Atchuthan Pillai vs Fr. Cyriac J. Mattathil and Others

Kunhi Raman, C.J.—This appeal arises out of an order made by the District Court of Trivandrum in an application that was filed by the Official Liquidator of the City Bank Ltd., which had been ordered to be wound up by orders passed in M. Ps. 12 and 13 of 1114. The Official Liquidator filed the petition u/s 287 of Act 9 of 1114 the first clause of which is worded as follows:

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, a fraudulent preference of its creditors, and be invalid accordingly.

The prayer in the petition was to set aside a number of alienations which were made within the period indicated in Section 287. The petition filed by the Official Liquidator was numbered C.M.P. 3655 of 1117. There was a preliminary objection taken to the application. It was contended on behalf of the contesting Respondents, that such an application did not lie u/s 287 of the Act. This question was argued as a preliminary point and the learned Judge upheld the objection and dismissed the petition filed by the Official Liquidator.

The learned Judge referred to certain authorities in the course of his order. He winds up his order by saying as follows:

No rulings of the British Indian Courts or of our High Court were cited to show that the winding up Court was competent to go into the validity or otherwise of transfers effected by as insolvent company to one of its creditors.

We are unable to follow why the learned Judge considered that authorities were necessary for elucidating this point, when the section itself is clear in its wording. Section 287 is to be found in that part of the Act which deals with powers of the Court where winding up proceedings are pending. The Liquidator is entitled to ask for directions whenever he feels that there is a question which requires elucidation by the Court. When he is collecting assets, as he is bound to do, if a doubt arises in his mind as to whether a particular alienation should be regarded as invalid because it amounts to fraudulent preference within the meaning of Section 287, he is entitled to apply to the Court for directions and the section expressly says that certain alienations shall be deemed to be invalid. No further authority is required to enable the Court to exercise the jurisdiction vested in it by Section 287. In the Circumstances, we are constrained to set aside the order made by the Court below on the preliminary Objection raised on behalf of the contesting Respondents and to remit the petition to the lower Court for disposal according to law.

We are not expressing any opinion, since we do not feel called upon to do so at this stage, as to the consequential orders that may be passed. But so far as the question of the validity of the alienations are concerned the Court certainly is invested with power u/s 287 to declare whether the alienation is valid or invalid. For that purpose, the petition must be inquired into and a decision arrived at. The costs of this appeal shall abide and follow the result of the application.