s. Monark Enterprises deny that it had knowledge of so called alleged bankruptcy of the company on 18th February, 1987. The learned Counsel for the Official Liquidator and the petitioners-workmen have emphasised that the Court Receiver appointed in the suit of the Central Bank had already taken charge of Plot No. 7A and the machinery and if M/s. Monark Enterprises would have taken due care and caution and made responsible enquiries in the matter, they would have definitely come to the conclusion that the transferor was in embarassed circumstances. Before I analyse this submission, I consider it necessary to refer to the leading judgement of the Supreme Court indicating the approach which the Court is enjoined to follow in cases of this kind. In the case of (N. Subramania Iyer v. Official Receiver)3, A.I.R. 1958 S.C.1, the Apex Court dealt with identical question under Insolvency legislation. It was held by the Apex Court that the burden of proof was entirely on the Official Liquidator who impugned the transaction of transfer. In paragraph 10 of his judgment, Sinha, J., speaking for the Bench of the Hon'ble Supreme Court, observed that it was not necessary for upholding of the transaction that the transferor who had been subsequently adjudged an insolvent should have been honest and straight forward in the matter of the transaction impeached. It was observed in paragraph 11 of the said judgment that both the transferor and the transferee must have shared common intention to defraud the creditors. It was held that unless the conduct of the transferee was blameworthy, the transaction could not be annulled. In that case, the High Court had accepted the submission of the Official Liquidator who represented the estate of the insolvent that the burden of proof was on the transferee to prove that the transition was bona fide. It was held that unless the conduct of the transferee was blameworthy, the transaction could not be annulled. In that case, the High Court had accepted the submission of the Official Liquidator who represented the estate of the insolvent that the burden of proof was on the transferee to prove that the transition was bona fide. Relying on several judgement of the Privy Council, the Apex Court negatived this proposition of law propounded in the judgement of the High Court under appeal. The definition of "good faith" in the Indian General Clauses Act (X of 1897) is in these terms: "A thing shall be deemed to be done in good faith where it is in fact done honestly, whether it is done negligently or not." The same definition of "good faith" is not adopted under the Indian Limitation Act, 1963. The definition of "good faith" as set out in the Limitation Act, 1963 states that a thing shall not be deemed to be done in good faith if not done without due care or caution. The definition of good faith as enacted in the Limitation Act was erroneously adopted in the High Court's judgement in support of its finding that the impugned transaction of transfer or usufructuary mortgage was not a transaction in good faith. The High Court held that the mortgagee had not acted with due care and caution and therefore, the transaction could not be considered to have been effected in good faith. Overruling this approach of the High Court and its ultimate decision, our Supreme Court held that the definition of "good faith" given in the Indian General Clauses Act (X of 1897) shall have to be read in all Central statutes unless some other definition was provided in the specific statute. It was therefore, held that the act of the transferee shall have to held to be have been done in good faith if it was done honestly, whether it was done negligently or without due care and caution. No definition of "good faith" is to be found in the Companies Act I of 1956. It was therefore, held that the act of the transferee shall have to held to be have been done in good faith if it was done honestly, whether it was done negligently or without due care and caution. No definition of "good faith" is to be found in the Companies Act I of 1956. Applying the ratio of this judgment to the facts of this case and their assessment and overall impact, I hold that M/s. Monark Enterprises had acted honestly in obtaining the transfer of the leasehold right in the plot in question and the structures thereon and their conduct is not blameworthy, although the conduct of the transferor is not free from doubt. It is not possible to hold that M/s. Monark Enterprises knew that the company was insolvent or that they acted in collusion or fraudulently or shared any common intention to defraud. The petitioning workmen have a valid claim. Merely because M/s. Monark Enterprises acted fraudulently or not in good faith. Having regard to totality of facts and circumstances of the case is impossible to hold that the transfers and the transferee shared the common intention other creditors or the workmen as directly or indirectly sought to be imputed to them. M/s. Monark Enterprises had supplied goods to the company. The company could have been sued also by Bank of Maharashtra as well as Dena Bank by reason of the company having accepted the Hundies for valuable consideration. In this view of the matter, I hold that the impugned transaction was entered into in good faith and for valuable consideration. The impugned transaction is not fraudulent or collusive. Accordingly I hold that the impugned transaction is not vitiated under section 531-A of the Act. The official Liquidator missed the point When he observed in paragraph 9 of his report that the said transaction could be avoided if it was not entered into in ordinary course of business. The company was a company engaged in manufacture of suitings and shirtings. To deal in real estate was not the business of the company. No one can legitimately state that the impugned transaction was entered into in ordinary course of business. But that is not all. Section 531-A of the Act provides for two contingencies. The said section saves transactions entered into in good faith and for valuable consideration thought not entered in ordinary course of business. 