TMI Blog1987 (3) TMI 462X X X X Extracts X X X X X X X X Extracts X X X X ..... the bills, vouchers and other documents to the company in support of the above amount claimed by it. Vide letters dated April 17, June 14 and June 25, 1984, the petitioner requested the company to make payments. In a letter dated July 3, 1984, the respondent-company confirmed to the petitioner that the bills, etc., forwarded by the petitioner have been checked by them but they requested for certain clarification in respect of certain vouchers. The petitioner satisfied the queries and the clarifications sought and the respondent-company accepted the explanation given by the petitioner. Thereafter, in part payment of the amount due, two cheques for Rs. 50,000 each in favour of the petitioner were issued. Both the cheques, however, were dishonoured on presentation. Thereafter, in spite of request made by and on behalf of the petitioner including the State Bank of India, the merchant bankers, the company failed to pay the above amount. A legal notice under section 434 dated May 14, 1985 was issued to the respondent-company to pay the amount of Rs. 2,22,289.23 with interest at the rate of 18% with effect from June 1, 1984 within 21 days. A reply was received from the respondent-compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal amount but also the interest and the interest accruing on the same. Thus, only a part of its claim has been satisfied and a part still remains due. He submitted that the petitioner can certainly press for the recovery of the interest amount particularly when the principal amount has been admitted and paid. Since the interest amount has not been paid, the petitioner could very well claim it under the provisions of section 433( e ) read with section 434. Unless the amount was bona fide disputed, the court is not powerless to go into the question even though the principal amount has been paid after the issue of notice. In support of his contention, he stated that even if the interest was not allowed at the rate of 18% per annum, it had to be allowed at the rate moneys are lent or advanced by commercial banks in relation to commercial transactions. Mr. R.K. Agrawal, appearing for the respondent-company, urged that the company totally denied its liability to pay any interest on the amount which has been paid by the company during the proceedings in this court. Secondly, no rate of interest was ever agreed upon or settled. Thirdly, the rate of 18% is unwarranted under any circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the statutory demand." In Palmer's Company Law, Twenty-third edition, page 1114, paragraph 85-86, the law stated is as under : "if the company bona fide disputes the debt, then it has not 'neglected to pay ' within the section," In Buckley on the Companies Acts, Fourteenth edition, page 523, the law stated is as under : "A winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as a scandalous abuse of the process of the court. At one time, petitions founded on a disputed debt were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petitions. But, of course, if the debt is not disputed on some substantial ground, the court may decide it on the petition and make the order..........If a petition has been presented which the court finds to be an abuse of process, the court may ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , whose debt is bona fide disputed, will be restrained from presenting a petition for winding up the company. Winding up proceedings are not to be had recourse to for the purpose of recovering a debt which is bona fide disputed, especially when the company appears to be solvent, but the court must see that the dispute is based on a substantial ground..........." The Supreme Court in the case of Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp Cas 456 , considered the grounds for winding up. The court observed (at pp. 463, 464): "We are satisfied that the debt in respect of which notice was given under section 434 was bona fide disputed by the appellant-company. The appellant-company had received legal advice and it had acted on it. On the facts it seems to us clear that the appellant-company did not dispute the debt in order to hide its inability to pay debts................. If the debt was bona fide disputed, as we hold it was, there cannot be 'neglect to pay' within section 434(1)( a ) of the Companies Act. If there is no neglect, the deeming provision does not come into play and the ground of winding up, namely, that the company is unable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ented not with a bona fide view of collecting the debt but out of malice for the purpose of ruining the company, the court will dismiss the petition with costs. In W.T. Henley's Telegraph Works Co. Ltd. v. Gorakhpur Electric Supply Co., AIR 1936 All 840, Iqbal Ahmad J., observed (at page 845): "If a company is solvent and there is a genuine dispute about an alleged debt, the resort by the creditor to the summary proceeding of serving on the company a notice under (old) section 162, and following the same by petition for winding-up, is ordinarily referable to a desire on the part of the creditor to bring pressure on the company in order to induce the company to pay the debt, without having the dispute settled by the civil court, by which court the dispute ought to be ordinarily settled. To make an order for winding up in such a case would deprive the company of its right to have the question between it and the petitioning creditor decided in. the normal way by the civil court constituted for the purpose, and this would be opposed to public policy. An application for winding up in such a case must, therefore, be regarded as a vehicle of oppression and an abuse of the process ..... 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