B. K. MEHTA, J. ( 1 ) THE Registrar of Companies Gujarat has filed this petition for winding up of Messrs Kavita Benefit Private Limited chitfund company under clause (e) of sec. 433 of the Companies Act 1956 on the ground that the company is unable to pay its debts. The case of the Registrar is that the financial position of the company as per the balance sheet as on 31-12-1972 filed by the company was such that it was unable to pay its debts and its liability exceeded the net tangible assets. The balance sheet as on 31-12-1972 showed an accumulated loss of Rs. 14 49 169 and its realisable assets were only of the order of Rs. 39 5 914 as against the liability of Rs. 53 53 633 The Registrar has also made a grievance that the Directors of the company had a control over large funds which they have collected in nature of subscriptions from its members to whom chit fund was sold from time to time and the Director have received a huge remuneration of Rs. 67 500 during all these years and also benefited by obtaining loans and advances at the cheap rate of interest. The Registrar is apprehensive that the affairs of the company were being managed solely for the personal benefits of its Directors and there appears to be no security of the public money deposited with the company. In his opinion it would be worth-while to put an end to the uneconomical working of the company. The Regional Director of companies had therefore served a show cause notice on the company as to why sanction should not be given to the Registrar of Companies to make an appropriate application for winding up as the company was unable to pay its debts. After hearing the representatives of the company the Regional Director has given his sanction on 10-3-1975 to the Registrar to make an appropriate application which has been filed in this Court on 9th July 1975. After notice to the company this petition was admitted on 27th July 1976 and usual advertisement has been inserted in two newspapers one in English and another in vernacular and the State Government gazette. After notice to the company this petition was admitted on 27th July 1976 and usual advertisement has been inserted in two newspapers one in English and another in vernacular and the State Government gazette. Pursuant to this advertisement three creditors of the company who are contractors and who have entered into contracts with the company for construction work have filed in their appearance and opposed the petition. No other creditor or subscribing member has come forward to support or oppose the petition. The company has filed its affidavit-in-reply of its Managing Director one Mr. L. R. Makhija contending inter alia that the business of the company was such that the liability of repayment of subscription received from the members becomes due only on completion of period under various schemes and that in the course of working of the company there were total 11 groups which have matured and the entire subscription amounts along with dividends payable to the members of all the 11 groups were refunded completely according to rules and regulations. The Managing Director further asserted in his affidavit-in-reply that there was absolutely no complaint of whatsoever kind or nature received from any member of any group or any creditor of the company that they have not been paid back the amount or any dues nor any inquiry whatsoever has been pending or made by the petitioner in this respect. It has been further stated in the affidavit-in-reply that these called liability of Rs. 53 53 0 shown in the balance sheet as on 31-12-1972 was not the liability in presenti but was a contingent liability which is to be discharged only on completion of period under various schemes provided the subscribers carry out their respective obligations under the rules and regulations of the relevant schemes. The Registrar has filed his affidavit-in-rejoinder and it was contended that the liabilities which are ascertained or are ascertainable on a particular date become liabilities on that date irres- pective of the fact that the same are payable at a future date. The Registrar further asserted in his affidavit-in-rejoinder that the incidence of the past payments do not determine the credibility of the company and cannot form the basis for reputation which is always in such a case good in the beginning and worst in the end. The Registrar further asserted in his affidavit-in-rejoinder that the incidence of the past payments do not determine the credibility of the company and cannot form the basis for reputation which is always in such a case good in the beginning and worst in the end. In should be noted that the Registrar of Companies has not denied the statement of the Managing Director of the company in his affidavit-in-reply filed on behalf of the company that there was not a single default on the part of the company in repaying the subscription to the members as and when it became due for repayment nor was there any complaint from any of the subscribers nor there was any default in repayment of the debt to the creditors. It is in this context that I have been called upon to decide whether the Registrar is entitled to an order of winding up under sec. 433 (e) of the Companies Act 1956 Section 433 (e) permits the court to wind up a company if the court is satisfied that the company is unable to pay debts. If the court is satisfied that the company is having regard to the circumstances unable to pay debts it will before making an order of winding up consider what is the extent of the debt and whether having regard to its assets and uncalled capital if any the liabilities exceed so as to warrant an order for winding up. At this