(1) Where any objection relating to a claim based on a debt, mortgage, charge or other encumbrance or lien, or similar obligation is preferred to the prescribed authority under sub-section (9) of Section 7, of the State Government or the Corporation or any person referred to in sub-section (2), sub-section (4) or sub-section (5) of section 8, or any other creditor of the objector, may contest such claim, inter alia, on any of the following grounds, namely:-
(i) that the transaction of debt, mortgage, charge or other encumbrance or lien, trust or other obligation on which the claim is based was entered into-
(a) to defeat or delay any dues of the State Government or any claim referred to in Section 8 or the claim of any other creditor or;
(b) to give to the claimant, or to a person through whom he claims, a preference over the dues of the State Government or of persons referred to in the said sub-section of Section 8 such transaction having been entered into within a period of one year immediately before the appointed day; or
(ii)that the transaction was not entered into in good faith and that its terms were not reasonable.
(2) The prescribed authority after taking into consideration all the circumstances of any such transaction and of the scheduled undertaking, may unless the claimant is proved to the satisfaction of the prescribed authority to be a transferee in good faith and for consideration, make an order cancelling or varying the transaction on such terms as it may think fit to impose and the transaction shall, thereupon, cease to have effect or, as the case may be, shall have effect subject to such variation.