The court has the discretion to order advertisement and admission of a winding up petition based on a prima facie case established by the petitioner, and the company's ability to pay off its debts and revive its business.

K.A. Mohammed Shafi, J.

1. This application is filed by the respondent-company in C. P. No. 26 of 1998 to revoke the admission of the winding up petition and to stay all further proceedings till the disposal of the application under Rule 96 read with Rule 9 of the Companies (Court) Rules, 1959. C. P. No. 26 of 1998 is filed by the respondents herein who are the shareholders of the company seeking an order for winding up of the company under Sections 433(e) and 433(f) and 439(1)(c) of the Companies Act.

2. When the company petition came up for admission on June 1, 1998, this court admitted the same and directed issue of notice to the respondent-petitioner herein and to publish in one issue of Indian Express and Malayula Manorama, Cochin edition and in the Official Gazette. The draft publication was produced on June 2, 1998, and was approved by this court and publication was directed to be effected with hearing date July 3, 1998.

3. This petition is filed by the respondent-company in the C. P. on June 18, 1998, seeking revocation of admission of the winding up petition and to stay all further proceedings till the disposal of the application. The respondents have filed a detailed counter-affidavit opposing this application. Both sides were heard in detail.

4. The petitioner-company was incorporated under the provisions of the Companies Act to carry on the business of sale of silk sarees and other dress materials under the name "Remanika" and it is carrying on business in a rented building at M.G. Road, Ernakulam. The company was incorporated on May 4, 1993, with an authorised share capital of Rs. 1 crore divided into 10 lakhs equity shares of Rs. 10 each which is fully paid up.

5. It is alleged by the respondents in the company petition filed by them that difference of opinion arose between the directors of the company and though the first respondent had properly conducted the affairs of the company as its managing director, he was illegally ousted and the present managing director has taken over the management of the company with an illegally constituted board of directors. According to them, the company is now sunk in debts and the company has got a debt of about Rs. 6 crorcs as against the assets of Rs. 1.5 crores. Various suits are filed by the creditors of the company for recovery of the amounts and they are pending in different courts. It is also alleged that the present managing director is engaged in distress sale of the goods which are the only assets of the company and appropriating the entire amount to himself. According to them, there is no possibility to extricate the company from its debts and to revive the business. Therefore, they have sought for an order to wind up the company.

6. In the affidavit filed in support of this application by the present managing director of the company it is contended that the allegations made against the company by the respondents in the C. P. are totally incorrect, false and made with malicious intention and there is absolutely no sustainable ground to wind up the company. The substratum of the company is not lost and the purpose for which the company was incorporated has not ceased to exist. The first respondent--first winding up petitioner who was the managing director of the company at the time of incorporation was systematically engaged in overtrading, spending excessively beyond the capacity of the company and borrowing huge amounts from banks and other financial institutions and spending lavishly for his own personal purposes. The illegal activities and mismanagement of the company by the first respondent created much difficulty to the company and after the present managing director took over the management of the company he has been attempting to set right the company and he has paid huge amounts to the banks and other creditors of the company. All the suits and criminal cases pending against the company are pertaining to the period when the first respondent was the managing d