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Issues: Whether the bank's receipt and retention of the funds paid into the company's account after presentation of the winding-up petition could be validated under the court's discretion under section 227 of the Companies Act, 1948.
Analysis: Section 227 renders dispositions of company property made after commencement of the winding up void unless the court otherwise orders. The governing principle is that the discretion is to be exercised on ordinary judicial principles, with particular regard to whether the transaction was bona fide, entered into in the ordinary course of trading, and for the benefit of the company as a going concern. On the facts, the accommodation arranged with the bank was for a limited period and intended to enable the company to continue business, and the payment received was treated as part of a transaction falling within the protective rationale of the section. The authorities distinguishing attempts to secure preferences to existing creditors did not apply.
Conclusion: The transaction was validated under section 227, and the bank was entitled to retain the whole sum paid into the account.
Final Conclusion: The appeal succeeded, the registrar's repayment order was discharged, and the disposition was upheld in favour of the bank.
Ratio Decidendi: A disposition made after presentation of a winding-up petition may be validated where it is a bona fide transaction in the ordinary course of trading entered into for the benefit of the company as a going concern, and not a device to obtain a preference.
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