Statutory Demand and Insolvency: failure to comply plus admissible documentary evidence can sustain winding up of a company.

Where a creditor served a statutory demand and the debtor failed to comply, the court treated that demand together with documentary admissions and balance-sheet disclosure as sufficient admissible evidence to establish inability to pay and affirmed winding up. The guarantor's argument that the guarantee was executed with a Hong Kong branch and thus lacked privity with the bank's head office was rejected on the basis of the contract text and parties' conduct. Defences of inadequate stamping in another jurisdiction and absence of an officer's certificate were held not to preclude reliance on the totality of evidence for winding up.

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Issues: (i) Whether the appellant company is liable to be wound up as being unable to pay its debts on the basis of the statutory demand and invoked corporate guarantee; (ii) Whether the defence that the guarantee was executed with the Hong Kong branch and thus there was no privity of contract with the bank's head/corporate office is sustainable; (iii) Whether insufficiency of stamp duty on the corporate guarantee and absence of an officer's certificate under the guarantee preclude reliance on the guarantee in the Company Petition.

Issue (i): Whether the appellant company is liable to be wound up as being unable to pay its debts on the basis of the statutory demand and invoked corporate guarantee.

Analysis: The respondent served a statutory demand under the Companies Act showing a debt exceeding the statutory threshold and the appellant failed to comply. The petition record includes documentary material and admissions (including letters and disclosure in the appellant's balance sheet) establishing the existence and quantification of the debt. Section 434 operates as a deeming provision where a creditor having served a demand and not being paid may rely on that to seek winding up; the Company Court may consider material other than a single document to conclude inability to pay.

Conclusion: The finding that the appellant is unable to pay its debts and hence liable to be wound up is upheld.

Issue (ii): Whether the defence that the guarantee was executed with the Hong Kong branch and thus there was no privity of contract with the bank's head/corporate office is sustainable.

Analysis: The guarantee and related documents describe the bank with its registered office and corporate office and specify action through its Hong Kong branch. The documents and surrounding conduct (including subsequent acknowledgement letters and amendments) demonstrate contractual relations and liability binding the appellant vis-a -vis the bank as pleaded in the petition. Jurisdictional/situs arguments about branch identity do not negate privity where the bank is identified and the contract binds the guarantor to the bank's obligations.

Conclusion: The contention of absence of privity with the bank's head/corporate office because the transaction involved the Hong Kong branch is rejected.

Issue (iii): Whether insufficiency of stamp duty on the corporate guarantee and absence of an officer's certificate under the guarantee preclude reliance on the guarantee in the Company Petition.

Analysis: The adequacy of stamp duty in the State where the document was executed was established; even if different stamp rules apply in another State, insufficiency of stamp duty is a defence available in appropriate proceedings (e.g., a civil suit) but does not automatically preclude a Company Court from treating the statutory demand and other convincing material as proof of debt for winding up. Similarly, while a certificate by an authorized officer may be conclusive proof under the guarantee, the creditor may prove the debt by other admissible evidence; absence of that particular certificate is not fatal to the petition where other convincing materials exist.

Conclusion: The defences based on stamp insufficiency and absence of the officer's certificate do not prevent the Company Court from adjudicating that the appellant is unable to pay its debts; those defences do not warrant interference with the winding up order.

Final Conclusion: The appellate court affirms the Company Court's conclusion that the appellant is liable to be wound up on the basis that it is unable to pay its debts, and dismisses the appeal.

Ratio Decidendi: Where a creditor serves a statutory demand and the debtor fails to comply, section 434 of the Companies Act, 1956 permits a Company Court to treat the company as unable to pay its debts; auxiliary objections such as branch situs, inadequate stamping in another jurisdiction, or absence of a contractually prescribed certificate do not necessarily preclude reliance on the totality of admissible evidence to establish inability to pay for winding up purposes.

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