Inability to pay debts and public interest justify winding up where deposit defaults and RBI non-compliance show persistent financial distress.

Acceptance of public deposits, repeated cheque defaults, non-compliance with RBI directions on approved securities, and a negative net owned fund were treated as evidence that the company could not meet depositor obligations. Those facts also showed liabilities exceeding realizable assets and supported the statutory basis for winding up on grounds of inability to pay debts and public interest. The company was therefore held liable to be wound up under the Reserve Bank of India Act, 1934 read with the Companies Act, 1956, and liquidation through the official liquidator was ordered.

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Issues: Whether the company was liable to be wound up on the ground that it was unable to pay its debts and that winding up was justified in public interest under the Reserve Bank of India Act, 1934 read with the Companies Act, 1956.

Analysis: The company had accepted public deposits, failed to comply with the Reserve Bank of India directions relating to investments in approved securities and continued default in repayment was evidenced by the repeated bouncing of cheques and the unsatisfactory financial position disclosed by inspection. The company's net owned fund was found to be negative on the material placed before the Court, its liabilities exceeded realizable assets, and its conduct showed persistent inability to meet depositor obligations. These facts supported the statutory ground for winding up and also established that continuance of the company was not in the public interest.

Conclusion: The company was liable to be wound up under section 45MC of the Reserve Bank of India Act, 1934 read with section 433 of the Companies Act, 1956.

Final Conclusion: The petition for winding up was allowed and the company was ordered to be liquidated through the official liquidator.

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