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2015 (7) TMI 578 - DELHI HIGH COURTWinding up of company - Inability to pay debts - Held that:- it cannot be determined by the company court that the company sought to be wound-up is "unable to pay its debts" within the meaning of clause (e) of section 433 of the Act unless it is heard at the admission stage. This is fortified by the use of the word "may" - denoting a discretion vested in the court - in the opening part of the section, as contrasted with the use of the word "shall" in the proviso to clause (h) which does not confer any discretion on the court where the winding-up petition is presented by the Government (Central or State) on the ground that the company has acted against the interests of the sovereignty and integrity of the country, security of the State, public order etc. There seems to be a clear line of difference between cases where there are substantial arguable issues in favour of the company sought to be wound-up even on the question whether the debt is due and cases where the merits of the revival scheme are projected as a defence and an appeal is made to the conscience of the company court to exercise the discretion not to order winding-up. Pradeshiya Industrial and Investment Corporation of UP (1994 (2) TMI 267 - SUPREME COURT OF INDIA) decided by the Supreme Court is a case which exemplifies the first category. There, there were certain questions of law raised in defence of the plea against the winding-up under section 433(e): that the promoters‟ agreement was cancelled, which aspect was not taken note of by the company court, that the appellant before the court which was sought to be wound-up was not a debtor at all as it was a financial institution which aspect was also not considered and that the claim was the subject matter of arbitration proceedings, which had also been overlooked by the company court. It was in these circumstances that the Supreme Court held that the defence of the company was a "substantial one and not mere moonshine". In fairness to the petitioner, it must be said that it was stated on its behalf that the effectiveness of the CDR Scheme and its impact on the ability of the respondent-company to repay its debts is a matter that can be examined in detail once the petition is admitted. The right of the respondent-company to argue, at that time in the course of the second motion proceedings, on the basis of the Scheme and the financial ability obtaining at that time was not disputed. In these circumstances, the winding-up petition is admitted. - Decided in favour of Appellant.
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