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Application for winding up of National Industrial Corporation Ltd. on the ground of inability to pay debts. Detailed Analysis: The case involves an application by Lakshmiji Sugar Mills for the winding up of National Industrial Corporation Ltd. due to the latter's alleged inability to pay its debts. Both companies had interconnected directors, with control initially held by Ram Rattan's group. However, control shifted to Ramji Das's group during a general meeting in December 1964. The application was resisted by the company shareholders and directors initially, but later also by the company itself after the change in control. The basis of the application was a debt owed by National Industries to Seth Brothers, the managing agents, which was transferred to Lakshmiji. Lakshmiji also provided services to National Industries, resulting in a total payable amount of Rs. 2,35,787.89 as per the balance sheet of 1963. Despite evidence showing the financial stability of National Industries post-1964, the petition was solely based on the failure to pay a debt exceeding Rs. 500 within the statutory period, triggering the presumption of inability to pay debts under the Companies Act. The main dispute centered around whether the debt transfer from National Industries to Lakshmiji was valid. The respondent argued that the debt could not be immediately demanded due to an agreement with the Uttar Pradesh Financial Corporation, which restricted withdrawals from certain deposits. Lakshmiji contended that the debt was not a deposit and was entitled to enforce it. The court analyzed the agreement and concluded that the debt should be treated as a deposit, given the circumstances of the transfer and the involvement of common directors. Ultimately, the court dismissed the petition for winding up, citing a bona fide dispute regarding the recoverability of the debt as a reason not to presume the company's inability to pay its debts. Since the financial stability of National Industries was not in question, and the dispute over the debt needed to be settled through proper legal proceedings, the court found no grounds for a winding-up order. In conclusion, the court dismissed the petition, leaving the parties to bear their own costs.
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