Inability to pay debts justified winding up where the company admitted liability, defaulted on payment, and showed no rehabilitation plan.

A company may be wound up under the Companies Act, 1956 where its inability to pay admitted debts is shown by the record. The company here did not seriously dispute the debt, admitted financial inability to pay, and failed to comply with a prior court direction to deposit the admitted dues. Its factory had remained closed for a long period, no rehabilitation scheme was produced, and the admitted financial crunch indicated that it could not discharge its liabilities. On those facts, the court held that continuing the company would serve no useful purpose and allowed the winding-up petition.

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Issues: Whether the respondent-company was unable to pay its debts so as to justify an for winding up under the Companies Act, 1956.

Analysis: The respondent-company did not seriously dispute the debt and admitted its financial inability to make payment. It also failed to comply with the court's earlier direction to deposit the admitted dues within the time granted. The factory had remained closed for a long time, no rehabilitation scheme was placed before the court, and the admitted financial crunch showed that the company was not in a position to discharge its liabilities. In these circumstances, continuing the company would serve no useful purpose.

Conclusion: The requirement of inability to pay debts was satisfied and the winding-up petition was allowed.

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