JUDGMENT (1.) THIS appeal is directed against the order passed by the Company Court on an application presented by the respondent for winding up the appellant company on account of its inability to pay its debts. By that order the court directed permanent stay of winding up proceeding on payment of the disputed amount to the solicitor of the petitioning creditor. The relevant facts, as stated in the petition in short, are as follows. The petitioning creditor, who is the respondent before us had been a supplier of petroleum and allied products as also of motor accessories to the company in terms of a written agreement dated November 30, 1965 on credit. She also carried out repairs to its motor vehicles. The bills in respect of such supplies and repairs were submitted in the usual course to the Company which duly accepted the same. A sum of Rs. 8000/- was paid by the Company on November 11, 1971 which was duly credited in the account and confirmed by the respondent on February 17, 1972. The Company from time to time made payments and after crediting all payments a sum of Rs. 11738. 99p. became due and payable by the Company to the respondent. The Company failed and neglected to pay the same or any part thereof inspite of demands. On or about March 20, 1972 the Company represented that it was in temporary financial difficulties and would pay, the dues shortly. To show its bonafides the company made over possession of its lorry WBL-894 at the respondent's petrol pump, thereby creating, with the respondent's concurrence, a security on, the same by way of pledge or hypothecation. In breach of the under-taking the company on March 23, 1972 sought to obtain possession of the said truck by sending a post-dated cheque for Rs. 3000/-which was dishonoured. The Company however wrongfully started criminal proceeding against the respondent employees under sections 341/403/427, of the Indian Penal Code and a search warrant was issued for the vehicle. The criminal proceeding, as it transpires, was ultimately quashed by this Court. The possession of the lorry was given back to the Company. (2.) THE respondent on April 4, 1972 issued a notice of demand under section 434 of the Companies Act through her solicitor Khaitan and Co. demanding payment of the aforesaid sum with interest. In the said notice the particulars (viz. The possession of the lorry was given back to the Company. (2.) THE respondent on April 4, 1972 issued a notice of demand under section 434 of the Companies Act through her solicitor Khaitan and Co. demanding payment of the aforesaid sum with interest. In the said notice the particulars (viz. No. of the bills dates and amounts) constituting the Company's debt to the petitioner were set out. The Company in its reply of April 24, 1972 disputed all allegations made in the notice. It was said, the Company was busy with the criminal complaint filed on March 29, 1972 against the employees of the respondent and would revert to the same in course of the week. The application, it appears, was filed thereafter on or about May 29, 1972 praying that tie company be wound up by this Court under the provisions of the Companies act, 1956. After the petition was admitted and before direction for advertisement was issued the Company filed an affidavit in-opposition with leave of Court contending that the application should he dismissed and no direction for advertisement should be issued as the proceeding was an abuse of the process of Court it was stated in the said affidavit that the respondent wrongfully disputed payments amounting to Rs. 8000/- made by cheques by the Company earlier which however was ultimately admitted by the respondent as late as February 17, 1975 the Company not only made payments duly but at times advanced huge amount there were mistakes and discrepancies in the bills submitted by the respondent who did not co-operate with the Company "in straightening the accounts' amicably. On February 23, 1972 the respondent informed that a sum of Rs. 9604-22 was outstanding as on December 31, 1971 and further a bill for Rs. 2384.96 was also unpaid. Inspite of requests and personal contacts no particulars were furnished for scrutiny. The company paid a further sum of Rs. 2500 /-, as it appears, after its cheque for the amount was dishonoured. The Company had always been ready to settle the accounts which however was made impossible by the respondent. The Company disputed the claim made by the respondent. On March 20, 1972 the respondent asked for confirmation of the balance of Rs. 2500 /-, as it appears, after its cheque for the amount was dishonoured. The Company had always been ready to settle the accounts which however was made impossible by the respondent. The Company disputed the claim made by the respondent. On March 20, 1972 the respondent asked for confirmation of the balance of Rs. 14,267.54 in the account as on February 28, 1972 and on the same day in the morning when the Company lorry WBL 894 called at the respondent's petrol station for