Validation under section 227 of post petition trade dispositions enabling continuation may be upheld and funds retained.

Disposition of company property after presentation of a winding up petition may be validated under section 227 where the disposition is a bona fide transaction entered into and completed in the ordinary course of trading and arranged to enable the company to continue as a going concern; applying that principle, the court found the banking accommodation was so arranged, that the payments credited and applied to the overdraft were trade related rather than preferential, and therefore allowed the appeal so the bank may retain the sums paid into the company's account.

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Issues: Whether a disposition of company property made after the presentation of a winding-up petition but before the winding-up order - specifically payments credited to the company's bank account and applied to an overdraft arranged to enable the company to continue trading - can be validated under section 227 of the Companies Act, 1948.

Analysis: The Court examined section 227 of the Companies Act, 1948, and relevant authorities including In re Wiltshire Iron Co., In re Park Ward & Co. Ltd., and Re Steane's (Bournemouth) Ltd., to determine the scope of the court's discretion to validate post-petition dispositions. The judgment distinguishes authorities involving attempts to obtain a preference or transactions not in the ordinary course of business, and applies the principle that bona fide transactions entered into and completed in the ordinary course of trading, and arranged to enable the company to continue as a going concern, fall within the class of dispositions which the court may validate under section 227. Viewing the evidence as a whole, the Court inferred that the banking accommodation was arranged for the express purpose of enabling the company to continue its business; the transaction was therefore a bona fide, trade-related arrangement benefiting the company rather than an attempt to secure a preference.

Conclusion: The Court allowed the appeal and discharged the registrar's order; the bank is entitled to retain the whole sum paid into the company's account. The decision is in favour of the appellant.

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