Rehabilitation scheme and Section 22 protection do not bar winding up unless present inability to pay debts is shown.

A winding up petition for inability to pay debts will not succeed where the company is operating under a sanctioned rehabilitation and amalgamation scheme that provides for staggered payment of unsecured creditors over time rather than immediate demand. On the material placed, no present inability to pay debts was shown. Section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 was treated as protecting the original sick industrial company under the framed scheme, not the amalgamated company that took over under the sanctioned arrangement. The statutory bar was therefore held inapplicable to the winding up proceedings against the amalgamated company.

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Issues: (i) Whether the company could be wound up on the ground of inability to pay debts despite the rehabilitation and amalgamation scheme under implementation. (ii) Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 barred the winding up proceedings against the amalgamated company.

Issue (i): Whether the company could be wound up on the ground of inability to pay debts despite the rehabilitation and amalgamation scheme under implementation.

Analysis: The relevant scheme contemplated a package arrangement for revival over a period of years, with unsecured creditors to be paid according to the projected schedule and not immediately on demand. The viability material and annexures formed part of the scheme framework and showed that the amalgamated company was expected to service its liabilities over the stipulated period. On the material placed, no sufficient basis was made out to show that the company was unable to pay its debts so as to justify winding up.

Conclusion: The ground of inability to pay debts was not established, and winding up was not warranted.

Issue (ii): Whether section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 barred the winding up proceedings against the amalgamated company.

Analysis: The statutory protection was found to relate to the sick industrial company whose scheme had been framed, namely the original company, and not to the amalgamated company which had taken over under the sanctioned scheme. Once amalgamation took effect, the original entity ceased to have an independent existence for this purpose. Therefore, section 22 could not be invoked by the respondent to defeat the winding up petition against the amalgamated company.

Conclusion: Section 22 did not bar the present winding up proceedings against the amalgamated company.

Final Conclusion: The petition failed because the petitioners did not establish a present inability to pay debts, and the rehabilitation scheme contemplated payment of unsecured creditors over time, so the winding up request was rejected.

Ratio Decidendi: A winding up petition on the ground of inability to pay debts will not succeed where the liability is governed by a sanctioned rehabilitation package providing staggered payment, and the statutory suspension under section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 does not automatically extend to the amalgamated company unless the statute so applies on its terms.

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