M.B.SHARMA J. - (1.) THE respondent, Indo Continental Hotels and Resorts Ltd. (for short, 'the company'), was earlier known as S.B. Properties and Enterprises Ltd. All the properties of the erstwhile S.B. Properties arid Enterprises Ltd. have been taken over by the company. New Era Furnishers (P.) Ltd. (for short, 'Era Furnishers'), is a private limited company. Tenders were invited by S.B. Properties and Enterprises Ltd., as it then stood, for furniture, furnishing and interior decoration of roof -top restaurant 'Shivir' and 'Rana Sanga Bar' in Hotel Mansingh at Jaipur. Anil Verma were the interior designers and all instructions were taken from them. Later on, the work order was revised and a fresh letter dated August 16, 1987, revising the previous letter dated July 9, 1987, was issued. It was done by Shri Kamal Bajaj, Chief Engineer of Mansingh Hotel, Era Furnishers started the work and completed the same within time and according to the terms and conditions of the work order, the company had been releasing payments to Era Furnishers on submitting their bills from time to time and as such a sum of Rs. 2,13,000 up to October 12, 1987, was remitted. Era Furnishers submitted its final bill on October 12, 1987, for the balance of Rs. 98, 313. Some defects were pointed out by the company arid the same were duly rectified by Era Furnishers. Era Furnishers had done some extra work also to the satisfaction of the Chief Engineer andAnil Verma, Interior Designer. The Chief Engineer, Shri Kamal Baijal, who settled the final bill of Era Furnishers including for the extra work done at Rs. 3,07,861 leaving a balance of Rs. 94,861 as due to the petitioner. A further sum of Rs. 44,000 was received by Era Furnishers on October 30, 1987, and thus a balance of Rs. 50,861 was still due and the said amount has been admitted by the company but has not been paid. Era Furnishers gave a statutory notice for payment of Rs. 50,861 as principal and interest thereon at the rate of 18% per annum, but still the amount has not been paid. It is the case of Era Furnishers that the respondent -company is unable to pay its debt within the meaning of Section 433 of the Companies Act, 1956 (for short, 'the Act').
(2.) THE petition is contested on behalf of the company on the ground that the amount due is not admitted and it is disputed and the work order remains incomplete till date and the defects pointed out have not yet been removed by Era Furnishers. The defects were pointed out in writing, vide letter dated October 17, 1987. Further communication was also sent. Thus, the case of the company is that a dispute existed between the parties all along of which Era Furnishers was aware but has deliberately tried to hide this fact from the court. It is said that the bills submitted on October 12, 1987, could not be final and the amount of Rs. 98,313 is not determined and does not fall within the four corners of clause of Section 433 of the Act. It is also the case of the respondent -company that, as per its last annual report, the respondent -company is commercially extremely well -off, with huge reserves which are now being utilised for expansion programmes. On being ordered by the court, the respondent -company also filed its latest balance -sheet to show its real financial status. From a bare perusal of the latest balance -sheet of the company, it will appear that it is financially sound and there can be no dispute that, on the ground that it has no liquid assets with it, it is unable to pay the debts due to Era Furnishers. According to learned counsel for Era Furnishers, the respondent -company shall be deemed unable to pay its debts because despite a statutory notice under Section 434(1)(a) of the Act, it has failed to pay the undisputed amount. A winding -up petition will lie and a company may be wound up by the court in case the case falls under any of the Clauses (a) to (f) of Section 433 of the Act At best, the case of Era Furnishers can fall under Section 433 read with Section 434 of the Act. Under Clause (e) of Section 433 of the Act, a company may be wound up by the court if it is unable to pay its debts. Section 434 of the Act provides that a company shall be deemed to be unable to pay its debts if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company by causing it to be delivered at its registered office, by registered post orotherwise, 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 it to the reasonable satisfaction of the creditor. According to learned counsel for Era Furnishers, on August 9, 1988, Era Furnishers gave a notice through its advocate within the meaning of Section 434 of the Act to the respondent -company and requested it to make the payment of Rs. 50,861 within 21 days of the receipt of the said notice. A copy of the said notice has been filed as annexure P -5. A look at the notice, annexure P -5, will show that it is dated August 6, 1988, and not August 9, 1988, and it will further show that it is a three weeks' notice demanding from the respondent -company balance of payment of Rs. 50,861 with interest at the rate of 18% per annum. It is also mentioned in the notice that on failure of payment, Era Furnishers shall be constrained to take such legal steps against the company as they may be advised for recovery of the said amount with interest at their risk and cost. It is also mentioned therein that the notice may be taken as a notice under Section 434 of the Act for taking steps for the winding up of the company if the payment is not made within 21 days of the receipt of that notice. It cannot, therefore, be disputed that the notice is in terms of Section 434 of the Act.
(3.) THE law is settled that, if the company in respect of which a winding up order is sought, has already bona fide disputed the amount claimed, then the court will not exercise its discretionary powers and will not make a winding up order of the company. In other words, a winding up petition cannot be a substitute for filing a suit, or any other remedy which may be available to it in accordance with law. Refusal to pay should be without any reasonable excuse and only in a case where the amount is a debt which can only be a definite sum without there being any dispute, can it be said that the company is unable to pay its debt within the meaning of Section 433 of the Act read with Section 434 of the Act. In Southern Industrial Polymers Pvt. Ltd. v. Amar Formulators and Electronics P. Ltd. [ 1984 ] 56 Comp Cas 77 (Kar), the scope of inquiry under Section 433 of the Act was considered and it was held that a winding up order should not be made in a case where there is dispute between the parties in respect of the rate of interest. In Wastinghouse Saxby Farmer Ltd., In re [ 1982] 52 Comp Cas 479 (Cal), it was held that, when the claim of the petitioner appears to be bona fide and the company is raising a dispute by alleging, without any concrete material, that, in collusion and conspiracy, the petitioner has committed a fraud upon the company in delivering indigenous materials although the contract was for sale of foreign materials, such allegation should not be allowed to be taken up without concrete material on which such allegation can be framed. In other words, it was held that if the dispute raised is not bona fide and there is no substance either in facts or inlaw in the said defence, a winding up order should be made. It is, therefore, to be seen whether the claim of Era Furnishers comes within the definition of 'debt' and whether the defence raised by the respondent -company is reasonable and bona fide ?;