The court's discretion under S.536(2) of the Companies Act should be exercised having regard to the particular circumstances of the case, and should normally validate transactions which are genuine, honest, and in the best interest of the company.

1. The Travancore Rayons Ltd. is the applicant. The application came up before this court under S.536(2) of the Companies Act. This Section provides that in a winding up any disposition of property of a company may after the commencement of the winding up, shall unless the court otherwise orders, be void. Three winding up petitions are pending against the applicant company. They are C.P Nos. 15/84, 21/1985 and 2/1986. All these petitions for winding up the company are on the ground that the company is unable to pay its debts.

2. In the application the company submits that the company was registered under the Companies Act, 1913 with its registered office at Rayonpuram, Perumbavoor, Kerala State. The company was incorporated on the 19th day of July 1945 and it commenced its business in March 1946. It was carrying on its business profitably during its early years. In 1975 there was an unprecedented strike by the workers lasting p for about six months and there was also a devastating fire in the factory in 1976 in which large quantity of raw materials gutted. After this unfortunate event the company was industrially sick for the past five years, though it was employing over 1500 workmen. A mode of rehabilitation was earnestly desired by the company. For this purpose a consortium of four All-India Financial Institutions consisting of IDBI, IFCI,

ICICI and IRBI met and discussed ways and means of rehabilitating the unit. I am told that the financial consortium ultimately expressed its preparedness to advance a loan of Rs. 511 lakhs. In fact, out of this sanctioned loan a substantial part of the loan has already been received by the company and the balance sanctioned loan amount is only Rs. 225 lakhs. I may also incidentally refer to an earlier loan granted by the above financiers to the company. As early as on 15-9-1984 this company was given Rs. 510 lakhs by the financiers. Of course, for this 510 lakhs of rupees the financiers obtained both movable and immovable properties of the company as security. To say it plainly the lean amount of Rs. 510 lakhs granted on 15-9-1984 is a secured debt.

3. Now the company wants the remaining amount of the 2nd loan sanctioned, namely Rs. 225 lakhs. When the company approached the financiers for the said loan the financiers insisted that they must be given security net only for Rs. 225/ lakhs but also for the entire amount of Rs. 511 lakhs. Since the winding up petitions are pending before this court, the financiers also insisted thai before offering movable and immovable properties as security, the company should obtain appropriate leave and sanction from this court under S.536 (2) of the Companies Act. This situation necessitated the company approaching before this court with the petition under S.536 (2) of the Companies Act.

4. As I said earlier the leave was sought under S.536 (2) of the Act since three company petitions for winding up the company are pending. These petitions have proceeded any length to reach the finale. They are in the first stage. The petitioners in two of the petitions are opposing the application filed by the company under S.536 (2). The petitioner in C.P. No. 21/1985 submits that an amount of more than Rs. 4 lakhs is due from the company and that out of the said amount Rs. 2,15,000/ is supposed to be an admitted amount. The petitioner in C.P. No. 15 of 1984 also submits that a little more than Rs. 20.000/ is due from the company to the petitioner. This petitioner also seriously opposes the application under S.536 (2) of the Companies Act. Of course, the petitioner in C.P. No. 2 of 1986 who claimed that they have to get as amount of Rs. 16 lakhs have not chosen to oppose this petition.

5. The company in question is one of the companies included in the notification under the Kerala Relief Undertakings (Special Provisions) Act, 1961. The consequential effect of enlisting the company within such a notification is really in effect a declaration of moratorium a hold u