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

Which of the following sets of facts alone is sufficient, under section 231(2), for the Tribunal to order winding up of a company whose scheme was sanctioned under section 230?

Winding up under section 231(2) needs both conditions: the Tribunal is satisfied that the scheme cannot be implemented satisfactorily with or without modifications, and the company is unable to pay its debts as per the scheme. Inability to pay alone, or mere delay or objection, is not sufficient.

  1. AThe scheme has been delayed by six months and the company has paid all debts due under it
  2. BA creditor objects to the scheme after sanction, though implementation is progressing satisfactorily
  3. CThe Tribunal is satisfied that the scheme cannot be implemented satisfactorily with or without modifications, and the company is unable to pay its debts as per the schemeCorrect
  4. DThe company is unable to pay its debts as per the scheme, though it can be implemented satisfactorily with modifications

Explanation

Section 231(2) has two conditions that must both be met: the Tribunal is satisfied that the scheme cannot be implemented satisfactorily with or without modifications, and the company is unable to pay its debts as per the scheme. The option with only inability to pay but workable modifications fails the first condition. Delay or objection alone is not enough.

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