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

Tribunal could modify Ganga Steels Ltd's sanctioned scheme but the company is still able to pay its debts as per the scheme, though implementation is difficult. 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. Implementation difficulty alone does not justify a winding up order.

  1. AYes, difficulty in implementation alone is enough
  2. BYes, if a single creditor requests it
  3. CNo, it must also be satisfied that the company is unable to pay its debts as per the schemeCorrect
  4. DNo, winding up is never possible after sanction of a scheme

Explanation

Section 231(2) needs two conditions: the scheme cannot be implemented satisfactorily with or without modifications, and the company is unable to pay its debts as per the scheme. Here the second is missing, so winding up cannot be ordered on this basis.

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