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accordance with the provisions of the Act, it will be members winding up. If the directors are not able to
accordance with the provisions of the Act, it will be members winding up. If the directors are not able to pay the debts within the specified period, the liquidator shall call a meeting of the creditors and it then becomes the creditors winding up [sec.495&Sec.498]. Is winding up possible during the pendency of a civil suit? Section 433 of the Act provides for the circumstances in which a company may be wound up by court. [5] Here arises a question that if there are parallel proceedings for the same subject matter i.e., for the recovery of debt, where one is a civil suit and the other is for winding up of the company, should they be allowed to subsist together? The act nowhere prohibits that the proceedings under the act shall or could not lie, where civil suits are pending or they subsequently be filed. There is no provision in the Act to oust the jurisdiction of the court and decide the winding up proceedings. There would have been a provision to that effect in the Act if the legislature had intended to that effect. Since the winding up proceeding is not merely for the benefit of the petitioner but of all its shareholders, creditors or contributories [6]. The pendency of a civil suit is not a bar to the admission of winding up petition based on same debt.[7] The proceeding for winding up will not be invalidated if a suit is filed by the petitioner by way of abundant caution to save the claim getting barred by limitation[8]. The winding up proceedings can be continued in a company court once it has come to the conclusion that it has not been a case of bona fide and tenable defence is made out [9]. While dismissing the petition for winding up the following principals have to be relied upon by the Court: 1) The defence of the company is in good faith and one of substance. 2) The defence is likely to succeed in point of law. 3) The company adduces prima facie proof of the facts on which the defence depends. 4) Where the debt is undisputed, the Court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay that particular amount and. 5) Where, the company owes the creditor a debt entitling him to a winding up order. But the exact amount of the debt is disputed; the Court will make the winding up order without requiring the creditor to quantify the debt precisely [10]. The following points have to be considered while dealing with winding-up: 1) A petition presented ostensibly for a winding-up order; but really to exercise pressure will be dismissed, and under the circumstances, may be stigmatized as a scandalous abuse of the process of the Court The modern practice has been to dismiss such petitions. If the debt is not disputed on some substantial ground, the Court may decide it on the petition and make the order. [11] 2) The company may be wound up even if it has large assets. The crux is to see if it is unable to meet its current demands i.e., if the current liabilities are more than the current assets. If the company is financially sound and in a position to pay its liability, it cannot be ordered to be wound up under Section 433(e) of the Companies Act. But the company should establish that it is capable of discharging its existing liabilities. There is presumption of inability [12]. 3) Although a winding up petition is an appropriate remedy and a mode of execution against a company
unable to pay its debt, it is not an alternative to the ordinary procedure for realization of the debts due from the company. Since, the creditor had already resorted to the civil suit; the court in its discretion can dismiss the petition [13]. 4) It has been observed that the pendency of a civil suit as such is not merely a ground to oppose a winding up petition [14]. Conclusion After analyzing and observing various legal propositions and situations, it is found that the right to apply for winding up is the creature of statute and not of contract, and the winding up orders passed by the court are not judgments in rem. In the absence of any prohibited provisions in the Act winding up proceedings u/s 433(e), 434,439 can be allowed even if a civil suit is already pending against the debtor company. But it should be marked that the winding up proceeding are greatly affected by the facts and circumstances of a particular case. The machinery of winding-up cannot be used as a pressure tactics, where a suit has already been instituted for recovery of debt, under such circumstances, the proceeding are in the nature of parallel proceedings in respect of the same cause of action. As a result, such course should not be considered by the court more so to avoid conflict of jurisdiction of findings by two parallel courts of competent jurisdiction. Thus at last it can be said that a genuine case has to be made out rejecting the malafide contention, in the interest of good faith and justice.
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