Permanent stay of winding up requires bona fide revival plan, not a private asset grab or bypass of liquidation safeguards.

The power under section 466 of the Companies Act, 1956 to stay winding up is discretionary and requires the court to be satisfied that the application is bona fide, commercially proper and genuinely directed to revival of the company. Mere willingness to pay creditors or settle claims is insufficient; the court must also ensure that the proposal does not amount to a private takeover of assets or bypass the statutory winding-up and compromise regime. On the facts described, no genuine revival plan for the textile business was shown and the real object appeared to be acquisition of valuable lands for real estate development. The application for a permanent stay of winding up was therefore dismissed.

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Issues: Whether the applicants were entitled to a permanent stay of the winding up under section 466 of the Companies Act, 1956.

Analysis: The power to stay winding up is discretionary and can be exercised only when the court is satisfied, on the materials placed, that the application is bona fide, that the proposed course is consistent with commercial morality and public interest, and that it genuinely serves revival of the company rather than a private takeover of its assets. Mere willingness to pay creditors or settle claims is not enough. The company court must also guard against any arrangement that would take the assets out of its supervision or circumvent the statutory regime governing winding up and compromise or arrangement. On the facts, the applicants had not shown a genuine proposal to revive the textile business. The material indicated that the real object was to obtain control of the company's valuable lands for real estate development, while bypassing the normal process of liquidation and sale under court supervision.

Conclusion: The applicants were not entitled to a permanent stay of winding up. The application was dismissed.

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