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Petition for winding up based on inability to pay debts and commercial insolvency. Dispute over contracts for boat construction. Company's financial difficulties and inability to repay loans. Validity of debt and counterclaim. Public interest and mala fide intentions of petitioners. Analysis: The petition filed by the Maharashtra Small Scale Industries Development Corporation sought the winding up of the respondents' company on the grounds of their inability to pay debts and commercial insolvency. The petitioners were creditors for a substantial sum and had served a statutory notice before filing the petition. The dispute revolved around contracts for boat construction, with the company failing to repay loans advanced by the petitioners for the contract work. The company's financial situation was dire, with large liabilities exceeding assets, significant losses, and an inability to complete contracts due to lack of finances. The company argued that the debt was not due until the completion of the contracts and relied on an arrangement with banks to delay payment. However, the court held that under the Companies Act, prospective liabilities could be considered in determining insolvency. The company's balance sheet revealed insolvency, with current liabilities surpassing assets, substantial loans, and operational issues leading to a lock-out. The court dismissed the argument that debts were not presently due, emphasizing the company's financial distress and inability to complete contracts without further borrowing. Additionally, the company raised a counterclaim against the petitioners for damages, alleging defaults in providing necessary funds. The court found the counterclaim lacking substance and seemingly raised to counter the petitioners' claim. Public interest arguments to allow the company to survive due to its naval construction activities were rejected, given the company's grave financial situation and minimal capital base. The court deemed it against public interest to support a company with no prospects of recovery, ultimately admitting the petition for winding up. Lastly, the company's assertion of mala fide intentions on the part of the petitioners was dismissed, considering the company's inability to complete contracts and the significant financial difficulties faced. The court ordered the petition to be advertised in various publications and set a hearing date for further proceedings, while the petitioners agreed to delay advertising for a week.
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