Winding-up for inability to pay debts is maintainable despite pending cheque-dishonour proceedings under the Negotiable Instruments Act.

A company may be wound up for inability to pay its debts where the debtor does not dispute the material facts, fails to reply to the statutory demand notice, and leaves the debt unpaid after issuing a cheque that is dishonoured. On those facts, the statutory condition of inability to pay was treated as satisfied. Pendency of proceedings under section 138 of the Negotiable Instruments Act did not bar the winding-up petition, because cheque-dishonour prosecution is distinct from debt-recovery proceedings and is not an alternative to company-law relief. The petition was therefore maintainable and the company was liable to be wound up.

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Issues: Whether the respondent-company was liable to be wound up for inability to pay its debts, and whether the pendency of proceedings under section 138 of the Negotiable Instruments Act affected maintainability of the winding-up petition.

Analysis: The respondent-company did not dispute the material facts or answer the statutory notice demanding payment. The record showed that financial accommodation had been advanced, the respondent issued a cheque towards repayment, and the cheque was dishonoured. A subsequent statutory demand notice also remained unanswered and unpaid. On these facts, the statutory requirement under the winding-up provisions that the company be deemed unable to pay its debts stood satisfied. The pendency of proceedings under section 138 of the Negotiable Instruments Act did not bar the winding-up petition, because criminal proceedings for cheque dishonour are distinct from proceedings for recovery of a debt and are not an alternative remedy in place of company-law relief.

Conclusion: The winding-up petition was maintainable and the respondent-company was held liable to be wound up.

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