Winding up settlement and property transfer may be accepted before an order is made if it serves the company's interests.

In a winding up petition where no winding up order had been made, the court considered that the deeming rule on commencement of winding up under section 441 had not yet taken effect and the avoidance rules for dispositions and preferences did not operate in the same way as in an actual liquidation. On the facts, the court treated the proposed settlement and transfer of the Guwahati property as a bona fide, company-focused arrangement supported by shareholders and not opposed by other creditors, and found it to be the best means of meeting liabilities and avoiding liquidation. The objections based on pari passu treatment, representative character, and alleged illegality of the sale were rejected.

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Issues: Whether, in a winding up proceeding in which no winding up order had been made, the court could accept a settlement between the company and the petitioning creditor and permit transfer of the Guwahati property in satisfaction of the creditor's claim, and whether the statutory provisions governing commencement of winding up and avoidance of dispositions barred such an order.

Analysis: The company court had not passed any winding up order; therefore, the deeming provision regarding commencement of winding up under section 441 operated only if and when a winding up order was ultimately made. In the absence of such an order, the provisions relating to avoidance of dispositions, attachments and preferential distribution of assets in winding up did not control the transaction in the same manner as they would in a liquidation already ordered. The court also found that the settlement was not a mere private compromise but a reasoned decision based on the company's interest, the absence of opposition from creditors other than the petitioning creditor and its sister concern, the substantial support of the shareholders against winding up, and the fact that the proposed transfer and cash component were considered the best available means to satisfy liabilities and avoid liquidation. The objections founded on representative character, pari passu treatment, and alleged illegality of the sale were rejected on the ground that those principles were not attracted in the absence of an actual winding up order and in the circumstances found by the court.

Conclusion: The settlement and the consequent order permitting disposition of the Guwahati property were held valid and were not barred by the winding up provisions relied upon by the appellant.

Final Conclusion: The appeal failed because the challenged order was a discretionary, reasoned exercise made to preserve the company and avoid winding up, rather than an impermissible compromise or liquidation transaction.

Ratio Decidendi: In a winding up petition where no winding up order has been made, the court may, in exercise of its discretionary powers, accept a bona fide settlement and permit disposition of company property if it is found to be in the best interest of the company and necessary to avoid liquidation.

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