Statutory demand under hand required: informal solicitor or premature manager letters do not trigger insolvency consequences.

A statutory demand must be a formal demand executed 'under the hand' of the creditor or otherwise meet the statute's formal requirements, and must be made when the company is actually in default; solicitor demand letters or a manager's contemporaneous letter served before presentment completion do not satisfy this requirement, so they do not trigger the statutory three week consequence. Separately, reliance on a company's balance sheet or unpleaded material cannot conclusively establish inability to pay; absence of pleaded proof of insolvency prevents sustaining a compulsory winding up. Consequence: petition dismissed for defective demand and insufficient proof of inability to pay.

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Issues: (i) Whether the notices relied on by the petitioning creditors complied with the requirement of a demand "under his hand" under Section 163 of the Indian Companies Act; (ii) Whether the petitioning creditors have established the company's inability to pay its debts so as to justify compulsory winding up under Section 182(5) of the Indian Companies Act.

Issue (i): Compliance of the statutory demand requirement of Section 163 of the Indian Companies Act by notices signed by the petitioning creditors' solicitors or by a letter signed by the petitioning creditors' manager.

Analysis: The Court examined whether the phrase "under his hand" in Section 163 is satisfied by a solicitor's letter or by the manager's letter presented on the due date of the promissory note. The Court held that the phrase carries a special purpose and formal consequence and cannot be treated as complied with merely by a solicitor's demand letter left at the registered office. The manager's letter dated the due day was also held insufficient because presentment for payment had not been effectively completed at the time of service or, if presentment were unnecessary, the company still had the remainder of the day to pay; thus the company was not in default at the moment of service as required by Section 163(1).

Conclusion: The notices relied upon did not comply with Section 163 and therefore did not constitute the statutory demand required to trigger the three-week consequence under the provision.

Issue (ii): Whether, notwithstanding failure of statutory notice, the petitioning creditors had elsewhere proved the company's inability to pay its debts so as to sustain the winding up petition.

Analysis: The Court considered whether the petition could be supported aliunde by amendment or by the company's own balance sheet. It observed that proof of inability to pay should have been pleaded so the company could answer; the balance sheet did not, on its face, conclusively establish inability to pay. The Court further noted that the judge's earlier findings on the promissory note's character and any arrangement releasing the company were no longer binding and left those questions open.

Conclusion: The petitioning creditors failed to satisfy the Court that the case fell within Section 182(5) and did not otherwise establish the company's inability to pay its debts; the winding up petition must therefore fail.

Final Conclusion: The petition for compulsory winding up is dismissed for want of proper statutory demand and insufficient proof of inability to pay; the intermediate order awarding costs against the petitioning creditors is discharged in part and limited costs for one affidavit are allowed to the company.

Ratio Decidendi: A demand under Section 163 of the Indian Companies Act must be a formal demand "under the hand" of the creditor (or otherwise satisfy the statute's special formal requirements) at a time when the company is in default; ordinary solicitor letters or contemporaneous manager letters served before presentment completion do not necessarily satisfy that statutory requirement.

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