Bona fide post-petition transfer requirement defeated: leasehold validation and leave to sue refused in liquidation proceedings.

Section 536(2) of the Companies Act, 1956 permits validation of a post-petition disposition only if the transaction is bona fide and in the interest of the company and its creditors. A transfer of leasehold rights executed after presentation of a winding-up petition, and after an injunction against alienation, was found unsupported by reliable evidence of good faith; the delayed request for validation and inconsistencies in the stated consideration also counted against the applicants. The Court further applied Article 137 of the Limitation Act, 1963 to treat the validation request as time-barred. On that basis, leave under Section 446(1) to sue the company in liquidation was also refused, since no enforceable transferable interest was established.

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Issues: (i) Whether the transfer of leasehold rights effected after presentation of the winding-up petition could be validated under Section 536(2) of the Companies Act, 1956. (ii) Whether leave under Section 446(1) of the Companies Act, 1956 could be granted to institute a suit against the company in liquidation.

Issue (i): Whether the transfer of leasehold rights effected after presentation of the winding-up petition could be validated under Section 536(2) of the Companies Act, 1956.

Analysis: Section 536(2) empowers the Court to validate a disposition made after commencement of winding up only where the transaction is bona fide and shown to be in the interest of the company and its creditors. The transfer in question was executed after presentation of the winding-up petition and after an injunction against alienation. The surrounding circumstances, including the delayed request for validation, the inconsistency between the stated consideration and the alleged payment, and the absence of reliable evidence of bona fides, supported the finding that the transaction was not entered into in good faith. The application was also treated as time-barred, the Court applying the limitation principle under Article 137 of the Limitation Act, 1963.

Conclusion: The transfer was not entitled to validation under Section 536(2) of the Companies Act, 1956, and the finding was against the appellants.

Issue (ii): Whether leave under Section 446(1) of the Companies Act, 1956 could be granted to institute a suit against the company in liquidation.

Analysis: Leave to sue a company in liquidation depends upon the applicant establishing a sufficient legal interest connected with the subject matter. Since the applicant failed to establish a bona fide transferable interest under the deed of transfer, no enforceable basis existed to seek leave to sue the company in liquidation. The application for leave was therefore dependent on the same failed claim of validation.

Conclusion: Leave under Section 446(1) of the Companies Act, 1956 was rightly refused, and the finding was against the appellants.

Final Conclusion: The common judgment affirms the rejection of both applications, leaving the appellants without validation of the transfer and without leave to sue the company in liquidation.

Ratio Decidendi: Validation under Section 536(2) of the Companies Act, 1956 is available only for bona fide transactions shown to be in the interest of the company and its creditors, and a belated application without proof of good faith is liable to be rejected.

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