petrol, the vehicle was wrongfully taken possession of by the respondent and was detained. The Company, to settle the matter amicably, offered to pay Rs. 3000/- and on the respondent's agreeing, sent a cheque for the amount and asked for reconciliation of the account. As the respondent in breach of the agreement refused to release the lorry while retaining the cheque, the Company stopped payment of the cheque, and failing in its efforts to settle the whole dispute, initiated the criminal proceeding referred to above. The material allegations in the petition were denied and it was reiterated that there was a serious and bonafide dispute between the parties regarding the claim. The application, it was submitted, was an abuse of the process of court and should be dismissed. (3.) IN her affidavit-in-reply the respondent stated that after verification and scrutiny of a bearer cheque for Rs. 3000 /-, due credit was given to the Company for rs. 8000/ - which included the said amount. The Company never raised any dispute in respect of the respondent's letter of 23rd February 1972 and in fact after reconciliation of accounts in February 1972 there was no dispute. The respondent denied that she did not co-operate and it was stated that the company's representative perused the accounts and admitted its correctness and there was nothing further to reconcile. The Company never disputed the bills and the present stand was taken by it merely to create a defence. The allegations made in the petition were reiterated and it was also reiterated that the custody of the lorry was given as security against outstanding dues and the vehicle should be detained till the dues were paid, as would be evident by the undated memo issued by the Company, agreeing not to take legal action for the detention of the lorry and to "mutually settle the accounts on agreed terms and conditions. "The respondent accordingly submitted that as the dispute was not bonafide but was merely a ruse for an untrue defence, orders as prayed for should be made. (4.) THE Court, on a consideration of the petition and the affidavits, came to the inference that "at this stage" of the proceeding there was no real dispute as there was no discrepancy in the account and the outstanding bills of the petitioning creditor were correct. As the Company failed to pay the debts it was to be deemed that; the Company was unable to pay them. The dispute raised by the company about the claim of the petitioning creditor was not bonafide and the winding up petition was not an abuse of the process of the Court at the initialtage. The Court however felt that a chance should be given to the Company to pay its outstanding dues to petitioning creditor or settle the same. It was accordingly ordered as follows: "if the Company pays to the petitioning creditor's solicitor sum of rs. 11738. 99 together with interest at the rate of 12 per annum from 4th of April 1972 till 4th September, 1972 by 5th of September, 1972, then the Company petition will remain permanently stayed". In default directions were given for advertisement and the matter was also directed to be on list on the 16th November, 1972. The Company has come up an appeal against this order. Mr. Anindya Mitra appearing with Mr. J. K. Roy for the appellant company has contended that the Company has seriously and bonafide disputed the debt claimed as due and owing from his client to the respondent. The bills submitted by the respondent, making up the alleged debt, are bereft of particulars. Vouchers in support of the bills were not forwarded for scrutiny by the respondent, the respondent accordingly should be called upon to establish her claim in a properly constituted suit in which the parties would have the opportunity to prove their respective cases. In this state of affairs the impugned order should not have been passed in the summary procedure for winding up under the Companies Act, 1956. (5.) IT is well settled, as has been pointed by Mr. Ajay Nath Ray, appearing with mrs. Indrani Banerjee for the respondent that a debt does not become a disputed debt merely because the debt is disputed. (5.) IT is well settled, as has been pointed by Mr. Ajay Nath Ray, appearing with mrs. Indrani Banerjee for the respondent that a debt does not become a disputed debt merely because the debt is disputed. Counsel relied en the outvoted observations made by Jessel, m. R. in (1) Re The Imperial Hydropathic hotel Company, Blackpool, Ltd. 49 L. T. 147 (149). "it is not because a man says I dispute the debt' that makes it a disputed debt. He must give some reasonable ground,. . . . this was not a case in which the creditor had notice of a bonafide dispute as to his debt, which would compel him to refrain from attempting to recover payment of what is really an undisputed debt, an undefended demand by means of a winding up petition and the result is, in my opinion, that he is entitled to succeed". In the facts of this case there is no material before us to show that the company raised any