Winding-up payments and validation under section 536(2): post-petition debt payments are refundable unless made in bona fide ordinary course transactions.

Payments made after the commencement of winding-up are treated as dispositions of company property and, when made toward pre-existing debts, offend pari passu distribution; they are therefore liable to be refunded to the official liquidator under section 536(2) unless validly protected. Validation under section 536(2) is confined to bona fide transactions entered into in the ordinary course of current trade or for the company's benefit, so post-petition payments of earlier debts do not qualify. The exclusion of the Companies Act in co-operative societies legislation is construed as limited to incorporation, regulation and winding-up of societies, and does not exclude the company court's jurisdiction over a company in liquidation.

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Issues: (i) Whether payments made by the company in liquidation after the commencement of winding-up were void and refundable to the official liquidator under section 536(2) of the Companies Act, 1956; (ii) whether the society made out a case for validation of those payments under section 536(2) of the Companies Act, 1956; (iii) whether the provisions of the Companies Act, 1956 were wholly inapplicable to a co-operative society by reason of section 61 of the Madras Co-operative Societies Act, 1932 and section 129 of the Andhra Pradesh Co-operative Societies Act, 1964.

Issue (i): Whether payments made by the company in liquidation after the commencement of winding-up were void and refundable to the official liquidator under section 536(2) of the Companies Act, 1956.

Analysis: The winding-up is deemed to commence from the date of presentation of the petition under section 441(2) of the Companies Act, 1956. Payments made thereafter towards a pre-existing debt were dispositions of the company's property after commencement of winding-up. Such payments offended the scheme of pari passu distribution and could not be treated as valid merely because they were made in discharge of a decree debt.

Conclusion: The payments were refundable to the official liquidator under section 536(2) of the Companies Act, 1956.

Issue (ii): Whether the society made out a case for validation of those payments under section 536(2) of the Companies Act, 1956.

Analysis: Validation under section 536(2) is confined to transactions that are bona fide and entered into in the ordinary course of the company's current trade or for the company's benefit. Payments made after commencement of winding-up in discharge of earlier debts do not satisfy that standard and cannot be validated on the facts found.

Conclusion: The society failed to establish a case for validation of the payments.

Issue (iii): Whether the provisions of the Companies Act, 1956 were wholly inapplicable to a co-operative society by reason of section 61 of the Madras Co-operative Societies Act, 1932 and section 129 of the Andhra Pradesh Co-operative Societies Act, 1964.

Analysis: The exclusion of the Companies Act in the co-operative societies legislation was read as confined to matters of incorporation, regulation and winding-up of societies, and not as excluding the company court's jurisdiction over a company in liquidation. The legislative entries also supported that limited construction. Since the society itself was not in liquidation, the broader objection based on total inapplicability did not arise for decision in these applications.

Conclusion: The Companies Act was not wholly inapplicable in the manner contended, and the objection to jurisdiction failed.

Final Conclusion: The official liquidator succeeded in recovering the post-petition payments, while the society's request for validation was rejected, resulting in a mixed disposal of the connected applications.

Ratio Decidendi: Payments made after commencement of winding-up in discharge of pre-existing debts are void unless validated, and validation is available only for bona fide transactions in the ordinary course of the company's current business; a co-operative societies statute excluding the Companies Act operates only in relation to the specified spheres of co-operative society law and does not exclude the company court's winding-up jurisdiction over a company in liquidation.

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