UMESH CHANDRA BANERJEE, J. ( 1 ) THE basic requirement of the provisions of section 434 of the Companies Act is the existence of a debt due and payable by the company to the petitioning creditor and in the event the petitioning creditor establishes such a claim even though prima facie, question of the maintainability of the petition under the provisions of the Companies Act for winding up of the company cannot be doubted. At this juncture it is to be noted that this burden lies on the company to satisfy the Court as to the existence of a bona fide dispute in regard to the matter in issue and in the event a debt is bona fide disputed, proper Course would be for the Law Courts not to proceed with the winding up proceedings further and leave be given to the petitioning creditor to file a suit for the adjudication of disputes in the matter in issue. While directing filing of the suit, the Court may, however also, direct furnishing of some securities. Incidentally, it is to be noted however that where a debt is disputed, it is the duty of the Court to go into the question of genuineness or otherwise of the dispute and in the event the Court is primarily satisfied as regards its genuineness and bona fides such a liberty ought always to be given to the petitioning creditor and the Court ought not to embark upon itself to detailed adjudication of the disputes between the parties. Conversely, however, in the event the dispute raised by the company does not seem to be genuine, it is a plain exercise of the judicial power to direct winding up of the company. ( 2 ) THE expression bona fide in common English parlance means. genuine: good faith in Om Prakash Mehta vs. Steel Equipment and Construction Co. Ltd. reported in 1967 (1) Company Law Journal 172, bona fide dispute has been ascribed to mean a dispute based on a substantial ground. The English Courts, however, attributed honesty as an equipment of bona fide (R vs. Roll 7 QBD 575) dispute on substantial ground. genuine: good faith in Om Prakash Mehta vs. Steel Equipment and Construction Co. Ltd. reported in 1967 (1) Company Law Journal 172, bona fide dispute has been ascribed to mean a dispute based on a substantial ground. The English Courts, however, attributed honesty as an equipment of bona fide (R vs. Roll 7 QBD 575) dispute on substantial ground. Considering, however, of the meaning attributed to the phrase by the English Courts bona fide is thus opposed to fraud, that does not, however, necessarily mean and imply that Law Courts will come to the conclusion that in the event the Court is not satisfied as regards the dispute being termed to be a bona fide dispute. The Court will come, to the conclusion the same is fraudulent and lack of bona fide does not necessarily mean fraudulent but it may lead to fraud. There cannot be such a generalisation as bona fide is opposed to fraud as such some further factors are required to make it a fraud though bona fide is opposed to fraud. ( 3 ) IT is to be noted that a growing practice has developed in this Court to allow the company to pay up the debt by instalments. I refrained myself from dealing with the matter in a greater detail as to the legality of such a practice but considering the socio-economic conditions country the practice seems to be a healthy one for at least an opportunity is given to the company to pay up its debts by instalments and survive rather than wind up its business, the resultant effect of which would be total loss of employment opportunities with all other consequences. ( 4 ) HAVING discussed the law on the subject as above, it is at this juncture that the factual aspect ought to be noted but before so doing the chequered career of the matter under consideration ought also to be considered. ( 5 ) FROM middle of 1987 this matter has travelled to the Appellate Court more than once and the trial Court has had to deal with the matter on a number of occasions. Justice Mrs. Monjula Bose on 19th June, 1987 passed an order in the matter for publication of advertisement though upon certain conditions namely failure to pay the dues of the creditor by instalments. ( 6 ) IN this context, the observation of Mrs. Justice Mrs. Monjula Bose on 19th June, 1987 passed an order in the matter for publication of advertisement though upon certain conditions namely failure to pay the dues of the creditor by instalments. ( 6 ) IN this context, the observation of Mrs. Bose, J. is pertinent to note: -"having heard the respective submissions of the parties the Court views that sufficient and ample opportunity was given to the company to file its affidavit-in-opposition and if it had a bona fide defence to the petitioner's claim, such defence could have been filed within the time granted. The very fact that in spite of two several extensions granted no opposition was filed, make it apparent that the company has no defence to the petitioner's legitimate entitlement and in the Court's discretion no further time should be allowed to a litigant who has not taken advantage of the discretion exercised twice in its favour by filing the necessary affidavit. To my mind, it is apparent that all attempts were made by the company to harass the petitioning creditor and it had no defence to the petitioner's claim and thus no affidavit-in-opposition was filed and since 21st April, 1987, till to-day the matter has been kept pending and almost two months have passed and no steps whatsoever were taken for filing any affidavit. It is only during the course of hearing when the company felt that the preliminary plea taken was not going to be acceptable to the Court, then a third extension of time for filing of affidavit was sought and as such, the Court is disinclined to give any further indulgence to such a litigant. " The order of Mrs. Bose, J. however, was challenged before the Court of Appeal and the Appellate Court disposed of the appeal in the application by directing deposit all the instalments in terms of the order dated 19th June, 1987 though however, time to pay as regards the 1st instalment was extended till July 22,1987. Such a deposit was directed to be made to the Advocate on Record of the petitioning creditor and the Appellate Court directed payment of cost thrown away before the Trial Court as well as the cost of the appeal assessed at 200 G. Ms. to be paid within one week from the date of the order. Such a deposit was directed to be made to the Advocate on Record of the petitioning creditor and the Appellate Court directed