Admitted debt and insolvency justify winding up, while curable service defects do not defeat the petition.

Procedural non-compliance with advertisement and affidavit-of-service requirements under the Companies (Court) Rules, 1959 was treated as curable and non-prejudicial, so it did not bar consideration of the winding-up petition. The company's admitted debt, repeated default on maturity, and inability to rebut insolvency supported winding up; proposed BIFR reference, alleged asset sales, and expected future realisation did not displace the admitted liability or presumption of inability to pay debts. Conduct of promoters and directors, including diversion of sale proceeds and misleading representations, was relevant to bona fides and insolvency. The winding-up petition succeeded, with the order kept in abeyance for a limited period for a going-concern sale process.

---

---

Issues: (i) Whether non-compliance with the advertisement and affidavit-of-service requirements under the Companies (Court) Rules, 1959 warranted refusal to hear or dispose of the winding-up petition. (ii) Whether the company was liable to be wound up on the basis of admitted debt, admitted default and insolvency.

Issue (i): Whether non-compliance with the advertisement and affidavit-of-service requirements under the Companies (Court) Rules, 1959 warranted refusal to hear or dispose of the winding-up petition.

Analysis: The requirements as to advertisement and filing of affidavit of service were treated as procedural. The advertisement had been issued in the newspapers and in the Official Gazette, and the hearing ultimately took place well after publication. The delayed affidavit of service was filed after the court vacation and the defect was held curable. The court relied on its power to enlarge time and to issue further directions, and held that no prejudice was caused to the company or to other creditors.

Conclusion: The procedural objections were rejected and did not bar consideration of the winding-up petition.

Issue (ii): Whether the company was liable to be wound up on the basis of admitted debt, admitted default and insolvency.

Analysis: The company had acknowledged the bonds, failed to repay them on maturity, and repeatedly admitted default. The court found that the company's defences, including the attempt to rely on the proposed BIFR reference, the asserted sale of business assets, and the claim of future asset realisation, did not displace the admitted liability or the presumption of inability to pay debts. The court also treated the conduct of the promoters and directors, including diversion of sale proceeds and misleading representations, as relevant to the assessment of bona fides and insolvency. Applying the principle that an undisputed debt must be paid and that inability to pay debts justifies winding up, the court concluded that the company had not rebutted insolvency.

Conclusion: The company was held liable to be wound up.

Final Conclusion: The winding-up petition succeeded, the company was ordered to be wound up, and the order was kept in abeyance for a limited period to permit a going-concern sale process aimed at protecting employee interests and maximising realisation.

Ratio Decidendi: Where a company admits its debt and default and fails to rebut insolvency, procedural defects in advertisement or service that cause no prejudice do not defeat winding-up relief.

---