Commercial insolvency under section 434(1)(c) requires proof of inability to pay debts, not just dishonoured cheques.

A winding-up petition under section 434(1)(c) of the Companies Act, 1956 required proof not only of the claimed debt but also that, after considering contingent and prospective liabilities, the company was commercially insolvent and unable to pay its debts. The allegation of insolvency was denied, and the petitioner produced no material on the company's overall financial position or liabilities. Mere dishonour of cheques and correspondence seeking balance-sheets were insufficient without proper pleadings and supporting evidence, so the petition was not made out.

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Issues: Whether a winding-up petition could be maintained under section 434(1)(c) of the Companies Act, 1956, on the basis that the company was commercially insolvent and unable to pay its debts.

Analysis: For invoking section 434(1)(c), the petitioner had to establish not only that the company owed the claimed debt, but also that, when its contingent and prospective liabilities were taken into account, the company was unable to pay its debts. The allegation of commercial insolvency was denied by the company, and no material was produced to show the company's contingent and prospective liabilities or its overall financial inability to meet the debt. Mere dishonour of cheques and correspondence seeking balance-sheets were held insufficient, in the absence of proper pleadings and supporting material, to discharge the petitioner's burden.

Conclusion: The petitioner failed to prove commercial insolvency under section 434(1)(c), and the winding-up petition was not made out.

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