2012 (10) TMI 1170 - HC - Companies Law

Court validates post-winding-up share sale, safeguarding applicant's actions

The Court affirmed its jurisdiction to validate the sale of shares post winding-up order under Section 536(2) of the Companies Act. It held that such ... - Issues Involved:1. Jurisdiction to validate the sale of shares post winding-up order.2. Bona fide nature of the transaction and its implications on the revival of the company.Summary:Issue 1: Jurisdiction to validate the sale of shares post winding-up orderThe point for consideration was whether the Court had jurisdiction to validate the sale of shares of the company after the winding-up order. The applicant argued that there was no restriction on the Court's jurisdiction in this regard, while the Liquidator and secured creditors opposed the relief sought. The Court referred to Section 536(2) of the Companies Act, which allows the Court to validate any disposition of property or transfer of shares made after the commencement of winding up unless the Tribunal otherwise orders. The Court concluded that its jurisdiction extends until the company is dissolved, and thus it can validate transfers made after the winding-up order but before dissolution.Issue 2: Bona fide nature of the transaction and its implications on the revival of the companyThe applicant contended that he had taken various steps for the revival of the company, including purchasing shares with the intention to discharge the company's dues and initiate revival steps. The Official Liquidator and secured creditors challenged the bona fide nature of the transaction. The Court examined the evidence, including communications between the applicant and creditors, payments made by the applicant towards the company's dues, and efforts for an out-of-court settlement. The Court found that the applicant's actions were bona fide and aimed at the company's benefit. Consequently, the Court validated the transfer of shares, rejecting the objections raised by the respondents.Conclusion:The Court validated the transfer of shares post winding-up order, recognizing the applicant's bona fide intentions and efforts towards the company's revival. The applications were ordered as prayed for, providing statutory protection and equitable consideration to the applicant's transactions.