Admitted debt and unpaid statutory demand can justify winding-up, while BIFR bona fides remain for statutory inquiry.

An admitted debt left unpaid after statutory demand can justify admission of a winding-up petition for inability to pay debts, especially where the company gives no real defence and sale proceeds are not applied to repayment. Questions concerning the bona fides of a reference under the SICA lie within the statutory inquiry of the BIFR, and the Company Court should not usurp that jurisdiction, though it may note prima facie concerns. Where promoters and directors have breached repayment assurances and mishandled assets, the Court may place the company under neutral protective supervision through an administrator to safeguard stakeholders while preserving day-to-day functioning.

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Issues: (i) whether the company had failed to pay an admitted debt and was liable to have the winding-up petition admitted; (ii) whether the Court should itself pronounce on the bona fides of the company's reference to the BIFR under the SICA; (iii) whether an administrator/provisional liquidator-type protective arrangement was warranted in view of the conduct of the promoters and directors.

Issue (i): whether the company had failed to pay an admitted debt and was liable to have the winding-up petition admitted.

Analysis: The debt under the FCCBs was repeatedly admitted in the company's explanatory statement, public announcements and affidavit. The company sold the MSD business but did not apply the proceeds towards repayment, and no real defence was shown to the statutory demand. Inability to pay debt was established on the materials before the Court.

Conclusion: The winding-up petition was rightly admitted on the ground that the company was unable to pay its debts.

Issue (ii): whether the Court should itself pronounce on the bona fides of the company's reference to the BIFR under the SICA.

Analysis: The formation of opinion by the board under section 15(1) of the SICA and the question whether the reference was bona fide fell within the BIFR's inquiry under section 16. The Court held that deciding that question itself would trench upon the BIFR's jurisdiction, though the Court recorded serious prima facie concerns about the promoters' conduct.

Conclusion: The Court declined to decide the bona fides of the BIFR reference and left that question to the BIFR.

Issue (iii): whether an administrator/provisional liquidator-type protective arrangement was warranted in view of the conduct of the promoters and directors.

Analysis: The Court found repeated breaches of assurances regarding repayment, diversion of sale proceeds and conduct indicating that the promoters could not be trusted with the company's affairs. To protect the company and its stakeholders while preserving day-to-day functioning, a neutral administrator was appointed with limited supervisory powers.

Conclusion: Protective supervision over the company was ordered by appointing an administrator.

Final Conclusion: The petition succeeded at the admission stage, the company was held unable to pay its debts, and interim protective control was placed over its affairs, while the question of the BIFR reference was left for the statutory forum to determine independently.

Ratio Decidendi: Where an admitted debt remains unpaid and the statutory demand is unanswered, the company may be admitted to winding up for inability to pay debts; and where the SICA entrusts inquiry into sickness and the bona fides of the reference to BIFR, the Company Court should not usurp that jurisdiction.

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