Question

Trading activities of a company were stopped temporarily in view of the trade depression with an intention to continue the same when the conditions improve. A petition was preferred into the tribunal for winding up of the company. The petition

• A. is liable to be dismissed.
• B. will succeed.
• C. will be kept pending till the conditions improve.
• D. will not be admitted.

Hint:

For winding up based on suspension of business, the 'animus' or intention is crucial. A temporary stoppage for a genuine reason with a clear intention to restart is not a ground for winding up. The law looks for evidence of an intent to abandon the business.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
The question deals with the grounds for compulsory winding up of a company by the Tribunal. One such ground is the suspension of the company's business for a whole year. The issue here is whether a temporary suspension due to external factors with an intention to resume constitutes a valid ground for a winding-up order.
Step 2: Detailed Explanation:
Under the Companies Act (both the 1956 Act and the 2013 Act), a company may be wound up by the Tribunal if it has suspended its business for a whole year. However, the courts have interpreted this provision purposively. The key factor is the intention behind the suspension. For a winding-up order to be made on this ground, the suspension of business must be such that it indicates an abandonment of the company's objects or an inability to carry on its business. In the given scenario, the suspension is: \begin{itemize} \item Temporary: It is not a permanent cessation. \item For a valid reason: It is due to a trade depression, an external factor beyond the company's control. \item With an intention to resume: The company clearly intends to continue its activities once the economic conditions improve. \end{itemize} Given these facts, there is no abandonment of the business. The company is merely waiting for a more favourable time to operate. Therefore, the ground for winding up is not met, and the Tribunal would be justified in dismissing the petition.
Step 3: Final Answer:
The petition is liable to be dismissed.