TMI Blog2007 (2) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... ry boiler for respondent Company at their Sewa unit in Gangapur, Joypore, Orissa. They state that job has been carried out satisfactorily and completed in August, 1994 but their dues of ₹ 41,50,192/-only with interest on it have not been paid by respondent-Company. Hence they filed Civil Suit 623 of 1997 before Hon'ble High Court, Madras claiming ₹ 62,66,790/- only with interest and by the judgment dated 17-7-2001 got decree for ₹ 92,89,721.59/- only with interest at 18% per annum on ₹ 41,50,192/-from 17-7-2001 till realisation and costs of ₹ 1,56,206/-. As said amount was not paid in spite of repeated requests, petitioner sent notices through their advocates on 30-8-2004 and 5-12-2004 and called upon respondent to pay the amount within statutory period of 21 days warning that otherwise legal action for winding up would be initiated. As there was no payment and Company neglected to pay, petitioners forwarded notice through advocate on 27-9-2005 again calling upon Company to make the payment and clarified that otherwise they would be initiating winding up proceedings. Respondent Company through its reply dated 14-10-2005 denied the claim of petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t can be drawn in the matter. Petitioner has filed rejoinder and stated that in appeal filed by respondent no stay has been granted by Madras High Court. They point out that respondent was served with summons of Civil Suit filed before Madras High Court but chose not to participate in proceedings. They also point out that Madras High Court has refused to set aside ex parte decree. To this rejoinder, respondent Company has again filed reply reiterating its earlier stand. 3. I have heard Advocate A.S. Chandurkar for petitioner Firm and Advocate Sunil Manohar for respondent Company in this background. 4. After narrating the entire history, Advocate A. S. Chandurkar has contended that the avoidance or neglect to pay the amount as decreed by Madras High Court against them by respondent Company is apparent and hence action under section 434 needs to be initiated. He points out that respondent has not obtained any stay in appeal filed by its and still, are not paying the amount though order refusing to set aside ex parte decree is already passed. In order to explain the scope of section 434, learned Counsel has invited attention to several cases to which I'll be making refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Court after provisions of section 433 and 434 are shown to be satisfied. He invites attention to provisions of section 443 to point out powers of this Court. He has also relied upon certain cases for this purpose. He has also pointed out 1 judgment to urge that in appropriate cases, this Court can apart from passing winding up order can also pass such other orders as may appear to it to be just and proper. 5. I find it proper to begin consideration with the following judgment of Hon'ble Apex Court relied by Advocate Manohar. In AIR 2005 SC 4175, Mediqup Systems Pvt. Ltd. vs. Proximo Medical System G. M.B.H., Hon'ble Supreme Court observes: 23. The Bombay High Court has laid down the following principles in Softsule (P) Ltd. Re. (1977) 47 Com. Cases 438 (Bom) Firstly, it is well settled that a winding up petition is not legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. If the debt is not disputed on some substantial ground, the Court Tribunal may decide it on the petition and make the order. Secondly, if the debt is bona fide disputed, there cannot be neglect to pay within the meaning of section 433( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od faith and one of substance: (ii) the defence is likely to succeed in point of law: and (Hi) the company adduces, prima facie proof of the facts on which the defence depends. Hon'ble Apex Court in matter before it noticed that there was bona fide dispute between parties and hence amount was not due and relevant observations are : '15. In our opinion, the High Court has failed to appreciate that there is a bona fide dispute concerning US $ 11000. While the learned single Judge had held the dispute concerning US $ 5000 is a bona fide dispute, he has erred in not holding that the dispute concerning US $ 11000 also is bona fide. The High Court, on the one hand, has held that the Company has admitted in no uncertain terms that US $ 11000 should be repatriated to the remitter on the other hand, the learned Judge failed to appreciate that the petitioning creditor in the instant case was not the remitter and was not entitled to the said sum of US $ 11000. It is not in dispute and as admitted by the respondent-petitioning creditor that the remitter of the sum of US $ 11000 was one M/s Pameda Medixinische Systems and not the petitioning creditor and that because of the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that there is no