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TMI Blog1994 (2) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... ters agreement contemplated that a new company would be brought into existence called the Northern India Petrochemicals Limited. Clause 3 of the agreement provided that initial authorised capital would be Rs 5 lakhs which would be issued in equity shares of Rs 10 each while the subscribed capital of the company would be such as would be decided by the Board of Directors of the Company from time to time. 4.Clause 6 of the said agreement contemplated that each party would ensure that its respective shareholdings in the paid-up equity capital of the company shall be 26% plus 10 equity shares for PICUP (the appellant herein) and 25% minus 10 equity shares for second respondent, Dalmia Dairy Industries Limited. 5.Clause 7 of the agreement further provided that the Board would consist of 13 Directors out of which 4 were to be nominated by PICUP, the appellant herein and 3 by the second respondent, Dalmia Dairy Industries and the remaining 6 Directors were to be appointed as per the provisions of the Act. 6.Clause 13(a) stated that the appellant, Dalmia Dairy Industries Limited will contribute equal sums as may be required, from time to time, for the purpose of preliminary and explorat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re to pay these amounts, namely, the dues on account of share capital and the expenses for exploratory work. It was alleged that the said sum of Rs72.50 lakhs was due. Therefore, the first respondent claimed to be a creditor. 13.It may be noted, as stated above, that the second respondent has already referred the dispute to arbitration under clause 27 of the promoters agreement for adjudication claiming specific performance of the promoters agreement and in the alternative for damages for breach of contract.The said amount is the basis for the winding-up petition as it is one of the claims in the statement of claims before the arbitrators. One further fact requires to be noted; the promoters agreement had already cancelled as per notice dated October 31, 1992. 14.In view of the above, the appellant denied the liability to pay the amount on various grounds not only in the company petition but also before the arbitrators. Inter alia it was urged that the winding-up petition was not maintainable. The claim itself was doubtful. It was a matter which required adjudication. Therefore, it was not a debt as contemplated within the meaning of Sections 433 and 434 of the Act. Respondent 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty is still pending adjudication before the arbitrator. No winding-up petition can be admitted unless the court comes to the conclusion that the defence put up is moonshine. In support of these submissions reliance is placed on Madhusudan Gordhandas v. Madhu Woollen Industries Pvt. Ltd.' In the instant case, the debt itself is yet to be established. Merely because the promoters agreement had been signed it does not follow that the appellant is liable as a debtor. 1 (1971)3SCC632:(1972)42CompCasl25 21.In opposition to this, learned counsel for the respondents would support the impugned orders contending that both the courts below have carefully analysed the legal position. They have correctly found that the agreement had been entered into under which there is an obligation to pay certain amount. This obligation if not discharged, would amount to a debt. Insofar as there is a prima facie case of liability, certainly the petition could be admitted. The ruling relied on by the appellant has no relevance to the facts of this case. 22.To determine the correctness of the above submissions it is necessary, on our part, to find out as to what exactly is the position in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany must be unable to pay the same. An order under clause (e) is discretionary. 26.A debt under this section must be a determined or a definite sum of money payable immediately or at a future date. 27.What then is inability when the section says "unable to pay its dues"? That should be taken in the commercial sense. In that, it is unable to meet current demands. As stated by William James, V.C. it is "plainly and commercially insolvent that is to say, that its assets are such, and its existing liabilities are such, as to make it reasonably certain as to make the Court feel satisfied that the existing and probable assets would be insufficient to meet the existing liabilities". (In European Life Assurance Society, LR (1869) 9 Eq 122) ; V. V. Krishna Iyer & Sons v. New Era Mfg. Co. Ltd. (1965) 35 Comp Cas 410: (1965) 1 Comp LJ 179 (Ker) 28.While dealing with the scope of Section 433(e) this Court had occasion to hold the following [at page 131 in Madhusudan Gordhandas1 [the case relied on by learned Solicitor General)]: (SCC pp. 638-39, paras 20-22) "Two rules are well settled. First, if the debt is bona fide disputed and the defence is a substantial one, the court will not wind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the windingup is reasonable; secondly, whether there are matters which should be inquired into and investigated if a winding-up order is made. It is also well-settled that a winding- up order will not be made on a creditor's petitionif it would not benefit him or the company's creditors generally.The grounds furnished by the creditors opposing the winding-up will have an important bearing on the reasonableness of the case. (See P. & J. Macrae Ltd., (1961) 1 All ER 302: 31 Comp Cas 424 (CA) 29.It is beyond dispute that the machinery for winding-up will not be allowed to be utilized merely as a means for realising its debts due from a company. In Amalgamated Commercial Traders (P) Ltd. v. A.C.K. rishnaswami (1965) 35 Comp Cas 456 (SC) this Court quoted with approval the following passagefrom luckley on the Companies Acts, "It is well-settled that 'a winding-up petition is not a legitimate means of seeking to enforce payment of the 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'." ..... X X X X Extracts X X X X X X X X Extracts X X X X
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