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Issues: (i) Whether a provisional liquidator, before a formal winding up order is made, can invoke powers to question a transfer under section 531A of the Companies Act, 1956. (ii) Whether the sale deed executed in favour of the purchaser was liable to be annulled as a void transfer.
Issue (i): Whether a provisional liquidator, before a formal winding up order is made, can invoke powers to question a transfer under section 531A of the Companies Act, 1956.
Analysis: Once a winding up petition is admitted and advertised, and a provisional liquidator is appointed, the provisional liquidator is placed in charge of the company's assets. The statutory scheme under section 450 of the Companies Act, 1956, read with section 457, confers on the provisional liquidator the powers necessary to protect the company's interests. The absence of a formal winding up order does not, by itself, render the request to impeach the transfer incompetent or premature.
Conclusion: The provisional liquidator had jurisdiction to seek annulment of the transaction even before the passing of a formal winding up order.
Issue (ii): Whether the sale deed executed in favour of the purchaser was liable to be annulled as a void transfer.
Analysis: Section 531A of the Companies Act, 1956, applies to transfers made within one year before presentation of the winding up petition if they are not in the ordinary course of business and are otherwise vulnerable to challenge. On the facts, the transfer was treated as a sale made for raising funds for business needs, there was consideration, possession had been delivered, and no circumstance was shown to indicate that the transaction was a sham or lacked bona fides. In these circumstances, the court found no basis to treat the transfer as void against the liquidator.
Conclusion: The sale deed was not liable to be annulled and the challenge to the transfer failed.
Final Conclusion: The request to set aside the transfer was rejected, and the impugned transaction was allowed to stand.
Ratio Decidendi: A provisional liquidator can exercise the powers necessary to protect the company's assets before a formal winding up order, but a pre-winding-up transfer will not be avoided unless it is shown to be outside the ordinary course of business or otherwise lacking bona fides.
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