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TMI Blog1989 (6) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... company for carrying out this business. The share capital of the company was to be one crore rupees, divided into 8 lakhs equity shares of Rs. 10 each and twenty thousand preference shares of Rs. 100 each. The holding of PSIDC was to be 26 per cent, and that of CCL 25 per cent. of the total issued equity share so that the voting powers between the parties and others should be : PSIDC not less than 26 per cent ; CCL not more than 25 per cent. and public including financial institutions 49 per cent. The balance capital requirement of the company was to be arranged by the board of directors of the company through loans. It was further agreed that the board of the company shall consist of not less than three and not more than twelve directors including ex officio directors and debenture directors, if any. The PSIDC was given the right to nominate the chairman of the company so long as it held not less than 26 per cent, of the subscribed equity capital of the company and this nomination had to be out of the directors of the company nominated by it. Clause 13 of the agreement is pertinently relevant which reads : "The parties hereto undertake to accept and abide by the conditions, if a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orking capital." These undertakings get included in the agreement dated June 6, 1977, by virtue of clause 13 thereof. In this backdrop, on February 10, 1982, the director (technical) wrote to the PSIDC seeking assistance of a bridging loan of Rs. 40 lakhs as the project was at the stage of completion. The PSIDC conceded this request and an agreement between PSIDC and PCL was entered into on February 17, 1982. In this agreement, it was provided that the loan was repayable, before June 30, 1982, or earlier, forthwith the payment being made by the PSIDC on any time. It was further specifically provided that the PCL shall utilise the proceeds of the bridging loan for acquiring/creating block assets towards the implementation of its project envisaging setting up of a ceramics insulators manufacturing unit at Dabwali Road, Bhatinda, Tehsil and District Bhatinda. From the balance-sheet for the year 1984, it appears that as on June 30, 1984, there was an overrun of Rs. 1,81,52,000. For meeting this overrun, the company appears to have utilised the bridge loan of Rs. 40 lakhs advanced by PSIDC and Rs. 1,05,60,000 for the CCL. In July, 1984, PSIDC sold all its equity holding in PCL to CC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and Co. v. Madhu Woollen Industries Pvt. Ltd. [1972] 42 Comp Cas 125 , 131 (SC), where, speaking for the court, Ray J. said : "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 up the company...The principles on which the court acts are firstly, that the defence of the company is in good faith and one of substance ; secondly, the defence is likely to succeed in point of law ; and, thirdly, the company adduces prima facie proof of the facts on which the defence depends." Relying on these dicta of the Supreme Court, Mr. O.P. Malhotra, senior advocate and learned counsel for the appellant company, has submitted that it is true that PCL borrowed Rs. 40 lakhs from PSIDC, but in view of the counter-claim of the company, there is no admitted liability which could form the basis of the winding up petition. As a matter of fact, he says, PSIDC still owes Rs. 52,53,960 to PCL. This has been the persistent stand of PCL from the very outset. PSIDC never claimed repayment of the bridge loan but when specifically asked by PCL by its letter of December 27, 1985, to reimburse the balance of Rs. 52,53,960 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctice that where a company had a genuine and serious cross-claim against the petitioner which it had not been reasonably able to litigate, the petition should usually be dismissed." He concluded with the decision of the Karnataka High Court holding that section 433 is not meant for settling money disputes between parties and when a claim or debt is disputed, the proper forum for that is the civil court and it would not be proper to decide the same in the summary proceedings under section 433. On the other hand, Mr. Vinod Sharma, advocate and learned counsel for PSIDC, has laid greaten stress on the language of the bridge loan dated February 17, 1982, and he has also referred us to the balance-sheets to establish that the liability is admitted. We have given our careful consideration to the rival contentions of learned counsel for both the sides and also the judgment of the learned company judge. We find that the learned company judge has not taken into consideration the provisions of clause 13 of the agreement between PSIDC and CCL dated June 6, 1977, by virtue of which the undertakings given by PSIDC and CCL to the Industrial Finance Corporation of India on May 22, 1980, and M ..... X X X X Extracts X X X X X X X X Extracts X X X X
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