1999 (2) TMI 489

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....ll be deemed to be unable to pay its debts- (a)and (b)** ** ** (c)if it is proved to the satisfaction of the Court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the Court shall take into account the contingent and prospective liabilities of the company." The only averments relied on by the petitioners insofar as ground for winding up are paragraph 23 of the petition. The petitioners have therein set out that very fact that the cheques issued by the respondents were dishonoured by non-payment also bear out fact that the company has no resource to meet its liabilities. In the circumstances, the company has become commercially insolvent and it is just, proper and necessa....

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.... its debts and secondly in so deciding the Court must take into account the contingent and prospective liabilities of the company. It may be true that the petitioners have been able to show that monies were advanced by the petitioners to the company and that the cheques when presented were dishonoured. That would be the first requirement namely that the company owes monies to the petitioners. However, that alone by itself is not sufficient. The second requirement which must be satisfied and which the Court must take into consideration are the contingent and prospective liabilities of the company. A perusal of the averments in the petition and in the affidavit in rejoinder and the annextures thereto, there is no material placed before the Co....

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....d liabilities of the Company in the affidavit in opposition raises a strong presumption of commercial insolvency under section 114 of the Evidence Act, 1872 because the company which had special means of knowledge of these facts had not chosen to disclose them. The said contention was rejected by the learned single judge on the ground that the burden of proof of proving insolvency is on the applicant. It was thereafter set out that the allegation as to the insolvency made by the petitioner have been denied by the respondent-company. In reply the applicant did not rely on specific facts and not event the last balance sheet which was published and distributed to the shareholders. The learned single judge thereafter proceeded to hold that in h....