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TMI Blog2001 (7) TMI 1164X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner-company that the respondent-company had executed a demand promissory note on the same date in favour of the petitioners for a sum of Rs. 2,08,50,000. The respondent-company had also executed personal guarantees of Shri G.D. Agarwal, Mrs. Shanthi Devi Radhakrishna Agarwal and Mr. M.P. Mehrotra. The guarantors had guaranteed the due and punctual payment to be made by the respondent-company to the petitioners under the agreement, further the respondent-company had issued various post-dated cheques towards the instalments with an undertaking to honour the said cheques on presentation by the petitioners. It further appears that the petitioners had got deposited the documents of title from Mrs. Agarwal creating an equitable mortgage of the property to secure the due and punctual payment to be made by the respondent-company to the petitioner-company. It is the case of the petitioners that the respondent-company failed and neglected to pay the hire charges under the aforesaid agreement from March, 1998, and therefore, the petitioner-company had terminated the agreement by its letter dated January 22, 2000, and requested the company to make payment of the hire charges and compensat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,62,00,000 as soon as there were defaults in the payment of the hire charges by the respondent-company. It is pointed out that the petitioner-company were also holding the duplicate switch keys of the trolleys and they could have taken away the said trolleys. In that case the respondents would not have been liable to make payment of the hire charges as soon as the petitioners had taken away the trolleys. Secondly it is submitted that in view of the three personal guarantees and security by way of mortgage of a flat there was no case for the petitioner-company to seek winding up of the respondent-company on the ground of inability of the respondent to pay the debt of the petitioner-company. According to the respondents, the petitioners were fully secured and they had no reason to seek winding up of the petitioner. Thirdly it is pointed out that the petitioner-company has already commenced the arbitration proceedings on the ground that there existed disputes and differences between the parties. The respondent-company has appeared before the arbitration proceedings and have raised a preliminary objection regarding the arbitrator in person as he was not only appointed by the petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners have filed the present petition to get wound up the respondent-company as pressure tactics for recovery of its dues under the hire-purchase agreement with the respondent-company. Admittedly there has been a dispute and difference between the parties in respect of implementation of the hire-purchase agreement, the petitioners have therefore resorted to the arbitration clause and referred the disputes though unilaterally for arbitration which is pending at Udupi, Karnataka State. The respondent-company has even questioned the correctness of the alleged debt demanded by the petitioner-company. It is significant to note that in the present proceedings the debt demanded is to the tune of Rs. 1,77,43,273 while in the notice of reference to arbitration the petitioners have put their claim to the tune of Rs. 2,37,45,378. In view of the aforesaid very large difference in the claims it is clear that the debt has not crystallised or been ascertained even approximately and the fact that the respondents have disputed the correctness of the claim is to be accepted. All the disputes and differences between the parties would be finally resolved in the arbitration proceedings when both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l advice and it had acted on it. On the facts it seems to us clear that the appellant-company did not dispute the debt in order to hide its inability to pay debts. Further we are satisfied that the question whether the declaration of dividend dated December 30, 1959, is valid or not raises a substantial question as to the interpretation of section 207 of the Companies Act. Further, whether the declaration dated December 30, 1959, is severable or not is also a substantial question. We do not propose to decide whether the declaration of dividend was valid or not or whether it was severable or not, because in these proceedings we are only concerned with the question whether the debt was bona fide disputed by the company on substantial grounds. If the debt was bona fide disputed, as we hold it was, there cannot be 'neglect to pay' within section 434(1)( a ) of the Companies Act. If there is no neglect, the deeming provision does not come into play and the ground of winding up, namely, that the company is unable to pay its debts is not substantiated." I am not all inclined to admit the present petition as the petitioners ought to resort to a civil remedy and they cannot be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned single judge of the High Court referred to this aspect he had not pursued it further. He has not considered as to what would be the consequence. Unfortunately, the Division Bench has overlooked this aspect when it held thus : 'In the present case, there is an allegation in the petition that there was an agreement between the company and Dalmia Dairy Industries for promoting the petitioner-company and that under the terms of that agreement the company had to pay certain amounts. There is nothing on record to suggest that such an agreement was not entered into.' (2) The first respondent is not a creditor, the appellant is not a debtor because it is a financial institution for an amount which is agreed to be subscribed. Neither the learned single judge nor the Division Bench has decided this important question whether there is a debt and the company has either neglected or is unable to pay. (3) The same claim is the subject-matter of arbitration which is pending adjudication. Therefore, there is no definiteness about it. (4) In view of all these, there is no prima facie dispute as to the debt. (5) The defence raised is a substantial one and not mere moonshin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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