TMI Blog1976 (1) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... s and is liable to be wound up. Secondly, the company has large liabilities to its secured as well as unsecured creditors, and according to the financial position of the company as on 30th June, 1974, the company has made a loss of Rs. 96,369, and considering the prospective and contingent liabilities of the company, the company is unable to pay its debts. The petition is for admission and for consequential orders. The petitioners' claim, as indicated in the above grounds, arises on the basis of 16 hundis each of Rs. 2,500 purported to have been executed by a director of the company named Manilal Keshavji Thakkar and guaranteed by another director named Mavji Keshavji Thakkar. According to the petitioners, on the maturity of the hundis, they caused notices of demand to be sent to the company and stated that these notices shall be treated under section 434 of the Companies Act, 1956. In the correspondence prior to the present proceedings, the company contended that they had not borrowed any amount from the petitioners and, consequently, the question of their not repaying the amount did not arise. However, the company, by its letters dated 11th November, 1974, 29th November, 1974, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndis and that in the books of accounts of the company there are no entries showing any borrowings from the petitioners on the relevant date or on any other date. It is submitted that the alleged borrowing is in contravention of the provisions of section 292 of the Companies Act, 1956. It is also contended that the notices of demand were sent by the petitioners through their attorneys without first presenting the hundis for payment and without dishonour thereof. The company, after denying the allegation that it has large liabilities, has stated that its position as ending 30th June, 1975, is as follows : "I say that for the year ending 30th June, 1975, the value of the fixed assets of the company such as plant, machineries and buildings, fittings, equipments, is over Rs. 8,00,000 after depreciation. The company's liability to the secured creditors in respect thereof is Rs. 1,03,606, the value of stock and raw materials is over Rs. 9,50,000 against the total liability of about Rs. 4,88,000 by pledge or hypothecation thereof. The company's book debts exceed Rs. 7,00,000 against which the company has borrowings of Rs. 3,35,708. Thus, the total assets of the company are of the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng loan from the market at market rate, and that the limit of such loan to be taken on hundis will be Rs. 2 lakhs. It further says, "any two of the directors will sign jointly and severally on the hundis". This resolution is signed by six directors which includes Manilal Keshavij Thakkar and Mavji Keshaviji Thakkar. On the basis of this resolution, it is pleaded by the petitioners that the company has continued borrowing from the market and, in particular, from the said Messrs. P. Naraindas Co. It is stated that the moneys advanced under the 16 hundis were borrowed by the company through Messrs. P. Naraindas Co. and it is also sought to be submitted that any two directors were required to sign on the hundis either jointly or severally, and that the hundis have beens signed by the two directors. The petitioners merely stated that it was false that the company had not received any consideration or money from the petitioners. On behalf of the petitioners, it was urged by the learned attorney, Mr. Dhimant Malvi, for the petitioners that the company has, through its directors, Manilal K, Thakkar and Mavji K. Thakkar, executed the 16 hundis referred to in paragraphs 7 to 10 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its debts is not substantiated. Thirdly, a debt about the liability to pay which at the time of the service of the insolvency notice, there is a bona fide dispute, is not "due" within the meaning of section 434(1)( a ) and non-payment of the amount of such bona fide disputed debt cannot be termed as "neglect to pay" the same so as to incur the liability under section 433( e ) read with section 443(1)( a ) of the Companies Act, 1956. Fourthly, one of the considerations in order to determine whether the company is able to pay its debts or not is whether the company is able to meet its liabilities as and when they accrue due. Whether it is commercially solvent means that the company should be in a position to meet its liabilities as and when they arise. It is not necessary for me to lay down all the principles which could be deducible from the case law and notable commentaries because, in my opinion, the above principles are a sufficient guideline on the facts of the present case. No hard and fast rule can be laid down in inquiring into the question of a bona fide dispute with regard to any debt. Whether there is a bona fide dispute or not will necessarily depend on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnexed to the letter dated 5th January, 1963, and, therefore, it can be reasonably said that the resolution is of some period prior to 5th January, 1963. This resolution in terms says that any two of the directors were required to sign on the hundis. Prima facie this resolution seems not to have been complied with. The hundis are signed by only one director, namely, Manilal K. Thakkar. The other director, Mavji K. Thakkar, who has signed the hundis has signed as a guarantor. In signing the hundis as a guarantor, Mavji's signature appears in the following manner: "I the undersigned a director of the above company hereby guarantee the repayment of the above-mentioned amount. Mavji K. Thakkar". Therefore, a question does arise as to whether the hundis are executed in terms of the said resolution or not ? A reading of the resolution and bearing in mind the relevant provisions of section 292 of the Companies Act shows that the defence of the company is bona fide . It is not one of those categories which can be characterised as "false" or "to avoid liability" or "to postpone the evil day". There is also considerable force in the submission made on behalf of the company that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not an absolute rule. The presumption is rebuttable. In the present case, the execution of the hundis by a director clothed with the power to borrow on hundis is denied and the consideration is also denied. On the facts of the present case, I do not think that this feeble stand under section 118( a ) can further the case of the petitioners. None the less, in the teeth of a clear statement that the company has not borrowed any money on hundis after 1969, one would have expected the petitioners to come forward to say as to whether the amounts were lent and advanced from time to time in cash or by cheques or the same were handed over to the directors or officers of the company or the finance broker's firm and to whom for being paid over to the company. On the other hand, what is sought to be stated in the affidavit-in-rejoinder is that "the moneys advanced under the said 16 hundis mentioned in the petition were borrowed by the company through the said brokers, Messrs. P. Naraindas Co". There is no affidavit made on behalf of Messrs. P. Naraindas Co. showing that they acted as brokers in the present case or the company borrowed the moneys from the petitioners through them. Mr. Dh ..... 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