The law confers a right upon a creditor to move for the winding up of a Company (Pvt Ltd or Public Ltd) if the Company without having just reasons, but refuses to pay the legitimate dues of the petitioning creditor.
However, the erstwhile regime of Winding up is now replaced by Insolvency Resolution Application. The Parliament of India in the year 2016 have enacted a historic legislation. Corporate Insolvency under Insolvency and Bankruptcy Code, 2016, which among other things, replaces the Winding up jurisdiction of High Courts, with "Insolvency Resolution Application" to be filed before National Company Law Tribunal (NCLT).
The proceedings lie against the Companies who are incorporated under the Companies Act, 1956 or Companies Act, 2013.
The debts of the Company include every kind of dues which are payable by the Company, which includes unpaid salaries / wages of employees, unpaid dividends etc.
If the debt is genuinely disputed by the Company, the Company Court may simply refuse to exercise its jurisdiction and would relegate the Petitioner to a traditional Civil Suit or any other remedy available under the law. Therefore, in every Insolvency Resolution Application, the main preliminary issue before the Court is “whether the Respondent Company (Corporate Debtor) raises a “genuine dispute”.
It must be bear in mind that this is not a recovery proceeding; and the nature of Application entails financial resolution of the Respondent Company by means of selling the Respondent Company to highest bidder. The possibility may be that the Respondent Company, under the threat of losing the Company, may pay their legitimate dues.