mutual exclusion between section 434(1)(a) and section 434(1)(b) and there is region common to both, which may be said to overlap. The Suvarn Rajaram Bandekar vs. Rajaram Bandekar (Siringaon) Mines Pvt. Ltd., 1997 (88) Comp. Cases 673 is the judgment of learned Single Judge of this Court wherein company was found in indebted to petitioner under a money decree of Civil Court. While examining the question whether decree holder is entitled to maintain a petition under section 433 of Companies Act, this Court has noticed that in addition to execution of decree winding up proceedings at instance of decree holder are also permissible and a petition by decree holder would fall within the ambit and scope of section 433(e). After referring to various judgments mentioned above, this Court has observed Having regard to these authorities there can be no dispute that clause (a) of section 434 is a general clause and applies to all sorts of debts including a judgment debt under the decree. It is, therefore, difficult to extend the proposition of Mr. Kakodkar that the debt under decree cannot be made a foundation for petition for winding up and it cannot be read in any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prescribed manner on the company to pay the sum due to him: and (ii) the company has for three weeks thereafter neglected to pay the same, or to secure or compound for it to the reasonable satisfaction of the creditor. We have already held that the Receiver is a creditor within the meaning of Cl. (a) of section 434(1) of the Indian Companies Act. In the statutory notice 10.Bombay, towards the income-tax due from the joint family. The debtor was not only (sic) asked to do something which was legally prohibited but was asked to comply with the Collector's requisition under section 46 of the Indian Income-tax Act, 1922. By not doing so. the Company clearly neglected to pay the amount within the meaning of section 434 of the Indian Companies Act. These observations of Hon'ble Apex Court do not come to the rescue of present respondent Company but are against it. Similarly in other ruling i.e. Pradeshiya Industrial and Investment Corp. observations in paragraph 29 of Hon'ble Apex Court are important: 29. It is beyond dispute that the machinery for winding up will not be allowed to be utilised merely as a means for realising its debts due from a company. In Amalgamate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own by Bombay High Court and Madras High Court quoted with approval by Hon'ble Apex Court in this judgment clearly clinch the issue against present respondent Company. In view of position as explained in judgments Madhuban Pvt. Ltd. vs. Narian Das of Delhi High Court, All India General Transport Corporation Ltd. vs. Raj Kumar Mittal of Calcutta High Court, Sarabhai Machinery vs. Haryana Detergents Ltd. of Punjab and Haryana High Court (supra), all by learned single Judges) Seethai Mills Ltd. vs. N. Perumalsamy and another of Division Bench of Madras High Court (supra), and Suvam Rajaram Bandekar vs. Rajaram Bandekar (Sirigaon) Mines Pvt. Ltd. judgment of learned Single Judge of this High Court (supra), I find that reliance upon judgment of Hon'ble Division Bench judgment of Gujarath High Court in case of Tata Iron and Steel Company in the facts of present case is misconceived and uncalled for. Plain meaning of inability to pay has been changed by deeming fiction even to comprehend neglect to pay within three weeks after receipt of statutory notice. Omission to pay except on account of bona fide dispute therefore is sufficient in law and commercial solvency of respondent C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n extenuating circumstance and proves neglect to pay on part of respondent. A person can be said to be neglecting to pay only when though he possesses that capacity, payment is not made for no valid reason. Legislature appears to have deliberately treated such culpable withholding of amount due to another by company as its inability to pay for the purposes of section 433(e) and that intention needs to be honoured. Discretion available to Court is only when the amount is not paid as it is not due because of bona fide dispute. When dispute is resolved in civil suit, may be even by ex parte decree there is no room for use of such discretion. 6. Once it is found that there is money decree against respondent Company and its amount is still due, service of statutory notice therefore as also non-payment springs into life the deeming fiction and hence recourse can be had to section 434(1)(a) as long as the money is legally recoverable from respondent Company. As money decree can be executed within period of 12 years, it is debt which can be recovered within 12 years and hence, limitation of 3 years is not at all relevant and reliance upon Article 137 of Limitation Act for this purpose ..... 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