JUDGMENT
Jayasimha Babu, J.
1. This is a petition for winding up the respondent-company on the ground that it is unable to pay its debts.
2. The case of the petitioner is that it had given a sum of Rs. 20,000 as deposit to the respondent-company in the year 1980, when it became a dealer of Solidaire stereo amplifiers, F. M. tuners, and other electronic equipment manufactured by the respondent-company and subsequently on September 1, 1982, it had advanced a loan of Rs. 2,00,000 to the respondent. The petitioner ceased to be a dealer in 1984. After giving credit to a sum of Rs. 7521.23 which amount, according to the petitioner had become due by it to the respondent on the trading account, and after adjusting the amounts paid by the company, towards interest claimed at 18 per cent., the petitioner has claimed that a sum of Rs. 2,79,911.63 was due to the petitioner as on October 31, 1990. This petition was filed on November 14, 1990.
3. The respondent-company has disputed the claims made by the petitioner and has contended that the respondent is not liable to pay any sum to the petitioner. It is the case of the respondent that the deposit amount as also the loan amount of Rs. 2,00,000 were repaid to the petitioner long prior to the date of this petition and that, in any event, the claim made against the respondent in this company petition which was filed in November, 1990, in respect of the amount deposited or advanced eight years ago is barred by limitation. The respondent has also disputed the petitioner’s claim that it is entitled to receive interest on these sums. According to the respondent-company, the petitioner is not a creditor and there is no negligence or failure on the part of the respondent in paying its dues and, in any event, the claims being disputed, and the dispute being bona fide and based on legally tenable grounds, this petition is an abuse of the process of the court and is liable to be dismissed.
4. The petition was advertised. In response thereto, no other creditor or any other person interested in the company has come forward to either support or oppose this petition.
5. The petitioner, has in support of its case, produced documents marked as exhibits P-1 to P-15 marked through the witness PW-1, Madhu D. Parekh, a partner of the petitioner-firm. For the respondent, a letter dated October 19, 1987, is marked as exhibit R-1. No witness has been examined for the respondent-company.
6. PW-1 has stated in his evidence, inter alia, that the distributorship of the petitioner for the respondent’s products came to an end in the year 1984; that he had not produced the original registers and ledgers in support of his claims in this petition and that there is no written agreement between the parties to pay interest either on the deposit amount or on the loan amount.
7. According to the witness PW-1, the agreement to pay interest was oral and no further details are given about it. The evidence of PW-1 itself would go to show that there is no written agreement between the parties to pay interest either on the deposit of Rs. 20,000 or on the loan amount of Rs. 2,00,000. What is relied on by the petitioner is the debit notes sent by it in the year 1984. The fact that the respondent did not protest against it or send any reply thereto cannot by itself be taken as sufficient to infer a contract between them to pay interest on these amounts. It is admitted by PW-1 that the respondent had made several payments. The case of the petitioner is that the three accounts, the loan account, the deposit account and the trading account were distinct and separate. According to the witness, the trading account and the deposit account were clubbed and subsequently the loan account was also clubbed, by the petitioner unilaterally and the amounts paid by the respondent adjusted towards interest.
8. The petitioner has produced the letters dated September 9, 1986, and October 4, 1986, written by the respondent and marked as exhibits P-8 and P-9, respectively. Under cover of exhibit P-8, the respondent had sent a sum of Rs. 20,000 “against the dues of Rs. 40,000”. In exhibit P-9, it is stated that a sum of Rs. 20,000 was sent “against the balance dues of Rs. 20,000”. Exhibit R-1 is a letter dated October 19, 1987, written by the petitioner to the respondent wherein it is stated that the amount due from the respondent as on that date towards the deposit account was Rs. 35,578.47. The petitioner has stated therein that it had suffered losses and required the funds. Nevertheless that letter does not refer to any amount being due from the respondent towards the loan account. The sum claimed in this letter is the amount of deposit plus interest thereon, less the sum of Rs. 7,521.23 admittedly due by the petitioner to the respondent.
9. These letters, exhibits P-8 and P-9, read along with exhibit PR-1 and the fact that loan account was separate account and had been treated as such by the petitioner though later unilaterally clubbed with other accounts would go to show that the balance amount due under the loan account was fully paid by October, 1986. The petitioner’s claim that it was entitled to interest on that accountant is prima facie not tenable in the absence of any written agreement or any letter from the respondent confirming any agreement to pay interest. The oral agreement is not pleaded in the petition and the witness has given no details as to where, when and who had orally agreed to pay interest. There is no presumption that every loan or advance is made on condition of interest being paid thereon. The claim made on this account is also prima facie barred by limitation.
