Just and equitable winding up permitted where substratum is gone and creditor-supported shareholder petition is maintainable.

Where a company had ceased business, assets were sold in execution, liabilities increased and the leasehold was functionally valueless, the substratum of the company was held to be gone and the company commercially insolvent; applying the statutory discretion to wind up as just and equitable, a winding-up order was appropriate to enable public investigation and orderly winding up. A petition by a fully paid-up shareholder need not be dismissed for lack of alleged surplus where creditors support the petition or the petition is bona fide; absence of assets alone does not bar a winding-up order under the statutory rule.

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Issues: (i) Whether the winding-up order against the company was justified as being "just and equitable" in the facts of the case; (ii) Whether a petition for winding up by a fully paid-up shareholder must be rejected unless he alleges and proves a tangible surplus for his benefit.

Issue (i): Whether the winding-up order was justified as "just and equitable".

Analysis: The Court reviewed admitted facts: the company had ceased business, plant and stock-in-trade were sold in execution, the company was unable to meet its debts, liabilities were increasing, and the leasehold and factory remained encumbered with a forfeiture clause. The Court considered whether the substratum of the company was gone, the practical availability of assets to meet creditors, and whether a public investigation and statutory winding-up procedure were warranted to bring an end to the company's affairs. The Court also weighed the effect of the lease forfeiture clause and the realistic prospects of obtaining value from the leasehold and factory in liquidation.

Conclusion: The Court held that the substratum of the company was gone, the company was commercially insolvent, and that, in the circumstances (including the need for public investigation and practical considerations about the leasehold), it was just and equitable to make a winding-up order. The winding-up order was upheld.

Issue (ii): Whether a fully paid-up shareholder's petition must be dismissed absent proof of a tangible surplus.

Analysis: The Court examined the dictum in Re Rica Gold Washing Co. and subsequent authorities, and the statutory provision that the Court shall not refuse to make a winding-up order merely because the company has no assets (Section 170(1) of the Indian Companies Act). The Court found that the rule requiring a fully paid-up shareholder to show a tangible surplus is not an absolute bar: it does not apply where creditors support the petition, where the statute contemplates orders despite absence of assets, or where the petition is not mala fide. The present petition was supported by creditors, and there was no proof that unsecured creditors could not possibly benefit from winding up.

Conclusion: The Court rejected the contention that the petition must be dismissed for lack of allegation or proof of a tangible surplus. The petition was treated in substance as a creditor-supported petition and was maintainable.

Final Conclusion: The Court affirmed the winding-up order as properly made on the merits: the company was commercially insolvent with its substratum gone, the petition was maintainable (being supported by creditors), and it was just and equitable for the Court to order winding up.

Ratio Decidendi: Where a company has ceased to carry on its business and its substratum is gone resulting in commercial insolvency, the Court may, in the exercise of its statutory discretion, make a just and equitable winding-up order; a petition by a fully paid-up shareholder is maintainable if supported by creditors or otherwise shown to be bona fide, and Section 170(1) of the Indian Companies Act precludes dismissal of a petition solely because the company has no assets.

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