stage of course the court considers the prospective and contingent liability for determining the extent of the debt as prescribed under clause (c) of sec. 434 (1) of the Act. The crux of the problem in this petition therefore in the first instance is whether it has been established that there were any debts of the company. Now the term debt has definite connotation which has come for consideration at the hands of the court on various occasions in different context. In Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax (1966) 59 I. T. R. 767 a question came for consideration as to what is the meaning of the words debt owed and debt in the context of ascertaining the net wealth for the purposes of tax liability under the Wealth Tax Act. In Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax (1966) 59 I. T. R. 767 a question came for consideration as to what is the meaning of the words debt owed and debt in the context of ascertaining the net wealth for the purposes of tax liability under the Wealth Tax Act. Subba Rao J. delivering the majority judgment observed at page 779 as under :the decision of a Full Bench of the Calcutta High Court in Banchharam Majumdar v. Advanath Bhattacharjee I. L R. 36 Cal. 936. throws considerable light on the connotation of the word debt. Jenkins C. J. defined that word thus: i take it to be well established that a debt is a sum of money which is now payable or will become payable in future by reason of a present obligation. Mookerjee J. quoted the following passage with approval from the judgment of the Supreme Court of California in People v. Arguello (1869) 37 Calif. 521. Standing alone the word debt is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two we say of the former that it is a debt owing and of the latter that it is a debt due. In other words debts are of two kinds: solvendum in presenti and solvendum in future. A some of money which is certainty and in all events payable is a debt without regard to the fact whether it be payable now or at a future time. A sum payable upon a contingency however. is not a debt. or does not become a debt until the contingency has happened. (emphasis supplied ). A some of money which is certainty and in all events payable is a debt without regard to the fact whether it be payable now or at a future time. A sum payable upon a contingency however. is not a debt. or does not become a debt until the contingency has happened. (emphasis supplied ). This statement of law is quoted with approval by the Supreme Court in Union of India v. Raman Iron Foundry A. I. R. 1974 S. C. 1265 at page 1271 Bhagwati J. speaking for the court observed as under in para 7 of his judgment: it would be profitable in this connection to refer to the concept of a debt for a sum due is the same thing as a debt due The classical definition of debt is to be found in Webb v. Stenton (1883) 11 QBD 518 where Lindley L. J. said a debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation. There must be debitum in presenti solven dum may be in persenti or in future that is immaterial. There must be an existing obligation to pay a sum of money now or in future. The following passage from the judgment of the Supreme Court of California in People v. Arguello (1869) 37 Calif. 524 which was approved by this Court in Kesoram Industries v. Commr of Wealth Tax (1966) 2 S. C. R. 688 (A. I. R. 1966 S. C. 1370) clearly brings out the essential characteristics of a debt: standing alone the word debt is as applicable to a sum of money which has been promised at a future day as to a sum now due and payable. If we wish to distinguish between the two we say of the former that it is a debt owing and of the latter that it is a debt due. ( 2 ) IN the context of this very section the Rajasthan and Punjab High Court have also held that when the debt becomes absolutely due in the sense that the creditor is entitled to claim its payment presently it is a debt which is payable by the company within the meaning of sec. ( 2 ) IN the context of this very section the Rajasthan and Punjab High Court have also held that when the debt becomes absolutely due in the sense that the creditor is entitled to claim its payment presently it is a debt which is payable by the company within the meaning of sec. 433 (e) (vide Registrar of Companies Rajasthan v. S. Sohanmull Golcha P. Ltd. (1972) 42 Company Cases 386 Registrar of Companies Punjab Himachal Pradesh and Chandigarh v. Atlas Transport Private Ltd. and Others (1974) 44 Company cases 496 In view of this settled legal position therefore when it is not seriously disputed by the Registrar of Companies that there was no default on the part of the company either in repaying the subscription as and when it became due or repaying the debt of the creditor as and when it became due I do not think that it can be successfully urged much less established that the condition precedent for exercise of power under sec. 433 of compulsory winding up viz. inability to pay the debt is satisfied. It is a common ground that the Registrar has proceeded on the basis that the liabilities which may crystalize in future would also be relevant for the purposes of determining whether the company is unable to pay its debts. I am afraid this is too broad a submission which can be sustained. As stated above in the first instance the court must be satisfied that there are in fact debts in the sense that there is a liability of the company in presenti. Unless the liability to pay a sum of money in presenti is not made out it cannot be said that a person is in debt. The learned Advocate for the Registrar of Companies urged that in that view of the matter clause (c) of sec 434 would be