Revival of winding-up company requires statutory standing and a bona fide financially credible scheme; post-winding-up share transfers remained void.

A company under winding up could not be revived at the instance of applicants who failed to prove statutory standing as creditors or contributories, and the Court refused to entertain their applications for stay and convening meetings. The proposed revival schemes were rejected because they lacked a credible financial basis, immediate working capital, and a workable plan to restart operations, making them speculative rather than bona fide. Post-commencement share transfers were also refused validation because transfers made after the commencement of winding up are void unless specifically validated by the Court, and mere possession of share certificates did not cure that bar.

---

---

Issues: (i) Whether the applicants had locus standi to seek stay of winding up and convening of meetings for revival schemes under the Companies Act, 1956; (ii) whether the proposed revival schemes were bona fide and merited judicial acceptance; (iii) whether transfers of shares made after commencement of winding up could be validated.

Issue (i): Whether the applicants had locus standi to seek stay of winding up and convening of meetings for revival schemes under the Companies Act, 1956.

Analysis: Section 466(1) empowers the Court to stay winding up proceedings on the application of the Official Liquidator, a creditor, or a contributory, but the exercise of that power depends on proof that the proceedings ought to be stayed and on the Court's supervision of any revival effort. Section 391, in the case of a company in winding up, contemplates a meeting for compromise or arrangement only at the instance of the Official Liquidator. The applicants did not establish their claims as creditors by reliable proof, and the alleged assignments in their favour were treated as doubtful. The statutory conditions for invoking the jurisdiction were therefore not satisfied.

Conclusion: The applicants lacked locus standi to maintain the revival and convening applications.

Issue (ii): Whether the proposed revival schemes were bona fide and merited judicial acceptance.

Analysis: The schemes proposed for revival did not show any immediate infusion of funds, any credible source of working capital, or any realistic plan to restart the mill, procure raw materials, finance operations, or access markets. The Court treated the promises of payment to creditors as unsupported by financial substance and found that the proposals were speculative rather than workable. A scheme for revival must disclose a credible foundation for restarting the undertaking and meeting liabilities; absent that foundation, the Court should not place the company in the hands of the proposed operators.

Conclusion: The proposed revival schemes were rejected as not bona fide and as lacking merit.

Issue (iii): Whether transfers of shares made after commencement of winding up could be validated.

Analysis: Section 536(2) provides that, in a winding up by the Court, any transfer of shares after commencement of winding up is void unless the Court otherwise orders. The Court held that mere possession of share certificates did not override that statutory bar, and that a void transfer does not pass title or create a trustee-beneficiary relationship. In the absence of justification for validation, post-winding-up share transfers could not be approved.

Conclusion: Validation of post-winding-up share transfers was refused.

Final Conclusion: The revival attempts failed on both maintainability and merits, the stay of winding up was vacated, and the Official Liquidator was directed to proceed with winding up expeditiously.

Ratio Decidendi: In a company under winding up, revival jurisdiction can be exercised only by persons with statutory standing and only on the basis of a bona fide, financially credible scheme; post-commencement share transfers remain void unless specifically validated by the Court.

---