39. No one can legitimately state that the impugned transaction was entered into in ordinary course of business. But that is not all. Section 531-A of the Act provides for two contingencies. The said section saves transactions entered into in good faith and for valuable consideration thought not entered in ordinary course of business. 39. The learned Counsel for the Official Liquidator has highlighted two more aspects of the impugned transaction and submitted that the said transaction cannot be said to have been arrived at in good faith by reason of these suspicious features apparent on face of record. The learned Counsel has invited my attention to Clause 1(VII) of impugned agreement dated 18th February 1987 which reads as under :--- " There is no claim of the employees of the assignors on the said plot or the said building or any part thereof and there is no judgment or order from any appropriate Court or Tribunal or any Court or authority having jurisdiction in India against the said plot or the said building or any part thereof and there is no decree, order or attachment ordered or granted by any Court or authority against the said plot or the said building." Certain dues of workmen were admittedly outstanding on 18th February 1987. The learned Counsel submits that this clause in the agreement shows mala fides of the company and clearly proves that the conduct of the company and its directors entering into the impugned transaction was not straight forward. This clause merely states that the said plot or the building thereon was not encumbered by any claim of workmen or decree or order by the Court or Tribunal. The said clause does not state that no claim of workmen was pending against the company. The company is not prohibited in law from disposing of one or other of its assets in good faith and for valuable consideration merely because of substance of claim of workmen. Even if the bona fides of the transferor are to be suspected, it does not automatically follow that the transferee acted in bad faith. In my judgment, the above clause of the agreement by itself is not sufficient to invalidate the impugned transaction or warrant a finding that the transaction was not entered into in good faith and for valuable consideration. In my judgment, the above clause of the agreement by itself is not sufficient to invalidate the impugned transaction or warrant a finding that the transaction was not entered into in good faith and for valuable consideration. The Court is required to take an overall view of all the facts and circumstances. It is most unfortunate that the workmen's dues are still outstanding. However on this ground alone I am not prepared to treat the impugned transaction as void ab initio or set aside the transaction as fraudulent or otherwise illegal. 40. The second suspicious feature of the transaction, according to Mr. Cama, becomes obvious from the fact that the resolution dated 27th November 1986, purported to have been passed by the Board of Directors of the company at Plot. No. 7, Government Industrial Estate, Kandivli Bombay, could not have been so passed as the said premises were then in charge of Court Receiver and were under duly sealed by the receiver M/s. Monark Enterprises contend that they cannot throw any light on this aspect as a copy of the said resolution was furnished by Shri Ravi Nariman, managing Director of the company to them. To my mind, the validity of the impugned transaction is not affected even if no such resolution was actually passed by the Board of the company as the company has entered into and adopted the transaction throughout and implemented the same after receiving consideration therefor. The doctrine of indoor management protects the transferee and the transfers. There is nothing to show that the transferee was aware of the alleged infirmity in respect of the resolution. No director or shareholder of the company has impugned the transaction at the hearing before me. Shri Merchant, the learned Counsel for former management of the company, has endeavoured to explain the alleged discrepancy regarding the alleged venue of the Board meeting. It is not necessary to pursue this aspect further in view of there being no evidence whatsoever to prove blameworthy conduct of the transferee or any knowledge on the part of the transferee M/s . Monark Enterprises about the alleged infirmity in passing of the Board resolution. It is not necessary to pursue this aspect further in view of there being no evidence whatsoever to prove blameworthy conduct of the transferee or any knowledge on the part of the transferee M/s . Monark Enterprises about the alleged infirmity in passing of the Board resolution. Taking an overall view of all the facts and circumstances of the case, I hold that the Official Liquidator and the petitioners workmen have failed to discharge the onus to prove fraud or collusion or any other ground sufficient in law to vitiate the impugned transfer. There is no material whatsoever to show lack of good faith on part of Bank of Maharashtra in accepting the mortgage of the said property. To my mind, the transaction of mortgage dated 24th September 1987 was also entered into in good faith and for valuable consideration and the same is not affected by reason of passing of order for winding up of the company. 