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TMI Blog2001 (10) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... reto, a few facts may be noted. 2. The appellants and the respondent-company had entered into a lease agreement dated 30-9-1994 whereby the appellants had leased certain machinery to the respondent-company, on the respondent agreeing to pay Rs. 1,32,30,000 as lease rentals payable in instalment of Rs. 6,61,500 each quarter extended over a period of five years effective from 16-11-1994 till 15-11-1999. It seems that the respondent committed default in payment of the lease rentals and according to the appellants a sum of Rs. 2,70,14,476 consisting of arrears of lease rentals and service charges is due from the respondent. To the petition, the appellant annexed correspondence between the parties including the reply dated 16-12-2000 to the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Supreme Court in the case of Hind Overseas (P.) Ltd. v. Raghunath Prasad Jhunjhunwalla AIR 1976 SC 565 held that the appellants ought to resort to the remedy of arbitration as provided in the printed agreement to resolve dispute between the parties. The learned judge observed that : "The Petitioners have by passed the regular civil remedy of civil suit and also by passed the arbitration clause in the lease agreement and have resorted to this extraordinary remedy which is to be resorted sparingly where there are no genuine dispute and the debt is an admitted liability. The petitioner have abused the process of the Court and the law by filing this petition." The learned judge, therefore, dismissed the petition with direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinciples applicable in the case of dissolution of partnership could be invoked in the case of company. In that case a petition under section 433(f) for winding up was filed on the ground that the company was formed as a result of mutual trust and confidence and the company in substance is partnership and, therefore, the principles of partnership would be attracted. The learned Single Judge of Calcutta High Court relying on an English case Cuthbert Cooper & Sons Ltd. In re 1937 Ch. 392 held that there was no evidence of mismanagement or misapplication either as regards shareholders or as regard directors. It was held that directors disputes are no ground for winding up on the facts and circumstances of the case. In appeal the division bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent petition for winding up which is instituted under section 443(1)(e) on the ground that the company is unable to pay its debt. Reliance placed on the decision of Hind Overseas (P.) Ltd.'s case (supra) was thus clearly misconceived. The learned judge was, therefore, not right in holding that the appellants ought to have pursued the alternative remedy of arbitration or suit. 8. It is well settled that a winding-up petition should not be allowed to be taken as a means to recover debt from the company. It is not a legitimate way to enforce payment of debts which are bona fide disputed by the company and cannot be used as a weapon to pressurise and coerce the company to make payments. But it is also equally well settled that when the debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll make a winding-up order without requiring the creditor to quantify the debt precisely. (See Tweeds Garages Ltd. In re [1962] Ch. 406). The principles on which the courts acts are first 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." (p. 131) 9. In United Western Bank Ltd. In re [1978] 48 Comp. Cas. 378 (Bom.), Kania, J. (as he then was) observed that when the defence is that the debt is disputed, the Court has to see first whether the dispute on the face of it is genuine or merely a cloak to cover company's real inability to pay the debts. The inability is indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is prima facie appears to exceed the limit of Rs. 500 indicated in section 434, it would be unjust to refuse wind up order on the ground that there is dispute as to precise amount owned. Tweeds Garages Ltd. In re [1962] 1 Ch. 406; it was clearly held that it would be unjust to refuse a winding up order to the petitioner who has admittedly owned moneys which have not been paid merely because there is a dispute as to the precise amount owning. Almost to the same effect are the observations in Cardiff Preserved Coal & Coke Co. v. Norton [1867] 2 Ch. App. 405. 12. The learned Single Judge of Calcutta High Court in Ofu Lynx Ltd. v. Simon Carves India Ltd. [1971] 41 Comp. Cas. 174 has observed : ". . . I, therefore, hold that a notice under se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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