Good-faith transfer for value protected from avoidance despite timing before winding-up and internal corporate irregularities.

Section 531A of the Companies Act, 1956 voids a transfer against the liquidator only if it is not in the ordinary course of business or is not made in good faith and for valuable consideration. The burden lies on the applicant to prove want of good faith or inadequacy of consideration. On the facts discussed, the boiler was sold after technical assessment, competitive offers were considered, and the price matched estimated market value, so the transfer was treated as bona fide. A sale within one year before the winding-up petition and outside the ordinary course was not enough by itself to invalidate it, and internal objections to authority did not succeed where directors were acting under a valid resolution and statutory validation applied.

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Issues: (i) Whether the transfer of the boiler was made in good faith and for valuable consideration. (ii) Whether the transfer was made within one year before the presentation of the winding-up petition and outside the ordinary course of business. (iii) Whether the transfer was made by the company through a valid board resolution and competent directors.

Issue (i): Whether the transfer of the boiler was made in good faith and for valuable consideration.

Analysis: Section 531A of the Companies Act, 1956 renders void against the liquidator only such transfers as are not in the ordinary course of business or are not made in good faith and for valuable consideration. The burden lay on the applicant to establish absence of good faith or inadequacy of consideration. The evidence showed that the boiler had been sold after a technical assessment by the bank, with competing offers on record, and at a price consistent with the estimated market value. There was no reliable proof that the transferee participated in any design to screen assets from creditors.

Conclusion: The transfer was held to be made in good faith and for valuable consideration, against the petitioner.

Issue (ii): Whether the transfer was made within one year before the presentation of the winding-up petition and outside the ordinary course of business.

Analysis: The transfer admittedly took place within one year before the winding-up petition. The respondents also conceded that the sale was not in the ordinary course of business. These factual elements, however, were not sufficient by themselves to avoid the transfer because the statutory protection for a bona fide purchaser for value remained available.

Conclusion: The transfer was within one year and not in the ordinary course of business, but this did not invalidate it.

Issue (iii): Whether the transfer was made by the company through a valid board resolution and competent directors.

Analysis: The resolution authorising sale was accepted as having been passed by persons acting as directors, and the challenge to their status did not succeed. Even if one director had ceased to hold office, section 290 of the Companies Act, 1956 validated acts done by a person acting as director notwithstanding a later discovery of defect or termination of appointment. The notice for the meeting was treated as sufficient under section 286(1), and the sale on behalf of the company was therefore not shown to be unauthorised.

Conclusion: The transfer was not established to be invalid for want of authority.

Final Conclusion: The statutory conditions necessary to avoid the sale were not proved, and the transfer of the boiler could not be declared void. The company applications were therefore dismissed.

Ratio Decidendi: In proceedings to avoid a transfer under section 531A, the applicant must prove want of good faith or absence of valuable consideration, and a transfer made for adequate value to a purchaser not shown to be acting fraudulently is not void merely because it occurred within the suspect period or after internal irregularities in corporate management.

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