TMI Blog1961 (9) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... 8, advertisements came out in the newspapers of the winding up petition. The order for winding up was made by this court on January 5, 1959. Then on May 15, 1959, on-the advice of the Public Vehicles Department the applicant wrote to the official liquidator for verification of his papers. On May 20, 1959, the official liquidator replied that an order from this court validating the sale under section 536(2) of the Companies Act, 1956, was necessary. The application has been tried on evidence before me. I have heard the evidence of Gabrial Albert Gasper, the applicant, and also of Radhagobinda Saha, the head cashier of the company at the relevant time who was summoned by the applicant. Gasper is a transport forwarding and clearing agent. He says that in the middle of September, 1958, a broker came to him with the information that the company was selling a truck. He went and inspected the vehicle. In two instalments he paid to the company a sum of Rs. 11,000 in cash and obtained a final receipt. Along with the truck a fork lift was also sold in which Gasper was not interested. The price of the lift was about Rs. 4,800. Gasper has produced the receipt that was granted to him dated Oc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no evidence that this money or any part thereof was actually utilised for the company's business. Moreover, it appears from the company's books that it hardly undertook any substantial business after this transaction. But Mr. Mukharji agreed that generally speaking on the evidence adduced before the court it was difficult for him to contend that Gasper did not pay the price of the vehicle or to dispute his bona fide s. Now, section 536(2) of the Companies Act, 1956, is as follows: "In the case of a winding up by or subject to the supervision of the court, any disposition of the property (including actionable claims) of the company, and any transfer of shares in the company or alteration in the status of its members, made after the commencement of the winding up, shall, unless the court otherwise orders, be void." The corresponding section in the old Act was section 227(2). This section also corresponds to section 227 of the English Act of 1948. Mr. Mukharji places strong reliance on the observations of the Madras High Court in Andkra Bank Ltd. v. Provisional Liquidator, Godavari Sugars Refineries Ltd. [1954] 24 Comp. Cas. 149 that, in exercising the discretion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the company and asked for a temporary overdraft of 1,000 to be cleared by April 15, 1952. The credits were to be collected by L. Sons and applied in the discharge of the overdraft. On April 9, 1952, W. explained to the bank that the credits had been extended to April 26, 1952, and asked for the overdraft facilities to be extended to that date, which the bank agreed to do. For a similar reason, on May 2,1952, the overdraft was extended until May 15, 1952, and also the amount was increased to 1,200. On May 7, 1952, a petition was presented for the compulsory winding up of the company. At that date the company was indebted to the bank for 803-11-0. On May 9, 1952, the amount of the overdraft was increased by a cheque drawn for the payment of the wages amounting to 165. On the same day W. informed the bank that he was going abroad on business, and that L. Sons would be collecting a credit expiring on May 20, 1952, and would be paying to the bank between 1,200 and 1,300. The overdraft facilities were extended until the money should be received through L. Sons. The petition was advertised on May 13 and May 14, 1952. On May 16,1952, when the overdraft stood at 1,142-2-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fers no discretion on the court. A transaction to be protected under that section must fulfil the conditions laid down in the section, otherwise it does not obtain the protection, whereas, as Vaughan Williams, J., himself recognised, there was under the section corresponding to section 227 of the present Act an absolute discretion, as was clearly stated by Vaisey, J., in the passage in his judgment to which I have just referred in Re Steane's (Bournemouth), Ltd. [1950] 1 All. ER 21 The case to which Vaughan Williams, J., refers is Re Wiltshire Iron Co. s case ( supra ) and the facts can be simply stated by reading from the headnote: 'Where a customer of a trading company had bona fide ordered and paid for goods, and the company had loaded the goods on a railway to his address, and sent him the invoices, after the presenting of the petition but before the winding-up order: Held, that the disposition of the property was complete before the winding-up order, and the goods ordered to be delivered to the customer.' In the course of his judgment Lord Cairns, L.J., said: 'Section 153 no doubt provides that all dispositions of the property and effects of the company made be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1,200 advanced to enable the company to pay wages due to its staff. Apart from the circumstance that in this case the bank did not go so far as to demand a debenture, the facts appear to me to have a distinct similarity. It is true that only part of the overdraft here was applied in the payment of wages, but it is clear from the evidence, and, to my mind, it is the only possible inference from the facts, that the accommodation arranged was arranged for a limited period for the express purpose of enabling the company to continue to carry on its business. Therefore, to use the language of Romer, J., it was a transaction 'for the benefit of and in the interests of the company'. In the case before Vaisey, J., Re Steatte's ( Bournemouth ) , Ltd. [1950] 1 All. ER. 21, a debenture was issued to secure moneys which were advanced for the purpose, as stated by Vaisey, J., in his judgment, of keeping the company going or of keeping things going generally. Those three authorities appear to me to govern the present case and to bring it within the benefit of section 227. Against that there are said to be two cases to which reference was made. The first is Re Liverpool Civil Service A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed circumstances, although they do not seem then to have had knowledge of the presentation of a petition ' Then in the next sentence there is a circumstance stated which would of itself, I think, be sufficient to distinguish that case from the present case: 'When, however, they actually received the two payments of 100 and 75, they were, in my judgment, aware of a petition having been presented. I can only treat the transaction as an attempt to get a preference over other creditors.' Therefore, it appears to me that these two cases do not in any sense govern the present case or stand in the way of the disposition in question being validated. It appears to me, viewing the evidence as a whole and drawing the inference that I do, that this was a transaction which is directly within the passage which I have read from the judgment of Lord Cairns in Re Wiltshire Iron Co. [1868] 3 Ch. App. 443 , and I can myself see no ground for distinguishing between the amount of the debit existing immediately before the presentation of the petition, viz ., 803 us. and the amount by which the overdraft became increased after the presentation of the petition." The appeal was allowed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Sugar Mill Co. Ltd. v. Gopal Chetty [1932] 2 Comp. Cas. 70 ; AIR 1932 PC 1 had confirmed a transaction which could not be said to have been entered into in the ordinary course of current trade. In this case a petition by some of the shareholders for winding up the company was dismissed. Subsequently, a lease for ten years of a factory owned by the company was granted pursuant to a resolution of the company at a general meeting. In the meantime, an order winding up the company was passed on appeal from the order of dismissal. The lessee had been in possession and paying rent regularly until an application was made by the official liquidator to declare the lease void. It was held that the transaction ought to be confirmed instead of being declared void. It seems to me, therefore, upon considering various authorities on this subject that the following principles are doubtless applicable to sub-section (2) of section 536 of the Companies Act, 1956: 1.The court has an absolute discretion to validate a transaction. 2.This discretion is controlled only by the general principles which apply to every kind of judicial discretion. 3.The court must have regard to all the surro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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