Post-winding-up share transfers may be validated, and an enforced floating charge prevails over an execution purchaser.
A transfer of shares made after commencement of winding up is treated as void subject to the court's power to validate it under section 227(2) of the Companies Act, 1913; the provision applies to an actual post-commencement transfer and does not make validation unavailable where the circumstances justify it. Where shares are already subject to an effectively enforced floating charge, a purchaser in execution takes no better title than the transferor, and the debenture holders' claim prevails over the execution sale. The operative effect is that post-winding-up share transfers may be validated by the court, while an earlier enforcement of the floating charge defeats a later purchaser's title.
Issues: (i) Whether a transfer of shares made after the commencement of winding up was void under section 227(2) of the Companies Act, 1913. (ii) Whether the prior sale in execution to the petitioner defeated the debenture holders' claim when the shares were subject to a floating charge.
Issue (i): Whether a transfer of shares made after the commencement of winding up was void under section 227(2) of the Companies Act, 1913.
Analysis: Section 227(2) was read as making post-commencement transfers void unless the Court otherwise orders, the statutory language referring to an actual transfer already made and leaving a discretion to validate it. The debenture holders' rights had accrued before the winding up, and there was no ground to refuse validation in the circumstances.
Conclusion: The transfer was not automatically void and could be validated by the Court.
Issue (ii): Whether the prior sale in execution to the petitioner defeated the debenture holders' claim when the shares were subject to a floating charge.
Analysis: The petitioner purchased the shares subject to the existing charge. The charge had been actively enforced long before the winding up, and the intervention of the debenture holders converted the dormant floating charge into an effective claim against the assets. The execution purchase therefore could not prevail over the charge.
Conclusion: The debenture holders' charge prevailed and the shares were directed to be registered in their favour.
Final Conclusion: The petitioner's claim failed, the debenture holders succeeded on the share-title dispute, and costs were awarded to the successful applicants.
Ratio Decidendi: A transfer of shares made after the commencement of winding up is void only subject to the Court's power to validate it, and a purchaser takes no better title than the transferor where the shares are already subject to an effectively enforced floating charge.
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