Post-commencement sub-lease of company property voided under winding-up law; Court refused validation and ordered possession to the Official Liquidator.

A post-commencement sub-lease of company property was held void under section 536(2) because winding-up proceedings commence from the BIFR recommendation for winding up, and any disposition thereafter requires Court validation. The alleged consent to sub-let was obtained only after that commencement, the lease did not confer an automatic right to create a sub-lease, and no proof showed bona fide conduct, ordinary-course dealing, or benefit to the company in liquidation. The Company Court also had jurisdiction under section 446(2)(d) to decide the Official Liquidator's report despite a pending small causes suit. The sub-lease was not validated and possession had to be handed over to the Official Liquidator.

---

---

Issues: Whether the sub-lease created after commencement of winding-up proceedings was a disposition of the company's property and void under section 536(2) of the Companies Act, 1956, and whether the sub-lessee was bound to hand over possession to the Official Liquidator.

Analysis: The lease deed did not confer any automatic right to create a sub-lease, and the alleged consent for sub-letting was sought and granted only after the BIFR had recommended winding up and after the winding-up petition had already been registered. The alleged sub-lease was executed without leave of the Company Court, was unsupported by proof of bona fide or ordinary course of business, and was not shown to be in the best interest of the company in liquidation. The Court held that winding-up proceedings commence from the BIFR recommendation for winding up, and any post-commencement disposition of the company's property is void unless the Court otherwise orders. The Company Court had jurisdiction under section 446(2)(d) to decide the issue in the Official Liquidator's report, and the pendency of the small causes suit did not bar such adjudication.

Conclusion: The sub-lease was declared void and the request to validate it was rejected. The sub-lessee was directed to hand over possession to the Official Liquidator.

Final Conclusion: The Court protected the company's assets for distribution in winding up and refused to recognise a post-commencement sub-lease that would defeat the creditors' and contributories' interests.

Ratio Decidendi: A transfer or sub-lease of a company's property made after commencement of winding-up proceedings is void under section 536(2) unless the Court validates it on proof that the transaction was bona fide, in the ordinary course of business, and in the best interest of the company in liquidation.

---