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Section 434 – The Companies Act,1956

The Companies Act, 1956

434. Company when deemed unable to pay its debts.

(1) A company shall 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 1[one lakh rupees] then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor;

(b) if execution or other process issued on a decree or order of 2 [any Court or Tribunal] in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) if it is proved to the satisfaction of the 3[Tribunal] that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the 3[Tribunal] shall take into account the contingent and prospective liabilities of the company.

(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by any agent or legal adviser duly authorised on his behalf, or in

the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm.


A Court Receiver is a creditor within the meaning of clause (a) of section 434 (1) of the Indian Companies Act; Harinagar Sugar Mills Co. Ltd. v. M.W. Pradhan (now G.V. Dalvi) Court Receiver, High Court, Bombay , 1966 (36) Comp. Cas. 426: 1966 (2) Com LJ 17: AIR 1966 SC 1707.


1. Subs. by Act 11 of 2003, sec. 52, for “five hundred rupees”.

2. Subs. by Act 11 of 2003, sec. 52, for “any Court”.

3.Subs. by Act 11 of 2003, sec. 52, for “Court”.

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The Companies Act, 1956

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