Inability to pay admitted debt justifies winding up when the company gives no effective rebuttal after due service.

A company may be wound up for inability to pay its admitted debt where the debt is not disputed and no effective rebuttal is filed after due service and publication. Here, the respondent-company admitted liability, yet filed no reply or counter-affidavit to contest the claim despite service under the Companies (Court) Rules, 1956. The Court treated the admitted default as sufficient to establish inability to pay under the Companies Act, 1956, and held that winding up was warranted. The winding-up petition succeeded, and the Official Liquidator was directed to proceed as liquidator in accordance with the applicable rules.

---

---

Issues: Whether the respondent-company was liable to be wound up on the ground of inability to pay its admitted debt.

Analysis: The petition was based on sections 433 and 434 of the Companies Act, 1956. The claim was supported by the respondent-company's admission of liability, and despite service and publication in accordance with rule 24 of the Companies (Court) Rules, 1956, no reply or counter-affidavit was filed to dispute the debt. On these facts, the Court found that the company had failed to discharge its admitted liability and was unable to pay its debt.

Conclusion: The issue was answered in favour of the petitioner. The respondent-company was liable to be wound up.

Final Conclusion: The winding-up petition succeeded and the Official Liquidator was directed to proceed as liquidator of the company in accordance with the applicable rules.

Ratio Decidendi: Where a company does not dispute an admitted debt and offers no effective rebuttal after due service and publication, inability to pay debt is established for winding up under the Companies Act, 1956.

---