Winding-up and creditor equality: selective settlement after provisional liquidation was refused to avoid impermissible preference.

The appellate court found no basis to interfere with orders admitting the winding-up petition, appointing a provisional liquidator, and refusing selective settlement with a few creditors. Multiple unpaid creditors, dishonoured cheques, and an unreliable statement of affairs supported the view that the company's assets and liabilities required collective resolution. Because the debts were not disputed in principle and the company had sought piecemeal settlements after provisional liquidation, selective satisfaction would have given impermissible preference to some unsecured creditors over others. The court treated the conduct as consistent with acquiescence in winding-up and held that a comprehensive compromise or arrangement, not selective payment, was the proper course.

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Issues: Whether the appellate court should interfere with the orders admitting the winding-up petition, appointing the provisional liquidator, and declining to permit selective settlement with a few creditors after provisional liquidation.

Analysis: The company had multiple unpaid creditors, dishonoured cheques, and a statement of affairs that did not inspire confidence as to the location and recoverability of assets. The record showed that the company had not disputed the debts in principle, had entered into settlements with some creditors, and sought interim directions that would effectively prefer a few unsecured creditors over the rest. In those circumstances, selective satisfaction of claims after appointment of the provisional liquidator would amount to impermissible preferential treatment. The company's conduct also showed acquiescence in the winding-up process and a need for a comprehensive scheme of compromise or arrangement rather than piecemeal settlements.

Conclusion: The impugned orders did not warrant interference, and the appeal was dismissed along with the connected applications.

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