Commercial insolvency controls winding-up: admitted debt, ignored notice, and parallel arbitration did not prevent admission of the petition.

Commercial insolvency, not an abstract balance-sheet comparison, governed the winding-up inquiry under the Companies Act, 1956. Failure to pay an admitted and undisputed debt after statutory notice raised a presumption that the company was unable to pay its debts, and the existence of immovable assets, blocked assets, or security in other proceedings did not defeat that conclusion. Pending arbitration and proceedings for interim protection under the Arbitration and Conciliation Act, 1996 were held not to bar a creditor's winding-up petition because the reliefs were different. Guarantors' undertakings and injunctions obtained elsewhere did not amount to payment or displace the company's liability.

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Issues: Whether the company was unable to pay its debts within the meaning of the winding-up provisions and whether the pendency of arbitration, the existence of security, and the orders obtained in other proceedings barred or outweighed admission of the creditor's winding-up petition.

Analysis: The statutory scheme under Sections 433(e), 434(1)(a) and 434(1)(c) of the Companies Act, 1956 was treated as directed to commercial insolvency, not a comparison of assets and liabilities in the abstract. Failure to pay an admitted and undisputed debt, coupled with non-response to the statutory notice, gave rise to the presumption of inability to pay. The existence of immovable or blocked assets, or security furnished in other proceedings, was held not to be decisive for assessing the company's present ability to pay its debts. The court further held that arbitration proceedings and proceedings under Section 9 of the Arbitration and Conciliation Act, 1996 do not bar a creditor's winding-up petition, because the issues and reliefs are different. The guarantors' undertakings and the injunction obtained elsewhere did not amount to payment, nor did they displace the company's own liability under Section 128 of the Contract Act, 1872.

Conclusion: The company was held to be commercially unable to pay its debts, and the winding-up petition was admitted.

Final Conclusion: The creditor succeeded on the winding-up petition, while the connected application filed by the company failed; admission was made conditional on payment within the time granted, failing which advertising directions were to follow.

Ratio Decidendi: For winding up on the ground of inability to pay debts, the decisive enquiry is commercial insolvency shown by failure to satisfy an admitted debt and neglect to pay, secure, or compound for it to the creditor's reasonable satisfaction, and not the mere existence of assets, security, or parallel arbitration proceedings.

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