Pre-winding up asset sale can be authorised to protect the company's estate and preserve value during deadlock.

In a pending winding up petition, the court may authorise sale of a company's assets before any winding up order is made. Section 536(2) is not limited to the post-order stage, and the court may also rely on its inherent powers under section 443(1) and rule 9 of the Companies (Court) Rules, 1959 to prevent deterioration of the estate and advance justice. Where the company has stopped business, liabilities exceed assets, the parties are deadlocked, and delay would further erode value, an interim sale direction is justified as a protective measure. The application for such relief was therefore held maintainable and meritorious.

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Issues: Whether, in a pending winding up petition before a winding up order is made, the court can direct sale of the company's assets under its powers under the Companies Act and the Companies (Court) Rules, 1959.

Analysis: Section 536(2) of the Companies Act, 1956 enables the court, in a case of winding up, to validate or permit dispositions of the company's property, and the language of the provision does not confine that power to the stage after a winding up order is passed. The court also retains inherent power under section 443(1) and rule 9 of the Companies (Court) Rules, 1959 to make such orders as are necessary to advance justice and prevent further deterioration of the company's position. Where the company has ceased business, the liabilities greatly exceed the assets, the parties are deadlocked, and delay only increases the burden, an interim direction for sale of assets is justified to preserve value and protect all concerned.

Conclusion: The court can direct sale of the company's assets even before a winding up order is made, and the application for such relief was maintainable and meritorious.

Final Conclusion: The interim sale of the company's assets was authorised as a protective measure in aid of the pending winding up proceedings, and the application was allowed.

Ratio Decidendi: The court may, in a pending winding up petition, permit disposal of the company's assets when necessary to protect the estate and advance justice, because section 536(2) and the court's inherent powers are not confined to the post-order stage of winding up.

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