41. Shri Puri, the learned Counsel for the petitioners-workmen, submitted that the provisions of section 25-FF of the Industrial Disputes Act, 1947 are applicable to the present case. I am not at all impressed by this contention. Section 25-FF has no application to this case. 42. Section 537 of the Companies Act was invoked by the learned Counsel for the Official Liquidator and the petitioners-workmen as an additional ground for impeaching the transaction. Section 537 invalidates attachments, distress or execution put in force, without leave of the Court, against the estate or effects of the company, after the commencement of the winding up. Both the learned Counsel relied on section 537(1)(b) of the said Act and submitted that the expression "any sale held" would vitiate the impugned transaction as the agreement of 18th February 1987 culminated into a sale only on 14th September 1987 or 19th October 1987 when the winding up proceedings had already commenced and it was admitted that no leave of the Court was obtained. In my judgment, section 537(1)(b) of the Act has no relevance at all to the problem. The said section shall apply only to such sales which were held in pursuance of attachments, distress or execution levied by the Court or by any other competent authority. The present transaction was a voluntary transaction and not a transaction in pursuance of attachment, distress or execution put in force. The said section shall apply only to such sales which were held in pursuance of attachments, distress or execution levied by the Court or by any other competent authority. The present transaction was a voluntary transaction and not a transaction in pursuance of attachment, distress or execution put in force. In taking this view, I am supported by the judgment of the Supreme Court in the case of (M.K.. Ranganathan. v. Govt. of Madras)4 reported in A.I.R. 1955 S.C. 604. Whilst scrutinising the argument based on section 537 of the Act, I came across section 536 of the said Act. The said section clearly provides that voluntary dispositions" of the property during the relevant period shall be treated as void unless the Court otherwise validates the same. Thus all transactions effected during the relevant period prior to commencement of winding up are dealt with under section 53 and 531-A of the Act and all voluntary transactions of dispositions after the commencement of winding up are dealt with under section 5369(2) of the said Act. The matter was, therefore, placed on board inviting submissions of the learned Counsel on interpretation of section 536(2) of the Act. 43. In (estates Development Ltd)5 , 27 Company Cases, 581, the High Court of Punjab held, at page 587, that section 227(2) of the Indian Companies Act, 1913, which is para materia section 536 (2) of Companies Act I of 1956, shall have no application where a contract was already concluded prior to the commencement of the winding up and the transaction was merely completed during the period of the winding up in pursuance of such contract which was concluded prior to the commencement of winding up. In that case an auction sale was already held prior to presentation of the winding up petition. It was held by the Court that the contract, was complete in all respects and only the conveyance remained to be drawn up and completed. It was held that the transaction completed in pursuance of contract already arrived at prior to the commencement of the winding up could not be annulled under the said section. The basic principle is clear. It is necessary that section 536(2) of the Act cannot be invoked unless the transferor exercises disposing power after the commencement of winding up. It was held that the transaction completed in pursuance of contract already arrived at prior to the commencement of the winding up could not be annulled under the said section. The basic principle is clear. It is necessary that section 536(2) of the Act cannot be invoked unless the transferor exercises disposing power after the commencement of winding up. In this case, the disposing power had already been exercised by the transferor prior to the commencement of the winding up and the only thing which remained to be done was obtainment of sanctions and permissions from various authorities. Thus the transaction cannot be treated as "disposition of property" affected the commencement of the winding up. The impugned transaction is, therefore, not vitiated either under section 537 or section 536(2) of the Act. 44. On this aspect, it is useful to refer also to the judgment of Vinelott, J., of Chancery Division in (Re French's wine Bar Ltd.)6,, reported in (1987) Butterworths Company Law Cases, 499. In this case, the company had entered into a contract in October 1985 for sale of its leasehold premises, good will, fixtures and fittings and its stock-in-trade. The contract provided that the company could rescind the contract if it was unable to obtain the necessary consent to the assignment from the lessor. The purchaser was allowed to get into possession on payment of deposit in October 1985. On 5th December 1985, a petition for winding up was presented to the Court. During the pendency of this petition i.e. on 17th January 1986, the contract was completed and the lease was transferred to the purchasers and proceeds of the sale distributed to the company's Bank. An order for winding up of the company was passed on 31st January 1986. The question before the Court was as to whether the transaction was liable to be avoided under section 522 of the English Companies Act, 1985. It was held by the Court that where a company had entered into an unconditional contract for sale of the property before the petition for winding up was presented and the contract was duly completed in accordance with its terms after the petition had been presented, the transaction did not constitute a disposition of the property of the company