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TMI Blog1992 (11) TMI 283X X X X Extracts X X X X X X X X Extracts X X X X ..... editor to obtain their services for the purpose of procurement of an order from one Neyveli Lignite Corporation Ltd. The value of the order ultimately turned out to be above ₹ 22 crore, and the commission for such procurement at the agreed 41/27 would come to more than a crore of rupees. We accept that in today's commercial world such contracts are not immediately to be inferred as contrary to the law or contrary to public policy, but might well be accepted as one of the realities of modern trade. 5. The time period for the contract was fixed by a writing of February 4, 1987 to expire with December 1987. On November 4, 1987 the petitioning creditor wrote that they were unable to proceed with their job and sought for termination. Again, by a letter dated December 23, 1987 the petitioner sought for time extension till 31,:3.88, which M/s. Dunlop India Ltd. refused by their letter of 4.1.88. 6. The matter should have ended there. But the matter did not end there. In spite of these letters showing an apparent cessation of the contract, M/s. Dunlop India Ltd. did go on to pay to the petitioning creditor, M/s. Anamika Udyog, a sum of ₹ 3 lakhs on July 11, 1988 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned voucher mentions final payment. The defence would be doubtful, because the stand of M/s. Dunlop India Ltd. is not consistent with all documents produced. 10. On the basis of the above facts, placing reliance upon the two payments made after expiry of the written contract period his Lordship in the Court below passed the security order. We must examine at this stage the true principles upon which the Company Court is to pass an order for security. 11. It is well known that if a debt is bona fide disputed, a winding-up application would not at all lie. If on the other hand, the disputes raised are mere sham disputes, then the debts would not become disputed merely by those being called disputed debts by the company. 12. But there may be borderline cases, as there often are, where the defence might appear to be not wholly sound. But the unsoundness of the defence cannot be pronounced upon there and then. It is felt that the matter will have to await trial. There is, in other words, a doubt about the ultimate possibility of success of the defence in the suit to be filed, if any. 13. In our opinion, if the Court is to order security in such cases of doubtful defence, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend, (e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence. 15. It appears from the fifth of the above tests that in case the defendant is unable to disclose facts spelling out a defence, even then the Court might allow the trial of the suit, thinking in its mercy and surely in its discretion, that there yet might arise a contingency whereby the claim of the plaintiff might not wholly succeed : the Court might then order furnishing of security. 16. This test as to furnishing of security does not talk about weighment of the strength of the defence at all. In other words, if the affidavits show that there is a defence, however thin, which is arguable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage of admission of the winding-up application. If this were the law, then the choice of remedy would produce different results. If the petitioning creditor goes for a suit he awaits trial without security. If on the other hand the petitioning creditor presents a winding-up application he obtains an order for security because the defence, so to speak, is somewhat watery. In our opinion, this distinction in law even if there now, should not any longer remain. Forms of action have long been buried, and so far as practicable, they should remain buried. 21. It was further stated in the case of Ofu Lynx Ltd. as follows:- .......... In any case where the court entertains some doubt as to the bona fides of the disputes sought to be raised and has suspicion about the true nature thereof, the Court may direct the company to furnish security to prove its bona fides and solvency and relegate the claimant to a suit on such security being furnished........... . 22. Again here, a difference in principle is being sought to be made between a regular suit and a winding-up application. No defendant is ordinarily asked to furnish security for showing solvency and the directions for fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. v. Jainti Enterprises., reported in 61 Co. Cas. 504, alternatively reported in (1987) 2 Co. L.J. 82, where the judgment was delivered by one of us (Prabir Kumar Majumdar, J.). I have had a consultation with his Lordship and we are both agreed that the case did not decide upon the principles on which a Company Court is to order security. With respect, our decision remains the same even after having considered the above quoted Delhi authority. 26. Mr. Sen also relied upon 7 Halsbury's Laws of England 1004 (Lord Hailsham edition), wherein it is stated that in relation to winding-up petitions the Court may order the amount of the alleged debt to be paid into court. That jurisdiction to secure, no doubt, resides in the Company Court but is to be exercised when the nature of the debt appears to the Court to be real, indisputable by the company, and yet the Court, for some articulate reason shrinks from accepting the same wholly there and then. That however, is not on the basis of any defence raised by the company but on the court's own use of discretion for example, when it feels for some expressed reason that the petitioning creditor might not be successful in ultimately ..... X X X X Extracts X X X X X X X X Extracts X X X X
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