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CS Executive · Company Law and Practice · Compromise, Arrangement and Amalgamations - Concepts

Nirmal Pharma Ltd's sanctioned arrangement is facing difficulty, but the company can still pay its debts as per the scheme, though the Tribunal thinks the scheme cannot be implemented satisfactorily. Can the Tribunal order winding up under section 231(2)?

No. Section 231(2) requires both that the scheme cannot be implemented satisfactorily with or without modifications and that the company is unable to pay its debts as per the scheme. Where the company can still pay, the second condition fails and the winding up power is not available.

  1. ANo, because winding up also requires that the company be unable to pay its debts as per the schemeCorrect
  2. BYes, because unsatisfactory implementation alone is sufficient
  3. CYes, but only if a majority of creditors consent
  4. DNo, because section 231 has no winding up power at all

Explanation

Section 231(2) has two conditions: the Tribunal must be satisfied the scheme cannot be implemented satisfactorily with or without modifications, and the company must be unable to pay its debts as per the scheme. Here the second is missing, so winding up cannot be ordered under this sub-section.

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