Void transfer during winding up cannot be validated where occupancy rights arose from suspicious lease arrangements.

Disposition of company property after commencement of winding up was void under section 536(2) of the Companies Act, 1956 unless the Court otherwise ordered, and the alleged lease arrangements were not shown to be for the company's benefit or the interest of stakeholders. The rent note and supplementary agreement, executed with knowledge of the pending winding up, were treated as unnatural and suspicious, supported by questionable stamp papers, and structured to avoid registration while creating extended rights over the premises. The later sponsorship arrangement did not confer any right of occupation and, at most, gave rise to a creditor's claim. Acceptance of rent or compensation could not validate the transaction, and no lawful right to retain possession was established.

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Issues: Whether the alleged lease and connected arrangements executed during the pendency of the winding up petition were void under the winding up provisions and, if so, whether they could be validated so as to confer a lawful right on the applicant to retain possession of the premises.

Analysis: The disposition of company property made after commencement of the winding up was hit by section 536(2) of the Companies Act, 1956 unless the Court otherwise ordered. The alleged rent note and supplementary agreement were executed with full knowledge of the pending winding up proceedings and were not shown to be for the benefit of the company, for keeping it going, or for the interest of the stakeholders. The terms were found to be unnatural and suspicious, the stated rent was grossly inadequate, the documents were supported by questionable stamp papers, and the arrangement was structured so as to avoid registration despite effectively creating rights extending beyond the nominal period. The later attempt to rely on a sponsorship arrangement did not assist the applicant, because that arrangement did not create any right to occupy the premises and, at best, disclosed only a creditor's claim. Acceptance of rent or compensation could not validate an otherwise void transaction.

Conclusion: The transaction was void and not liable to be validated, and the applicant had no lawful right to continue in possession as tenant or on the basis of any charge over the premises.

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