Winding-up transfer of fully paid-up shares held void where no court validation was sought.

A transfer of fully paid-up shares made after commencement of winding-up proceedings did not confer contributory status on the transferee. Although section 428 of the Companies Act, 1956 includes holders of fully paid-up shares within the term "contributory," that provision did not override section 536(2), which renders post-commencement transfers void unless validated by the Court. As the winding-up petition had been presented before the transfer and the order related back under section 441(2), the surrounding facts, including undervaluation, linked management, and no validation request, showed the transfer was not bona fide. The transfer was therefore void and the applicant was not a contributory.

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Issues: Whether the applicant, as holder of fully paid-up shares transferred after commencement of winding-up proceedings, could be treated as a contributory of the company in liquidation, and whether the transfer was void in the absence of validation by the Court.

Analysis: Section 428 of the Companies Act, 1956 includes within the term "contributory" the holder of fully paid-up shares, but that inclusion does not override the effect of section 536(2), which renders a transfer made after commencement of winding-up proceedings void unless the Court otherwise orders. The winding-up petition against the transferor had been presented before the transfer, and by virtue of section 441(2) the winding-up order related back to the date of presentation. The surrounding circumstances, including the under-valued nature of the transfer, the interlinked management, and the absence of any application for validation, showed that the transaction was not bona fide and was not for the benefit of creditors or for keeping the company going. In such circumstances, the applicant could not claim contributory status on the basis of the transferred shares.

Conclusion: The applicant was not a contributory, and the transfer of shares was void under section 536(2) of the Companies Act, 1956.

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