specific dispute in respect of the numerous outstanding bills. The due receipt of bills has not been disputed. Even in the reply to the statutory notice, the Company's solicitor asked for a week's time to deal with the claims made by the respondent but it does not appear that a bonafide or any dispute was raised at any time till the filing of the winding up petition or thereafter and as a limited company it was required to maintain its own accounts which was never referred to by the company. In the circumstances it is impossible to hold that there was any bonafide dispute about the debt as an acceptable defence against the petitioning creditor's claim. (6.) MR. Mitra, next contended that the debt was amply secured to the respondent's satisfaction by the lorry belonging to the Company which was to be detained by the respondent according to her case till her dues were paid. In fact the petitioning creditor in her petition took up the position that the Company delivered possession of the truck as a security by way of pledge or hypothecation to be taken back on full payment of the dues. The respondent in her petition has stated that in breach of the agreement creating security, the Company initiated criminal proceedings against her employees and sought to recover possession of the vehicle. The respondent in her petition has stated that in breach of the agreement creating security, the Company initiated criminal proceedings against her employees and sought to recover possession of the vehicle. It could no longer be said in the circumstances that there was a security in existence for repayment of the debt. Further, it appears to us, the words "to secure. . . . . . . . it" in section 434 (1) (a) means and implies creation of a security enforceable in law to secure payment of the debt. Mere detention of the lorry till debts are paid, even if claim, does not create any right in the creditor to enforce its sale for repayment of the debt. The contention of Mr. Mitra in this behalf accordingly is unacceptable. (7.) OUR attemption was drawn to the undated memo issued by the Company stating that the lorry was detained owing to misunderstanding on part of the respondent for which the company agreed not to take legal action but to settle the accounts on agreed terms and condition. A point was made contending that in view of the above provision it was no longer open to the respondent to move the winding up petition before the accounts are settled mutually. (8.) INTERNAL evidence would, indicate that the memo must have been written sometime between March 23, 1972 after the detention of the lorry and March 29, 1972 when the criminal proceeding was initiated. It has been rightly pointed out by Mr. Ray that there was no concluded contract between the parties, the memo being unilateral and the initiation of the criminal proceeding and issue of search warrant for the lorry at the instance of the Company also clearly establish the said position. It has now to be examined if the statement of accounts as submitted by the petitioning creditor in her statutory notice, which is made part of the petition, establish the fact that the specified amount of Rs. 11738.99 is an existing debt for non-payment whereof the winding up of the debtor Company has been prayed for. There is no dispute that the amount due on December 30, 1972 according to the said statement would be Rs. 9008.82 while according to the respondent's letter of February 23, 1972, the amount due on December 31, 1971 was Rs. 9604.22. 11738.99 is an existing debt for non-payment whereof the winding up of the debtor Company has been prayed for. There is no dispute that the amount due on December 30, 1972 according to the said statement would be Rs. 9008.82 while according to the respondent's letter of February 23, 1972, the amount due on December 31, 1971 was Rs. 9604.22. In the respondent's letter of March 20, 1972, the company's debt to her as on February 28, 1972 is said to be Rs. 14267. 54 but the statement of account shows the indebtedness as Rs. 13663. 14 on the said date. It will thus appear that there; are inherent discrepancies in the account maintained by the respondent. In this connection it may be noted that a sum of Rs. 3000/- paid by the Company by bearer cheque on July 11, 1970 was not given credit till about February 17, 1972. (9.) MR. Ray has contended with emphasis that even if there are discrepancies in the accounts of the respondents unexplained on the materials on record, if the Court is satisfied that the indebtedness of the Company exceeds Rs. 500/-, it should not hesitate to pass an order for winding up the Company, to which a creditor is otherwise entitled, when the Company had failed to pay or secure or compound for it to the reasonable satisfaction of the creditor within the statutory period. (10.) THE Supreme Court in (2) M/s. Madhusudan Gordhandas and Co. v. Madhu woolen Industries Private Ltd. A.I.R. 1971 S.C. 2600 at p. 2605 observed. "where the debt is undisputed the court will not act upon a defence that the Company has ability to pay the debt but the Company chooses not to pay that particular debt (See Re: A company 94 S. J. 369). Where however there is no doubt that the Company owes the creditor a debt entitling him to a winding up order, but the exact amount of the debt is disputed the Court will make a winding up order without requiring the creditor to quantify the debt precisely (See Re : Tweeds Garages ltd. 1962 Ch. 406-1962 (I) All. E. R. 121). 