Substantial settlement of liabilities justified rejection of winding-up reference, subject to affidavit and indemnity bond for residual dues.

A sick industrial company's winding-up reference was rejected because the secured and statutory dues were substantially settled, including clearance by the bank, State Financial Corporation, provident fund and sales tax authorities, and other creditors were addressed through settlements. The Court accepted that the remaining liabilities were either under negotiation or not supported by adequate material. It also required an affidavit and indemnity bond undertaking to clear any residual amounts, after which the proceedings were closed.

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Issues: Whether, in view of the settlement of substantial dues and the undertaking to clear any balance amounts, the reference for winding up under the Sick Industrial Companies (Special Provisions) Act, 1985 should be rejected and the proceedings closed.

Analysis: The respondent-company placed material showing that the secured dues had been settled, the concerned bank had issued a no-dues certificate, the State Financial Corporation had issued a clearance certificate, provident fund dues had been cleared, sales tax dues had been settled, and other creditors had been addressed through settlements. The remaining liabilities were either stated to be under negotiation or were supported by insufficient material. In these circumstances, the Court found that the company had substantially cleared its liabilities and that the matter could be closed on the filing of an affidavit and an indemnity bond undertaking to clear any amounts mentioned in due course.

Conclusion: The reference was rejected and the proceedings were closed in favour of the respondent-company.

Final Conclusion: The Court declined to continue with the winding-up reference because the company had substantially settled its dues and furnished the required undertaking for any residual liabilities.

Ratio Decidendi: Where a sick industrial company has substantially settled its liabilities and undertakes through affidavit and indemnity bond to discharge any remaining dues, the reference under the Act may be rejected and the proceedings closed.

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