redundant. Sec. 434 (1) (c) provides as under :a company shall be deemed to be unable to pay its debt x x x x x x (c) if it is proved to the satisfaction of the Court that the company is unable to pay its debts and in determining whether a company is unable to pay its debts the Court shall take into account the contingent and prospective liabilities of the company. I am of the opinion that the apprehension of the learned Advocate is not well-founded for the obvious reason that clause (c) also postulates that it must be proved to the satisfaction of the court that the company is unable to pay its debts and in determining whether it is so unable. the court shall take into account the contingent and prospective liabilities. In other words in order to determine the extent of the debt the court shall take into account the contingent and prospective liabilities. But if the liability on which the petition is based is contingent liability as in the present case it cannot be said that it would amount to a debt which is payable in presenti. The rules and regulations of the schemes which have been undertaken by the company from time to time in course of its working in the past have been placed on record. According to the rules and regulations of the scheme the subscriber will be entitled to repayment of his subscription provided he does not make any default in making his subscription during the period of the scheme. In other words he would be entitled to repayment of his subscription provided he goes through the scheme. He would be entitled to benefit of the prizes and gifts provided he does not commit any default in complying with the obligations prescribed in the scheme. The liability of the company to repay the subscription is clearly therefore contingent liability and that laibility will not be a debt in presenti. It is no doubt true that in the very nature of the business of the company large funds have been placed at the disposal of the Directors. It is equally true that the Directors and their friends have obtained loans from the company. By the order of this Court all these loans have been repaid to the company. It is also an admitted position now that the company has stopped its chit-fund business and has switched over to the construction activities and agency business. Under the circumstances therefore I am of the opinion that the petitioner has not been able to establish that there is any debt which has become due and payable by the company either to its creditors or to subscribers. Under the circumstances therefore I am of the opinion that the petitioner has not been able to establish that there is any debt which has become due and payable by the company either to its creditors or to subscribers. ( 3 ) THE learned Advocate for the Registrar of Companies attempted to persuade me that the liabilities of the company have far exceeded the assets thereof. I do not think that this will justify in the first instance for any compulsory winding up order. (vide A. C. K. Krishnaswami v. Stressed Concrete Constructions Private Limited (1964) 34 Company Cases 6 The learned Advocate for the Registrar therefore urged that apart from this excess of liabilities over the assets the company has no profit or sufficient income to meet with its liabilities as and when they become due. In this connection he has drawn my attention to the balance sheets filed on behalf of the company for the years ending on 31-12-1975 and 21 where the company has according to the learned Advocate manipulated to show profits by indiscriminately resorting to their power of forfeiture of subscription in gifts. I do not think that this criticism would be justified merely on the stray circumstance that it was only during these last two years that the company has shown profits. It is no doubt true that before this petition was filed the company was consistently showing losses in their financial working. It is also true that it was only in the last two years that some profits have been shown. However it would be risky for the court to jump to the conclusion from this stray circumstance that the profits are manipulated. The Registrar has not placed any material on record to show and to satisfy the court that the power of forfeiture had been indiscriminately and illegally exercised by the company. It cannot be said that the Registrar had no opportunity to verify the position by having an inspection of the records of the company. As a matter of fact during the pendency of the petition the Registrar could have availed of that opportunity and made criticism good. In absence of convincing material therefore it would not be possible for me to agree with this criticism of the learned Advocate for the Registrar that the profits were manipulated. As a matter of fact during the pendency of the petition the Registrar could have availed of that opportunity and made criticism good. In absence of convincing material therefore it would not be possible for me to agree with this criticism of the learned Advocate for the Registrar that the profits were manipulated. If the company had power to forfeit subscription on a default being committed by the subscriber or to forfeit prizes or benefit in case of default by the subscriber? I do not think that it can be presumed from that mere existence of power that the same had been exercised mala fide and/or illegally. This criticism of the learned Advocate for the Registrar is therefore not justified. ( 4 ) IN that view of the matter therefore the result is that this petition fails and should be dismissed. The company shall bear the costs of the Registrar and the Advocates costs have been quantified at Rs. 1 250 The company shall bear its own costs. .