Commercial insolvency test confirms inability to pay debts; compulsory winding up ordered and liquidators appointed.

Petition for compulsory winding up under the Companies Act was decided on the commercial insolvency test: inability to pay present liabilities and no immediate assets or realistic prospect of resuming operations. Evidence showed aircraft destroyed/out of service, cessation of flying operations and technical staff, unpaid lease and creditor demands, non-compliance with statutory demand procedure, and failure to prepare or circulate required balance-sheets; correspondence did not create an enforceable subsidy. Applying the legal test, the petition was allowed and official liquidators were appointed to wind up the company.

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Issues: Whether the petition under section 162 of the Indian Companies Act for the compulsory winding up of Punjab Flying Club Limited should be granted on grounds that the company is unable to pay its debts, has ceased to function and is in a moribund condition.

Analysis: Evidence establishes that all three aircraft owned or operated by the company were destroyed or out of service, no flying operations or technical staff existed for several months, no cash was on hand, lease rent and creditors' demands remained unpaid, and statutory demands under section 163(2) were not complied with. The company failed to prepare or circulate statutory balance-sheets for the required periods and the managing committee and members did not convene or take steps to remedy the situation. Correspondence with Government did not demonstrate any binding agreement for further grants beyond the fixed term, so no enforceable subsidy was due. The relevant legal test is commercial insolvency: inability to meet current demands despite any unrealizable or disputed assets or claims. Applying that test to the proved facts shows absence of assets immediately available to meet liabilities and no reasonable prospect of resumption of operations in the near future.

Conclusion: The petition under section 162 is allowed; the Punjab Flying Club Limited is to be compulsorily wound up and official liquidators are appointed. The decision is in favour of the petitioner.

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