within the meaning of the relevant provisions. The court relied on the observations made in the judgement of Buckley, J., in the case of (Re Gray's Inn Construction Co. Ltd.)7, (1980)1 All E.R. 814 at 819. The said observations are as under:--- "It is a basis concept of our law governing the liquidation of insolvent estates, whether in bankruptcy or under the Companies Act, that the free assets of the insolvent at the commencement of the liquidation shall be distributed rateably amongst the insolvent's unsecured creditors as at that date. In bankruptcy this is achieved by the relation of the trustee's title to the bankrupt's assets back to the commencement of the bankruptcy. In a company's compulsory winding up it is achieved by section 227 (That is of the 1948 Act, the predecessor of section 522)." Analysing the said observations of Buckley, L.J., Vinelott, J., felt that the company must be beneficially entitled to the assets on the relevant date and the asset must be such which is capable of being released for benefit of its creditors. 44A. In the instant case also, the contract was arrived at between the parties much before the presentation of petition for winding up and it was merely completed during the pendency of the winding up petition inasmuch as the necessary sanction of the Collector was received during that period. Prior to the presentation of winding up petition M/s. Monark Enterprises were already put in possession of the property and the said purchaser had already parted with substantial amounts in pursuance of the contract already concluded. 44B. Relying on the judgment of the High Court of Punjab in the case of Estates Development Ltd., 27 Company Cases , 581 already referred to hereinabove and the abovereferred English case, I hold that the impugned transaction is not affected by the provisions contained in section 536(2) of the Act. In substance, the company had already exercised its disposing power prior to presentation of petition for winding up and the instant case cannot be considered as a case of disposition of property effected after the presentation of winding up merely because the permission or sanction of the Collector was received in September 1987. Viewed in this perspective and taking an overall view of the matter, the impugned transaction shall have to be treated as valid as it does not suffer from any legal infirmity. 45. Mr. Viewed in this perspective and taking an overall view of the matter, the impugned transaction shall have to be treated as valid as it does not suffer from any legal infirmity. 45. Mr. Puri, the learned Counsel for the petitioners-workmen, then argued that without the workmen's consent, no transfer could be effected as the workmen are deemed to be co-owners of the Undertaking. There is no merit in this contention also. 46. In view of the above discussion, I pass the following order:--- (1) Report of the Official Liquidator dated 9th November 1990 (a) Leave is granted to the Official Liquidator to take out proceedings against the ex- Directors of M/s. Kishco Mills Pvt. Ltd. and Mr. Wadhoo Sakhrani in respect of the alleged preferential payments out of the sale proceeds received by the said M/s. Kishco Mills Pvt. Ltd. from M/s. Monark Enterprises. (b) Application of the Official Liquidator for leave to take out proceedings to impugn the transaction of 18th February 1987 is rejected in view of findings recorded and orders passed on Company Applications Nos. 136 and 137 of 1991 after hearing the Official Liquidator. (2) Company Application No. 136 of 1991. (a) Judge's Summons is made absolute in terms of prayer (a). This order shall be operative after 10th Dec., 1991 in order to enable the petitioners and the Official Liquidator to consider filing of an appeal, if so advised. (b) Prayer (b) of the Judge's Summons is adjourned for recording oral evidence. (c) Having regard to the facts and circumstances of the case, there shall be no order as to costs. (d) Since the conduct of Shri Ravi Nariman appears to be blameworthy, the Official Liquidator shall probe into the question and make a report to the learned Company Judge at the earliest possible as to whether any proceeding should be taken in the matter for alleged misfeasance or non-feasance. (di) The workmen appear to have a pari passu charge in respect of the assets belonging to the company on the date of winding up. No final opinion is expressed. (di) The workmen appear to have a pari passu charge in respect of the assets belonging to the company on the date of winding up. No final opinion is expressed. The Official Liquidator shall apply to the learned Company Judge for permission to adopt proceedings for sale of Plot No.7A after taking necessary legal advice and for return of the part of the amount already disbursed to the Central Bank from the sale proceeds of movables for benefit of the workmen who appear to have pari passu charge on these securities along with secured creditors of the company under section 529A of the Act. (e) Oral application of the Official Liquidator for leave to file a suit to challenge the decree dated 5th September 1986 is rejected. (3) Company Application No. 137 of 1991. Judge's Summons is dismissed, with no order as to costs. (4) The Central Bank of India is directed to pay to the petitioners-workmen "on account" a sum of Rs. 2,000/- without prejudice to their legal rights and contentions to enable the petitioners to file an appeal against this order, if so advised, and to meet the cost of litigation in part. Such payment shall be made on or before 25th November 1991 to the petitioners or their Advocate. (5) Cost of the official Liquidator to come out of the assets of the company in liquidation. (6) Issue of certified copy of this order is expedited. Order accordingly. -----