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TMI Blog2010 (4) TMI 1186X X X X Extracts X X X X X X X X Extracts X X X X ..... t for manufacture of polyester yarn (MLI) in the year 1994. The petitioner bank sanctioned various credit facilities such as Cash Credit Hypothecation, Term Loan, WCTL, FITL, LC and LG. The respondent company having availed the above referred credit facilities failed to repay the amount due. The petitioner bank issued number of notices calling upon the respondent company to repay the amount due under various credit facilities availed by it. The outstanding amount, which the respondent company has to pay under various credit facilities is ₹ 2468.45 lakhs. The petitioner bank issued a statutory legal notice on 21.02.2008 under the provisions of Section 434 of the Companies Act demanding the respondent company to pay the amounts due under various credit facilities within 21 days. The notice was duly served on the respondent. But the respondent neither gave a reply nor paid the amount as demanded. As on 14.02.2008, the respondent company was due in a sum of ₹ 37,96,23,482/- . The respondent company is unable to pay the debts within the meaning of Section 434 of the Companies Act, and therefore, it is liable to be wound up. 3. Notice before admission came to be ordered on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect the livelihood of thousands of employees. 5. Paragraphs 20 and 21 of the counter affidavit need to be noted and they read as hereunder:- 20. I submit that the petitioner Bank as stated above has already filed a recovery O.A before the Hon ble DRT (Debt Recovery Tribunal) having availed the remedy of filing application before DRT, the petitioner bank cannot invoke Section 434 of the Companies Act on the ground that the Respondent Company is unable to pay the debt, moreover the petitioner bank is silent with regard to material particulars to allege that the respondent company has become commercially insolvent and as such liable for winding. 21. I submit that once a forum has been invoked for recovery of amount, the petitioner Bank is precluded from issuing a notice under Section 434 of Companies Act and contend that the respondent company is unable to pay debts. Therefore, the petition is liable to be dismissed. There are several disputed facts in the transaction which the Respondent company is contesting in the O.A before DRT which is the appropriate forum to adjudicate the dispute . 6. Heard Sri E.Madan Mohan Rao, leaned counsel appearing for the petitioner and S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d creditors of company. A perusal of Section 443 of the act would show that absolute discretion is vested in the Court to make an order for winding up. Court can refuse to make an order of winding up, if it is of opinion that the person is acting unreasonably in seeking to have the company wound up instead of pursuing with other remedy. 11 In Kapil N.Mehta s case (4 supra), it has been held that Section 443(2) of the Companies Act, 1956, mandates the Court that if there is other remedy available and if the petitioners are acting unreasonably in seeking to have a company wound up, instead of pursuing that other remedy, the Court may refuse to make that order. Here the word `may will have to be read as `shall . Thus, where these two conditions are satisfied, the court is not expected to make an order of winding up on the ground that it is just and equitable. 12. In American Express Bank Ltd. case (5 supra ), the Gujarat High Court held that in the matter of the petition for winding up on the ground that the company is unable to pay its debt, the Court has to bear in mind that winding up petition is not an alternative to the ordinary procedure for realization of the debts due f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment Corporation of U.P s case [1994]79 Comp Case 835(SC). The opinion of William James V.V was quoted with approval while hold that (page 842): What then is inability when the section says unable to pay its dues. That should be taken in the commercial sensce, in that it is unable to meet its current demands . Ordinarily, a creditor who on demand fails to get amounts due paid to him becomes entitled to obtain an order of winding up ex debito justitiae. However, it is to be noticed that what is envisaged under Section 433(1) (e) is not inability to pay a particular debt, but inability to pay its debts. Section 433 only provides rule of evidence by providing circumstances in which it can be presumed that the company is unable to pay its debts. Section 433 only provides rule of evidence by providing circumstances in which it can be presumed that the company is unable to pay its debts. Neglecting to pay in terms of Section 434(1)(a) , the specified demand of a creditor raises such a presumption as to inability to pay its debts. Thus, mere inability to pay a particular debt by itself cannot be held to be sufficient to pass an order of winding up ex debito justitiae. With the aid of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dy been filed before the Debt Recovery Tribunal under the provisions of the Recovery of Debts due to Banks and Financial Institutions Act, 1993, it cannot be held that the petition for winding up would not be maintainable. Section 434(1)(a) of the Companies Act, 1956, prescribes a statutory presumption of inability on the part of the company to pay its debt if the conditions prescribed therein are fulfilled. Thus, if the statute says that the company must be deemed to be unable to pay its debts, the logical result would be to admit the petition for winding up to investigate it. 15. It is well settled that the procedure under Section 433 of the Indian Companies Act is summary. When the company produces prima facie proof of facts on which the defence depends and which is probable and there is likelihood to succeed in point of law, it cannot be said that the company has neglected to pay within the meaning of Section 434(1)(a) of the Companies Act. Bona fide dispute implies substantial ground for the dispute raised. 16. Indisputably, the petitioner bank filed O.A on the file of the Debt Recovery Tribunal for recovery of the amounts due from the respondent company. Filing of th ..... 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