Illegal contract cannot support winding-up claim where statutory approvals under company law were not obtained.

A winding-up petition cannot rest on a contractual claim where the underlying contract was entered into in breach of Section 297 of the Companies Act, 1956. Prior board consent was required, and where the company's paid-up share capital exceeded one crore rupees, prior Central Government approval was also mandatory; neither approval was obtained. Section 297(5) does not cure a breach of the proviso to Section 297(1), and Section 629-A imposes only penal consequences without validating the illegal transaction. As a result, the claimed sum was not a legally recoverable debt, and a petition under Section 433(e) can proceed only on such a debt.

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Issues: Whether a winding-up petition based on a contractual claim is maintainable when the underlying contract was entered into in contravention of Section 297 of the Companies Act, 1956.

Analysis: The contract was entered into between the company and a firm in which three partners were directors of the company and the fourth was the wife of one such director. On these facts, Section 297(1) applied and required prior consent of the Board, and, because the company's paid-up share capital exceeded one crore rupees, previous approval of the Central Government was also mandatory. The requisite approvals were not obtained. The omission was not cured by Section 297(5), because that provision addresses absence of Board consent and does not validate a contract entered into in breach of the proviso to Section 297(1). Section 629-A only provides penal consequences and does not remove the illegality of the transaction. As the contract was illegal, the claimed amount did not constitute a legally recoverable debt. A winding-up petition under Section 433(e) can proceed only on the basis of a legally recoverable debt.

Conclusion: The petition was not maintainable on the basis of the illegal contractual claim and was liable to be dismissed.

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