9911796707
TMI Blog1986 (7) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant before us, alleging that the Krishna Oil Mills and Industries Ltd., a public limited company registered under the Indian Companies Act, 1913, was carrying on business in the manufacture and sale of tin cans and aerated water. It entered into a partnership in September, 1952, with Rajeswari and Co., which was carrying on business in the pressing of cotton bales. Under the partnership agreement, Rajeswari & Co. was to install a cotton baling press in the buildings of the company and the business would be carried on under the name Rajapalayam Cotton Pressing Factory, with the profits being divided between the company and Rajeswari & Co. in the ratio of 7 to 9, respectively. This was replaced by another agreement in 1954, but the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elations and friends of the directors of the company. In the result, there was nothing left for paying off the tax arrears of the company. The suit was resisted by the company, which in its written statement, admitted that it was working at a loss for some years and was obliged to replace its original business of seed crushing and oil extraction by a more modest business activity and, in such circumstances, it entered into a partnership with Rajeswari & Co. for carrying on the business of pressing cotton bales. It denied that when disposing of its assets, it was aware of the intention of the income-tax authorities to reopen its assessments. It pleaded that because of action threatened by the Registrar of joint Stock Companies in 1959, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company had utilised the sale proceeds arising upon the transfer of its assets in paying off all its other creditors and that even if the company had done so in order to avoid payment of its income-tax dues, no relief could be granted to the Union of India. In this appeal, it is urged for the Union of India that the transfer of assets was effected in favour of a person who was not a creditor, that the assets had been undervalued and that there was evidence to show that the benefit of the sale proceeds was enjoyed by the directors of the company who were also partners of Rajeswari & Co. Section 53 of the Transfer of Property Act provides that every transfer of immovable property made with intent to defeat or delay the creditors of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for himself. He may pay one creditor and leave another unpaid: Middleton v. Pollock [1876] 2 Ch D 104, 108. As soon as it is found that the transfer here impeached was made for adequate consideration in satisfaction of genuine debts and without reservation of any benefit to the debtor, it follows that no ground for impeaching it lies in the fact that the plaintiff who also was a creditor was a loser by payment being made to this preferred creditor there being in the case no question of bankruptcy." This proposition of law was reaffirmed by the judicial Committee subsequently in Ma Pwa May v. S. R. M. M. A. Chettiar Firm [1929] 56 IA 379. It seems clear that it is open to a debtor to prefer one or more creditors over the others in the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X
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