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

Under section 231, the Tribunal may order winding up of a company whose sanctioned arrangement is failing. Which combination of conditions must exist?

The Tribunal may order winding up only if it is satisfied that the sanctioned scheme cannot be implemented satisfactorily, with or without modifications, and the company is unable to pay its debts as per the scheme. Both conditions must be met together.

  1. AThe scheme cannot be implemented satisfactorily with or without modifications, and the company is unable to pay its debts as per the schemeCorrect
  2. BThe scheme is delayed by one month and the company has declared no dividend
  3. CA single creditor objects to the scheme and the company has made a loss
  4. DThe scheme can be implemented only with modifications and the company wishes to wind up

Explanation

Section 231(2) requires the Tribunal to be satisfied that the scheme cannot be implemented satisfactorily, with or without modifications, and that the company cannot pay its debts as per the scheme. Both conditions are needed; the option requiring modifications fails because modifications are expressly considered first.

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