New RBI Grade B 2025 Notification will come Soon! Enroll Here

    Question

    As per the provisions of the Companies Act when is an

    unregistered company deemed to be unable to pay its debts?
    A If a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one lakh rupees then due, has served on the company, a demand requiring the company to pay the sum so due, and the company has, for thirteen weeks after the service of the demand, neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor Correct Answer Incorrect Answer
    B If any suit or other legal proceeding has been instituted against any member for any debt or demand due, or claimed to be due, from the company and the company has not, within ten days after service of the notice paid, secured or compounded for the debt or demand Correct Answer Incorrect Answer
    C If it is otherwise proved to the satisfaction of the Tribunal that the company is unable to pay its debts Correct Answer Incorrect Answer
    D Both b & c Correct Answer Incorrect Answer

    Solution

    Section 375 (4) An unregistered company shall, for the purposes of this Act, be deemed to be unable to pay its debts: (a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding one lakh rupees then due, has served on the company, by leaving at its principal place of business, or by delivering to the secretary, or some director, manager or principal officer of the company, or by otherwise serving in such manner as the Tribunal may approve or direct, a demand under his hand requiring the company to pay the sum so due, and the company has, for three weeks after the service of the demand, neglected to pay the sum or to secure or compound for it to the satisfaction of the creditor; (b) if any suit or other legal proceeding has been instituted against any member for any debt or demand due, or claimed to be due, from the company, or from him in his character as a member, and notice in writing of the institution of the suit or other legal proceeding having been served on the company by leaving the same at its principal place of business or by delivering it to the secretary, or some director, manager or principal officer of the company or by otherwise serving the same in such manner as the Tribunal may approve or direct, the company has not, within ten days after service of the notice: (i) paid, secured or compounded for the debt or demand; (ii) procured the suit or other legal proceeding to be stayed; or (iii) indemnified the defendant to his satisfaction against the suit or other legal proceeding, and against all costs, damages and expenses to be incurred by him by reason of the same; (c) if execution or other process issued on a decree or order of any Court or Tribunal in favour of a creditor against the company, or any member thereof as such, or any person authorised to be sued as nominal defendant on behalf of the company, is returned unsatisfied in whole or in part; (d) if it is otherwise proved to the satisfaction of the Tribunal that the company is unable to pay its debts.

    Practice Next

    Relevant for Exams: