JUDGMENT
Sunil Ambwani, J.
1. This creditors-winding up petition has been filed by Banaras Beads Limited, A-1, Industrial Estate, Varanasi, to wind up Prashant Glass Works Private Limited, with its registered office at Motiwala Industrial Estate, P. O. Bhullanpur PAC, Varanasi, on the averments that the respondent-company has not paid Rs. 1,92,670 in spite of the demand notice dated May 19, 2000, under Section 434(1)(a) of the Companies Act, 1956, served upon the registered office of the company to which no reply was sent, and thus raising the presumption that the respondent-company is unable to pay its dues.
2. Notices were issued on July 11, 2000, to the respondent-company to file objections, if any, and a restraint order was passed directing that the respondent-company shall not transfer its immovable property without permission of the court. A counter affidavit of Sri S.N. Garg, authorised signatory of the respondent-company has been filed through Sri Vipin Sinha, advocate. A rejoinder affidavit has also been filed.
3. I have heard Sri R.P. Agarwal, learned counsel for the petitioner-company, and Sri Navin Sinha, senior advocate, assisted by Sri Vipin Sinha, for the respondent-company.
4. It is alleged that respondent-company is engaged in the business of manufacture of glass beads.
5. The petitioner supplied cobalt oxide valuing Rs. 7,93,350 to the respondent-company by bill dated November 14, 1997. It was not paid, although sales tax declaration Form 3B was submitted against the said supply. The petitioner had a credit balance of Rs. 6,00,680 on account of certain materials supplied by the respondents and after the adjustment of the said credit, the respondent-company owes Rs. 1,92,670 to the petitioner-company. A statutory notice of demand dated May 19, 2000, was sent by registered post duly addressed to the registered office of the respondent-company to which no reply has been received and thus counsel for the petitioner has required the court to raise the presumption under Section 434(1)(a) of the Companies Act, 1956, that the company is unable to pay its dues and is as such liable to be wound up under Section 433(e) of the Companies Act, 1956. It has been submitted that the assets of the company are inadequate to meet its liability in the normal course of business.
6. The respondent-company in its reply submitted that the respondent-company and the petitioner-company have supplied materials to each other, and that after adjusting the amount due towards the petitioner-company, of a sum of Rs. 6,00,680, there was a balance of Rs. 1,92,670 due to the petitioner-company. Since a further sum of Rs. 2,06,000 was due against the petitioner-company and payable to the respondent-company, these amounts were adjusted after which there remains a debit balance of Rs. 14,953. It is contended that flats were given on rent by M/s. Motiwala Investment Company Private Limited, which has merged and stands amalgamated in M/s. Prashant Glass Works Private Limited–respondent-company as per the scheme sanctioned by this court on September 20, 1998. The rights and liabilities of M/s. Motiwala Investment Company Pvt. Ltd. stands transferred to the respondent-company. Whereas Rs. 1,623 was paid to M/s. Marwa Advertising by the respondent-company at the instance of the petitioner, Rs. 2,06,000 was to be paid by the petitioner-company towards rent of apartments Nos. 61 and 62 for Rs. 1,78,500 up to March 31, 1999, and towards apartment No. 72 for Rs. 27,500 up to March 31, 1997. All these three apartments are situated in M/s. Narsing Apartments, Mehmoorganj, Varanasi. The respondent-company has stated that these rents were due in pursuance of the lease deed (annexure CA-2), and Rs. 3,06,000 was payable with effect from April 1, 1996, to March 31, 1999. For payment of rent of flat Nos. 61, 62 and 72, the respondent-company has relied upon a letter dated September 29, 1997 (annexed as annexure CA-6). Sri Navin Sinha, senior advocate submits that the company petition has been filed as a counter blast to a dispute of transfer of allotment of shares pending before the Company Law Board, New Delhi.
7. In rejoinder affidavit, it is stated that Ashok Kumar Gupta, chairman and managing director of the petitioner-company and Ajit Kumar Gupta, managing director of the respondent-company are real brothers. There have been serious differences between Sri Ajit Kumar Gupta, and his only son Sri Prashant Gupta due to which Sri Prashant Gupta was obliged to leave the house of his parents and to live separately in flats Nos. 61 and 62 as above. At the time when the flats were taken on lease by the petitioner-company, Sri Prashant Gupta was living in these flats. The flats were not vacated in spite of persuasion. The petitioner had not paid any rent for quite a long time. An understanding was arrived at between the parties in March, 1997, in which another flat, being flat No. 72, was required to be made available to the petitioner for use and occupation of an officer of the petitioner, and it was agreed that petitioner would pay the consolidated rent of Rs. 1,27,500 from April 1, 1996, to June 30, 1997, and give up their rights forthwith towards which fax message dated March 27, 1997, was sent by the respondent-company demanding Rs. 1,27,500 in response to which rent was remitted by the petitioner-company to the tune of Rs. 1,02,000 on March 31, 1997, and Rs. 25,500 on May 1, 1997, and thus discharging the entire liability. As far as the rent of flat No. 72 is concerned, it is taken on lease with effect from July 17, 1997, and was occupied by Sri Samir Rastogi, an officer of petitioner-company with the understanding that the said employee would pay rent to the respondent-company directly. The said flat was occupied up to December 30, 1997, for which no claim was made by respondent-company for the last three years and thus the liability is not admitted due to the laches on the part of the respondents.
8. From the aforesaid facts brought out from the affidavits of the parties, it is apparent on record, that there is a bona fide dispute about the amount due. The petitioner-company has not denied that it had taken the aforesaid flats on rent from the respondent-company. In Clause (c) of sub-para (iv) of paragraph 7 of the rejoinder affidavit, it is admitted by the petitioner-company that Sri Prashant Gupta did not vacate the said flats Nos. 61 and 62 and did not return to his parents house. In sub-para (v) of paragraph 7 of the rejoinder affidavit, it is further admitted that the rent towards flat No. 72 was not paid and was due up to September 29, 1997. The question whether the respondent-company is entitled to realise the rent and the interpretation of agreement between the parties, and further the fact that the rent due towards flat No. 72 cannot be recovered due to laches on the part of the respondent-company, are not to be decided by this court in a creditor’s winding up petition. The company petition for winding up with a view to enforcing payment of a disputed debt is an abuse of the process of the court, and should be dismissed, unless of course, it is shown that the alleged dispute is not a bona fide one, for a winding up petition is not to be used as machinery to try a common law action. In Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami [1965] 35 Comp Cas 456, the Supreme Court said that if a debt is bona fide disputed, there cannot be “neglect to pay” within Section 434(1)(a) of the Companies Act, and if there is no neglect, the deeming provision does not come into play, and thus the ground of winding up that the company is unable to pay its debts is not substantiated. No other authority needs to be cited on this well settled proposition, and has been applied as a test in a creditor-winding up petition by all the courts. The decisions cited by Sri R.P. Agarwal are not applicable to the facts of the present case. In Advent Corporation Pvt. Ltd., In re [1969] 39 Comp Cas 463 (Bom) a consent decree was passed whereby the respondent-company agreed to pay the amount in instalments on specific dates. On the same day an agreement was entered into between the petitioners and the company for the purchase of the top floor of the building, being constructed by the respondent-company. The company failed to pay two of the instalments and ignored the notice Section 434(1)(a) of the Companies Act and filed a suit for permanent injunction restraining petitioners from taking any action in pursuance of the notice. On the said fact, it was held that there was no bona fide dispute regarding debt.
9. In K.T.S. (Singapore) PLC Ltd. v. Associated Forest Products (Pvt.) Ltd. [1996] 85 Comp Cas 190, the Calcutta High Court held that allegations of defective material, the right to a discount, and the entitlement to damages were known to the company. No steps were taken to realise any part of such loss or to assert the right to discount and unconditional acknowledgment of the liability to pay the entire amount was made by the respondent-company by telex message and memorandum of understanding and also the document of guarantee, and that respondent-company did not choose to give reply to the statutory notice and in the aforesaid circumstances, it was held that the debt was due and thus the court rejected all other defence. The presumption of insolvency was raised and winding up was admitted. Both the aforesaid cases decided by the Bombay High Court and the Calcutta High Court are distinguishable on the facts, In the present case, there is no acknowledgment of debt. The respondent-company never, by conduct or by inference, admitted the liability. On the contrary, the petitioner-company could not deny that the rent was due, but tried to defend its liability on the ground that it cannot be made the subject matter of adjudication in this proceeding.
10. Sri Navin Sinha, senior advocate, has produced before the court the last audited balance-sheet of the respondent-company for the year ending March 31, 2001. The respondent-company is a profit-making company and has shown income of Rs. 136,232,009.09 in the relevant year and profit available for appropriation is Rs. 19,805,708.78. It has fixed assets of Rs. 21,904,506.19 and investments of Rs. 14,118,580.43. The company as such is enjoying a sound financial health.
11. In the aforesaid facts and circumstances, I do not find any ground to issue notice under Rule 24 of the Companies (Court) Rules, 1959. The company petition is accordingly dismissed.