Inability to pay debts established where the company admitted the debt but continued default despite notice and repeated payment extensions.

A company's inability to pay debts was established where the debt was substantially admitted, only interest was disputed, and the company failed to comply with repeated directions to pay the admitted sum despite statutory notice and multiple extensions. The Court treated the continued default and partial deposit over an extended period as sufficient evidence of inability to pay debts under the Companies Act, 1956, and held the company liable to be wound up.

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Issues: Whether the respondent-company was unable to pay its debts and liable to be wound up under sections 433(e) and 434(1)(a) of the Companies Act, 1956.

Analysis: The debt was substantially admitted by the respondent-company, which acknowledged the outstanding amount but disputed interest. Despite repeated opportunities and directions to pay the admitted sum in instalments, the respondent-company failed to comply over an extended period and deposited only a small part of the amount. The Court found that the continued default, notwithstanding service of statutory notice and multiple extensions of time, established inability to pay debts.

Conclusion: The respondent-company was held liable to be wound up for inability to pay its debts.

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