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CS Professional · Corporate Restructuring, Valuation and Insolvency · Regulatory Approvals of Scheme

Godavari Steels Ltd's sanctioned arrangement is only partly workable, but the company can still pay its debts as per the scheme. Can the Tribunal order winding up under section 231(2) merely because implementation is unsatisfactory?

No. Winding up under section 231(2) needs two conditions together: the scheme cannot be implemented satisfactorily, with or without modifications, and the company is unable to pay its debts as per the scheme. If the company can pay, the Tribunal should use directions or modifications instead.

  1. AYes, unsatisfactory implementation alone is sufficient
  2. BYes, if any one creditor complains
  3. CNo, the company must also be unable to pay its debts as per the scheme, and the Tribunal must be satisfied that it cannot be implemented satisfactorily even with modificationsCorrect
  4. DNo, winding up is never possible after a scheme is sanctioned

Explanation

Section 231(2) requires both: the Tribunal's satisfaction that the scheme cannot be implemented satisfactorily with or without modifications, and the company's inability to pay its debts as per the scheme. Since the company can pay, winding up is not available on this ground; modifications or directions are the route.

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