1962 Ch. 406-1962 (I) All. E. R. 121). The principles on which the court 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. " In (3) Of Lynx Ltd. v. Simon carves India Ltd. A. I. R. 1970 Calcutta 418 it was observed: "----a notice under section 434 of the Companies Act, 1956 will not be rendered invalid only because of the fact that the amount of debt mentioned in the notice may not be exactly the correct amount of the debt due, provided the amount mentioned in the notice includes the debt due and exceeds the sum of Rs.500 in case of a bonafides dispute to the debt or substantial portion thereof a winding up petition is refused not because of invalidity of the notice, but because of the fact that there is no failure or neglect to pay on the part of the Company in view of the disputes. " In Palmer's Company Law (21st edition page 378) it has been laid down "where there is no doubt that the company owes the creditor a debt entitling him to a winding up order and only the precise amount of the debt is disputed, the Court will make a winding up order without requiring the creditor to quantify his debt precisely. " (11.) IN the case before us, as we have seen, the account set out in the petition on the respondent's own case, suffer from serious discrepancies. The account as it appears is a sort of running account with the Company paying lump sums from time to time. On an enquiry made by the Company on December 1, 1972 the respondent by her letter of february 17, 1972 advised the Company that the sum of Rs. 8000/- paid by cheques bearing dates between July 11, 1970 to May 5, 1971 had "since been credited to your (Company's) account. " in the notice under section 434, the bills mentioned therein date from September 30, 1971 but no credit for Rs. 8000/- had been given in respect of the said bills which the letter referred to above indicated. 8000/- paid by cheques bearing dates between July 11, 1970 to May 5, 1971 had "since been credited to your (Company's) account. " in the notice under section 434, the bills mentioned therein date from September 30, 1971 but no credit for Rs. 8000/- had been given in respect of the said bills which the letter referred to above indicated. It is possible that the said amount was credited for earlier dues but the position is far from clear. We have also noted some other discrepancies between the account annexed to the notice and the correspondence made by the respondent. (12.) AS we have seen, the impugned order directs payment of the amount claimed with interest thereon to the solicitor of the petitioning creditor without any condition. This amounts to payment of dues of the respondent as claimed with interest inspite of the serious discrepancies in the account maintained by her relating to her transactions with the Company. With respect to the learned Judge, we feed that the order for payment in such circumstances should have been made, if at all, subject to such terms and conditions as the court might think fit and proper. We accordingly propose to vary the order. It appears that in compliance with the orders passed from time to time in this appeal, the Company has deposited a total sum of Rs. 12000/- with its solicitor Messers T. Banerjee and Co. On the basis of which the operation of the order under appeal has been stayed. For the ends of justice and in the special circumstances of the case we set aside the order under appeal and direct that the solicitor of the company will hold the said amount free from lien and subject to further orders of Court for a period of three months from date. If within this period the petitioning creditor institutes a suit for recovery of her dues in respect of the claims made in the present proceeding, the said amount will remain as security for the payment of the dues under any decree which may be passed in the said suit. If no suit is filed by the petitioning creditor within the time aforesaid, the said amount will be refunded by M/s. T. Banerjee and Co. to the Company. If a suit is filed, the said Solicitors are directed to invest the said sum of Rs. If no suit is filed by the petitioning creditor within the time aforesaid, the said amount will be refunded by M/s. T. Banerjee and Co. to the Company. If a suit is filed, the said Solicitors are directed to invest the said sum of Rs. 12000/ - in short term fixed deposits renewable after every three months. The appeal is accordingly disposed of in the manner indicated above. The parties however will pay their own costs in. this appeal and in the trial court.