Compromise in winding up petition accepted partly; automatic reinstatement on breach rejected as impermissible in law.

In a winding up petition based on inability to pay admitted debts, the Court accepted the compromise only to the extent it reflected a lawful settlement of the parties' disputes, including payment terms, premises vacating, security deposit retention, and outstanding dues. The clause providing for automatic admission or reinstatement of the company petition on breach of the settlement was held impermissible in law and rejected. The compromise was recorded, the petition was disposed of on that basis, and the petitioner was left at liberty to revive the company petition if the respondent failed to comply with the settlement terms.

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Issues: Whether the compromise filed in the winding up petition could be accepted in part and whether the clause providing for automatic admission or reinstatement of the petition on breach of settlement terms was legally permissible.

Analysis: The parties placed a compromise before the Court in a company petition for winding up on the ground of inability to pay admitted debts. The settlement covered vacation of premises, payment of a sum of money, retention of the security deposit, and settlement of outstanding dues. The Court accepted the compromise insofar as it reflected a lawful settlement between the parties. However, the clause stating that the company petition would stand admitted again upon breach was found to be impermissible in law and was rejected. The Court nevertheless made it clear that if the respondent failed to comply with the compromise terms, the petitioner would be at liberty to revive the company petition.

Conclusion: The compromise was accepted to the extent of the lawful settlement terms, the automatic reinstatement clause was rejected, and the petition was disposed of recording the compromise with liberty to revive in case of breach.

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