Winding-up defaults and bona fide settlement payments: court upheld provisional liquidator directions but refused automatic restitution on relation back.

Default by the company in complying with the modified repayment schedule entitled the petitioner to implementation of the earlier winding-up directions, including appointment of a Provisional Liquidator and publication of citation, because the Court had already provided that those consequences would follow on default. Payments made by the company to the petitioner during the pendency of the winding-up petition were not automatically recoverable on the basis of relation back alone; bona fide settlement payments are not treated as part of a common fund unless they are shown to fall within fraudulent preference or another statutory ground of invalidity. The request to deposit those sums back in Court was therefore rejected.

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Issues: (i) Whether, on default of the respondent-company in complying with the modified repayment schedule fixed in the winding-up proceedings, the petitioner was entitled to appointment of a Provisional Liquidator and publication of citation; and (ii) whether amounts paid by the respondent-company to the petitioner during the pendency of the winding-up petition had to be deposited back in Court on the footing that, upon winding up, the petition would relate back to the date of presentation.

Issue (i): Whether, on default of the respondent-company in complying with the modified repayment schedule fixed in the winding-up proceedings, the petitioner was entitled to appointment of a Provisional Liquidator and publication of citation.

Analysis: The respondent-company had repeatedly failed to adhere to the repayment arrangements earlier accepted and to the modified schedule fixed by the Court. The earlier order had expressly provided that, upon default, the citation could be published immediately and the appointment of the Provisional Liquidator could be given effect to on the petitioner's application. The default having occurred and the appellate challenge to that order having failed, the conditions for implementation of the earlier directions stood satisfied.

Conclusion: The petitioner was entitled to appointment of the Provisional Liquidator and publication of citation, and the application was allowed.

Issue (ii): Whether amounts paid by the respondent-company to the petitioner during the pendency of the winding-up petition had to be deposited back in Court on the footing that, upon winding up, the petition would relate back to the date of presentation.

Analysis: The relation-back effect of a winding-up order does not automatically undo all bona fide payments made during the pendency of the petition. The legislative scheme preserves genuine commercial transactions and specifically targets invalid antecedent dealings through the doctrine of fraudulent preference. Payments made in the course of settlement efforts while the petition was pending could not, without more, be treated as money belonging to a common kitty or as requiring restitution. Such recovery would arise only if the transactions were shown to fall within the statutory mischief of fraudulent preference in appropriate proceedings.

Conclusion: The respondent's request for deposit back of the amounts paid to the petitioner was rejected, and the application was dismissed.

Final Conclusion: The Court implemented the earlier winding-up directions by appointing the Provisional Liquidator upon default, while declining to compel return of settlement payments made during the pendency of the petition absent a statutory basis for invalidation.

Ratio Decidendi: Payments made bona fide during the pendency of a winding-up petition are not automatically recoverable on relation back of the winding-up order and are avoidable only if they amount to fraudulent preference or another statutorily invalid transaction.

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