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2022 (11) TMI 1075 - HC - Companies LawTransfer of shares before liquidation - company in liquidation was ordered to be wound up - Seeking approval to the transfer of 6600 shares of Svadeshi Mills Company Ltd (in liquidation), initially in the name of the applicant No.1 and, thereafter, further, out of those shares, 2800 shares in the joint names of applicant Nos. 2 and 3 and another lot of 2800 shares in the name of applicant No.4, purportedly under Section 536 (2) of the Companies Act, 1956. HELD THAT:- The parameters for exercise of discretion are well neigh settled. The court has absolute discretion to validate a transaction. Exercise of discretion is controlled by the principles which govern exercise of a judicious discretion in other jurisdictions. The Court must be cognizant of all the attendant circumstances and if from all the surrounding circumstances, the Court comes to the conclusion that the transaction, otherwise hit by Section 536 (2) of the Act, 1956, should not be rendered void, the Court would be justified in making a declaration that transaction is not void. If the facts of the case are appraised on the touchstone of aforesaid principles, aspect of delay in laying a claim of ownership over the subject shares can not be said to be wholly inconsequential. Such a claim was made for the first time in the year 2014 - Applicants cannot urge that the transactions were entered into being unaware of the winding up order. Evidently, the applicant No. 1 has received a substantial amount as a part consideration for transfer of shares in favour of applicant Nos. 2 to 4. Such enrichment is clearly in teeth of the prohibition contained in Section 536 (2) of the Act, 1956. The validation of which is sought, have been entered into being fully cognizant of the prohibition in law. No element of benefit to the company in liquidation is manifest, even remotely. In the circumstances, the Court cannot give its imprimatur to such transactions. In a given case, the Court may be justified in validating the transaction entered into even after the passing of the winding up order. However, in the facts of the case, such exercise of discretion would not be justifiable. Application dismissed.
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