following tests to determine as to whether the substratum of the company has disappeared

(a) where the subject-matter of the company has gone; or

(b) the object for which it was incorporated has subsequently failed; or

(c) it is unpossible to carry out the business of the company except at a loss which means that there is no reasonable hope that the object of trading at a profit can be attained, or

(d) the existing or probable assets are insufficient to meet the existing liabilities’.

(ii) When there is a Complete Deadlock in the Management. A company will be wound up on this ground even though it is making good profits. In Re. Yenidje Tobacco Co. Ltd. A and B the only shareholders and Directors of a Pvt. Ltd. company became so hostile to each other that neither of them would speak to the other except through the Secretary. Held, there was a complete deadlock and consequently the company

was wound-up. ‘

(iii) Illegality of Object and Fraud. If any of the company’s objects are illegal or apparently, if they become illegal by a change in the law, the Court will order the company to be wound up on the ground that it is just and equitable to do so.

However, for winding up on this ground, fraud in the prospectus or in the manner of conducting company’s business is not sufficient. It must be shown that the original object of creating the company was fraudulent or illegal.

(iv) When the Company is a’ Bubble’, i.e., it Never Had any Real Business. S u c h companies are commonly called as ‘fly-by-night’ companies.

(v) Oppression. A winding-up petition may lie where the principal shareholders have adopted an aggressive or oppressive policy towards the minority.

(vi) Sick Company. If the Board for Industrial and Financial Reconstruction (BIFR) created under the Sick Industrial Companies (Special Provisions) Act, 1985 expresses the opinion that the sick company should be wound up on just and equitable ground and forwards that opinion to the High Court, ordinarily and unless an appeal has been made against the opinion to the appropriate Appellate Authority under the above Act, the High Court will order winding up.

(vii) Grounds Analogous to Dissolution of Partnerships. If the company is a private one and its share capital is held wholly or mainly by its Directors, it is in substance a partnership in corporate form, and the court will order its winding-up in the same situations as it would order the dissolution of a partnership on the ground that it is just and equitable to do so.

(viii) Requirements for Investigation. Where Directors were making allegations of dishonesty against each other in respect of defalcations of the funds of the company, the company was ordered to be wound up on the ground that it was a case in which the conduct of some of the officers of the company required an investigation which could only be obtained in a winding up by the Court [Re Varieties Ltd. (1893) 2 Ch. 235J.

3. The Balance Sheet cjf Mis. Hush Hush Ltd. as at 31.3.1999 filed with the Registrar of Companies, Mumbai disclosed that the liabilities amounted to Rs. 2.75 crores as against the Assets of Rs. 1 .25 crores. On the basis of the scrutiny of the Balance Sheet, the Registrar filed a winding up petition against the company stating that it is commercially insolvent and that the company is unable to pay its debts on the ground that the value of liabilities far exceeded the value of assets. Examine whether

the company has any case to defend against the winding up petition filed by the

Registrar.