Post-commencement winding up transactions require proof of bona fide business purpose and benefit to the liquidation estate.

A disposition made after the commencement of winding up is void unless the Court orders otherwise. Where consent terms or payments are entered into after the deemed commencement date, the party seeking validation must plead and prove that the transaction was bona fide, in the ordinary course of business, and for the benefit of the company in liquidation. The Bombay High Court noted that the winding up petition date fixes the relevant commencement point, and that payments made after that date, including after appointment of a provisional liquidator, were not shown to satisfy the statutory test. The transactions were therefore not protected against creditors' claims and the sums received had to be restored to the liquidation estate.

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Issues: Whether the consent terms and payments made after the deemed commencement of winding up could be validated as transactions in the ordinary course of business and for the benefit of the company in liquidation.

Analysis: The deemed commencement of winding up related back to the date of presentation of the winding up petition. The consent terms were executed after that date, and substantial payments were made thereafter, including payments after appointment of the provisional liquidator. Under the statutory scheme, dispositions after commencement of winding up are void unless the Court otherwise orders. A party seeking validation must plead and prove that the transaction was bona fide, in the ordinary course of business, and for the benefit of the company in liquidation. The applicant did not discharge that burden, and the Court found no sufficient basis to protect the transactions against the claims of creditors.

Conclusion: The consent terms and payments were not validated, and the transactions were held liable to be treated as void for the purposes of the winding up.

Final Conclusion: Post-commencement dealings by the company in liquidation were not protected, and the amount received under the consent terms had to be restored to the official liquidation estate.

Ratio Decidendi: A disposition made after the commencement of winding up is void unless the Court orders otherwise, and the burden lies on the party seeking validation to establish that the transaction was bona fide, in the ordinary course of business, and for the benefit of the company in liquidation.

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