Subsequent to this agreement, dispute arose between the two companies regarding the payment of the commission. There are two forms: cash-flow insolvency and balance-sheet insolvency. Insolvency is the state of being unable to pay the debts, by a person or company (debtor), at maturity; those in a state of insolvency are said to be insolvent. The Supreme Court, after perusing through the deed of settlement and the compromise came to the conclusion that there is a bona fide dispute with regard to the amount of claim made by the respondent company in the company petition and it is substantial in nature. If the Company Court is satisfied that the debt upon which a petition for winding up is founded is a hotly contested debt and also doubtful, it should not entertain such a petition. that the company be wound up; Debtor can be Company Only. Whether the fact of commercial solvency, per se, is sufficient to reject the petition for winding up? A creditor’s winding up petition implies insolvency and is likely to damage the company’s creditworthiness and its financial standing with its creditors or customers and even among the public. 30th April 2013. if, other than during the interim period-. Constant ... • Inability to pay debts will be considered as criteria for determining a sick company • Provisions of revival and rehabilitation of sick In substances, the Scheme remains the same as the substituted 1956 Act, but there are quite a few interesting deviations from ... company is unable to pay its debts continues to exist under The author concurs with the finding of the Supreme Court and believes that the decision given was fair and equitable. Company Registration No: 4964706. There have been several instances where the jurisdiction of the Company Court has been abused by filing of winding up petitions to pressurize companies to pay debts which are substantially disputed and the Courts have been very casual in issuing notices and ordering publication in the newspapers which may attract adverse publicity. The Company Court, while exercising its powers under Sections 433 and 434 of the Companies Act, 1956 would not be in a position to decide who was at fault in not complying with the terms and conditions of the two documents. In this case, the Supreme Court of India has added another dimension to the never ending debate over the misuse of Section 433(e) of the Companies Act which allows winding up of a company to be made if there is an ‘inability to pay debt’ by the company. Regarding mergers section 230 to 240 of the Act, 2013 administer the same. Free resources to assist you with your legal studies! When the appellant denied any liability, the respondent filed a winding up petition under Sections 433(e) and (f), 434 and 439 of the Companies Act, 1956 against the appellant. Companies Act, which address the circumstances of when a company may be wound up and when a company is deemed unable to pay its debts, and concluded that section 345 should be used to determine whether or not a company is ‘insolvent’ for purposes of section 79 of the (new) Act. (c) if the company has acted against the interests of the sovereignty is unable to pay its debts, and, in determining whether a company is The inability to pay debts forms one of the grounds on which a court may order a company to be put into liquidation.A court must also be satisfied that a company is or is likely to become unable to pay its debts before ordering a company to be placed into administration.These are the two principal corporate insolvency processes in England and Wales. Soon thereafter, the respondent alleged that despite receiving periodical payments from ‘S’, IBA failed to pay any amount in terms of the settlement, even after receiving a notice to such effect by the respondent. What is an old debt? (1) A company may, on a petition under section 272, be wound up by the Tribunal,—. This is not an example of the work produced by our Law Essay Writing Service. The author believes that the decision of the Supreme Court in the present case is just and in favour of public policy. The above discover puts in section 270 to 365 of the Act, 2013. Krishnaswami (1965) 35 Com Cases 456 (SC), Madhusadan Gordhandas & Co. v Madhu Woollen Industries Pvt. Inability to pay debts – A company is deemed to be unable to pay the debts under Section 271 (2) of the Companies Act, 2013 if a creditor to whom company has to pay an amount exceeding Rs. A petition with the Company Court cannot be used a means of putting improper pressure on a company to pay a bona fide disputed debt. contingent and prospective liabilities of the company. Section 434(1) of the Companies Act, 1956 lists three circumstances where a company is Take a look at some weird laws from around the world! Under the Companies Act, 2013, Chapter XV deals with Compromises, Arrangements and Amalgamations. 1 lakh has served a notice at the registered office of the company by registered post or otherwise, which requires the company to pay the due amount and the company has failed to pay the sum within 21 … 7th Aug 2019 Whether a creditor can prefer an application for winding up for discharge of a debt liability when there is a substantial dispute as to liability? the 1956 Act is not available under the s. 231 of the 2013 Act. SICA was repealed and the provisions relating to winding up of companies on the ground of inability to pay debts were also amended/deleted from the Companies Act, 2013. The Pay Something for Nothing” proposition. e Inability to pay debts Section 434 of the Companies Act lays down the from COMPANY SE 10 at Lokmanya Tilak Municipal Medical College, Mumbai satisfaction of the creditor; (f) if the company has made a default in filing with the Registrar its conducted in a fraudulent manner or the company was formed for The parties, therefore, are locked up in lis before this Court and the central point to be resolved is whether there exists a “debt” within the provisions of Companies Act and whether the company could be deemed to be “unable to pay” as required under Section 434 of the Companies Act. 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