10. What now remains to be considered is the claim regarding the deposit. There is no written evidence on record for the payment of interest and the claim for interest on this deposit cannot be prima facie accepted as a valid claim. The petitioner has relied on a letter written by the respondent on November 23, 1987, marked as exhibit P-5 under the cover of which, the respondent has sent a sum of Rs. 10,000 to the petitioner. This letter which was apparently sent in reply to exhibit R-1 refers to a balance to be sent by the respondent to the petitioner.
11. It is also the stand of the company in the reply notice that this sum of Rs. 10,000 was paid towards the deposit account. It is asserted in that reply exhibit P-11 that the deposit account has been settled.
12. Although exhibit P-5 indicates that some balance was payable to the petitioner as on November 23, 1987, the exact amount due has not been set out therein. The petitioner has not produced its original ledgers and accounts. The claim made by the petitioner regarding interest is not supported by any written statement. The petitioner itself had admitted that it is liable to pay Rs. 7,521 on the trading account to the respondent.
13. A creditor seeking to have the company wound up on the ground of inability to pay its debts should first establish that its claim is unimpeachable. When there is uncertainty regarding the amounts if at all to which the petitioner is entitled, the court will not proceed to make a winding up order. The petitioner in such a situation is not left without a remedy. It is open to the petitioner to establish its claim in the civil court and if the decree that may be obtained by it remains unsatisfied in whole or in part, the petitioner can seek the winding up of the company.
14. Section 434(1)(b) of the Act expressly provides that :
“434. (1) A company shall be deemed to be unable to pay its debts -….. . .
(b) if execution or other process issued on a decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part.”
15. It is not the legislative intent that the company court should convert itself into an ordinary civil court and proceed to hold a trial at the instance of every petitioner claiming to be a creditor of the company and proceed to pass a decree and thereafter order the winding up of the company on the ground that it is unable to satisfy the decree. Section 434(1)(a) confers a jurisdiction to direct the winding up only in cases where the creditors’ right to receive the amount claimed is clear and unimpeachable and the company is unable to demonstrate prima facie that it has a bona fide and legally sustainable defence to such claim.
16. Smt. A. Kamala Devi, learned counsel for the petitioner, invited my attention to the decision of the Kerala High Court in Suresh Shenoy v. Cochin Stock Exchange Ltd. [1989] 65 Comp Cas 240. The court therein, relying on the decision of the Supreme Court in the case of Amalgamated Commercial Traders (P.) Ltd. v. A. C. K. Krishnaswami [1965] 35 Comp Cas 456 and in the case of Madhusudan Gordhandas v. Madhu Woolen Industries Limited [1972] 42 Comp Cas 125 held that what is to be considered at the preliminary stage is whether the debt is disputed on some substantial or accepted ground and that a detailed examination at that stage is not contemplated. The court rejected the creditor’s petition for winding up holding that the petitioner was not bona fide, that the respondent had a valid defence, and that the petition was vindictive.
17. Learned counsel also relied on the decision of the Madhya Pradesh High Court in the case of Laxmichand Prakashchand v. Kalyan Solvent Extractions Limited [1991] 71 Comp Cas 435, wherein the court, while dismissing the creditor’s winding up petition, held that in a winding up petition, the creditor has to establish that the debt owed by the company is clear, valid in law, unimpeachable and cannot be disputed. These decisions are not of any assistance to the petitioner.
18. Mr. M. A. Sadanand, learned counsel for the respondent-company, relying on the decision in the case of Bukhtiarpur Bihar Light Railway Co. Ltd. v. Union of India ; Agrob Anlagewbau GmbH v. Orient Ceramics and Industries Limited [1986] 60 Comp Cas 691 (Delhi); Kudremukh Iron Ore Co. Ltd. v. Kooky Roadways P. Ltd. [1986] 60 Comp Cas 1069 (Kar) and T. Srinivasa v. Flemming (India) Apotheke Private Limited [1990] 68 Comp Cas 506 (Kar) submitted rightly that unless the debt alleged to be due is clear and free from doubt, it cannot reasonably be said that there is negligence, failure or inability to pay the debt and, therefore, the discretionary order of winding up which order if made would result in sounding the death-knell of a company, should not be made.
19. The evidence placed before the court is not such as would warrant a finding that there is a debt owing to the petitioner which is unimpeachable and that the respondent has failed and neglected to pay a debt due to the petitioner. It cannot therefore be said that the company is unable to pay its debts.
20. This company petition for winding up the respondent-company is, therefore, dismissed. It is, however, open to the petitioner to agitate its claim before the civil court. In the circumstances of the case, the parties shall bear their respective costs.