Winding-up petition on admitted debt survives where money-lending objections, coercion claims, unauthorised interest, and inadequate security all fail.

An intercorporate deposit was treated as a corporate placement of surplus funds, not money-lending business, so the U.P. Regulation of Money Lending Act, 1976 did not bar the winding-up petition. The pleadings also failed to establish coercion, undue influence or absence of free consent, because the respondent voluntarily sought the deposit and executed the documents after board approval. The managing director was found to have authority to agree to the enhanced interest, with the principle of indoor management supporting the petitioner's reliance on internal authorisation. The equity shares offered as security were not readily realisable or sufficient to cover the admitted liability, so they did not defeat the petition.

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Issues: (i) whether the petitioner's advance as an intercorporate deposit attracted the U.P. Regulation of Money Lending Act, 1976 and barred the winding-up petition; (ii) whether the agreement was vitiated by coercion, undue influence or absence of free consent; (iii) whether the managing director was authorised to agree to the enhanced rate of interest; and (iv) whether the security of equity shares was adequate so as to defeat the winding-up petition.

Issue (i): whether the petitioner's advance as an intercorporate deposit attracted the U.P. Regulation of Money Lending Act, 1976 and barred the winding-up petition

Analysis: The advance was treated as a corporate placement of surplus funds and not as a money-lending business. Public companies were exempted from the operation of the U.P. Regulation of Money Lending Act, 1976 in respect of loans, advances or deposits, and the record did not show that the petitioner carried on the business of money lending. The respondent had also passed a resolution accepting the amount as an intercorporate deposit. The statutory bar for recovery of a loan did not, therefore, apply to the winding-up petition.

Conclusion: The objection under the U.P. Regulation of Money Lending Act, 1976 failed and the petition was not barred on that ground.

Issue (ii): whether the agreement was vitiated by coercion, undue influence or absence of free consent

Analysis: The pleadings did not disclose any specific case of coercion or undue influence. Mere financial necessity, or the fact that the respondent sought funds on less favourable terms, did not establish domination of will by the petitioner. The respondent had voluntarily sought the deposit, accepted the terms through its board resolution, and executed the documents. On these facts, the consent could not be treated as involuntary or vitiated.

Conclusion: The plea of coercion, undue influence and absence of free consent was rejected.

Issue (iii): whether the managing director was authorised to agree to the enhanced rate of interest

Analysis: The managing director had board authority to execute the relevant documents with necessary modifications. The enhanced interest followed the respondent's default and request for extension. The Court applied the principle of indoor management and treated the petitioner as entitled to assume that internal corporate authorisation existed. The increased rate of interest was, therefore, not shown to be beyond authority.

Conclusion: The objection to the enhanced rate of interest was rejected.

Issue (iv): whether the security of equity shares was adequate so as to defeat the winding-up petition

Analysis: The shares offered as security stood in the names of the managing director and his wife, were not shown to be immediately marketable in the required lot size, and were subject to a lock-in period. Their quoted value was also below par and far short of the admitted debt with interest. The security was thus neither readily realisable nor sufficient to cover the admitted liability.

Conclusion: The security was not adequate and did not defeat the winding-up petition.

Final Conclusion: The debt was prima facie established, the statutory objections failed, and the petition was fit to be admitted and advertised, though publication was temporarily deferred on the conditions imposed by the Court.

Ratio Decidendi: A creditor's winding-up petition is maintainable on an admitted debt where the debtor's objections based on money-lending restrictions, alleged coercion, unauthorised interest, or alleged security do not withstand scrutiny, and inadequate or non-realizable security does not by itself displace the company's liability to pay.

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