payment of cost thrown away before the Trial Court as well as the cost of the appeal assessed at 200 G. Ms. to be paid within one week from the date of the order. There was also a default clause that in the event of failure to deposit the instalment as directed in terms of the Trial Judges order, leave was given to the petitioning creditor to take further proceedings for winding up of the appellant after obtaining fresh direction from the learned Company Judge. Subsequently, on 18th August, 1987, even though the appeal was disposed of at an earlier point of time namely 15th July, 1987 on the prayer of the company, the time to pay the instalment in terms of the order of the learned Company Judge has been extended till 28th August 1987 and in default leave was given to the petitioning creditor to proceed in terms of the order of the learned Trial Judge. The order of the Appellate Court, however, was not adheard to, by reason where for petitioning creditor applied before the learned Company Judge and Mrs. Bose, J. on 3rd September, 1987 extended returnable date by 6 weeks from the date of the order and advertisements were directed to be published once in the "statesman" and once in the 'aajkal'. On the very next day, however, i. e. , on 4th September, 1987 the matter was again mentioned and upon hearing the learned Company Judge ordered that upon payment of Rs. 1 lac by 4 P. M. on that date and a further sum of Rs. 62,000 by pay order by Tuesday next after 4th September, 1987, the advertisements were directed not to be published and the matter was directed to appear as a specially fixed matter on Wednesday next after 4th September. On 17th September, 1987, however, it was submitted to the learned Company Judge that the September instalment has also not been paid by 15th September, 1987 being the due date in pursuance whereof time was extended till 3rd October, 1987 and in default of payment by that time, the advertisements were directed to be published as ordered earlier. On 17th September, 1987, however, it was submitted to the learned Company Judge that the September instalment has also not been paid by 15th September, 1987 being the due date in pursuance whereof time was extended till 3rd October, 1987 and in default of payment by that time, the advertisements were directed to be published as ordered earlier. Incidentally, however, on 28th September, 1987 and during the long vacation, the company moved the learned Vacation Judge and obtained an order of extension till 2nd November, 1987. On 27th October, 1987, however, the matter again came up before the learned Company Judge and Mr. Bose, J. recorded an order on that date to the following effect:-"the Court has viewed the order dated 29th September 1987 and particularly noted the conduct of the party, namely, the company. Time and again the Court had given indulgence to the company to enable it to pay the dues of the petitioning creditor and taking advantage of the extensions given, it appears that the Vacation Bench was moved for extending the time to make payment in terms of the order passed by the Court on 17th September, 1987. Be that as it may, it appears by the order dated 28. 9. 87 the Vacation Bench has extended the time to make payment for instalment due on 3. 10. 87 till 2. 11. 87. This order, however, does not interfere with the order passed by this Court, since it is clear that the extension would not interfere with the payment for the other dates of instalments, and it appears that there has been default in payment of instalment for the month of October, 1987. As such, no further mercy or indulgence should be shown to the company which appears to be taking advantage of the extensions given not with a view to pay the petitioning creditor's dues, but merely to take time and to avoid payment of its debts. Advertisements will thus be published in accordance with the order passed on 3. 9. 87. Returnable date is extended by six weeks. " ( 7 ) ON November 18, 1987, the learned Company Judge further ordered that according to the Appeal Court's direction, the order for payment stands and as such the Advocate on record will hand over the money to the petitioning creditor. 9. 87. Returnable date is extended by six weeks. " ( 7 ) ON November 18, 1987, the learned Company Judge further ordered that according to the Appeal Court's direction, the order for payment stands and as such the Advocate on record will hand over the money to the petitioning creditor. Subsequently, on 15th January, 1988, the learned Company Judge passed the following order : -"time for filing the affidavit-in-opposition has expired on 27. 12. 87. It appears that previously at the time of admission directions had been given twice and the time was extended and the matter has come in the first today after advertisements. It appears that since the passing of the order dated 19. 6. 87 only two instalments have been paid by the company and the company is in arrear in respect of other instalments requiring the advertisements to be issued. The learned Advocate appearing for the company has also on this occasion prayed for extension of time to file affidavit-in-opposition on the ground of Mr. Nopany's illness. This very prayer was made on earlier two occasions. As such, the Court cannot give any further indulgence to the company on the self same ground. The Court also enquired from the learned advocate appearing for the company as to whether the company was agreeable to pay any part of the amounts in default for the Court to consider as to whether the Court should exercise its direction in allowing further time for filing the said affidavit-in-opposition. The learned advocate on behalf of the company on instruction submitted that the company is not in a position at present to pay any amount and, in this view of the matter, the Court is not inclined to grant the prayer for extension of time to file the affidavit-in-opposition. Further prayer was made by the company to adjourn the matter till today next for further instructions to be taken, which the Court views will serve no useful purpose as the representative of the company present in Court has instructed the learned advocate for the company that no amount can be paid by the company. The Court also gave an opportunity to the company to mention as to how much it would be able to pay now if at all, and the company expressed its inability to pay anything. This shows that throughout the company has been acting in a dilatory manner. The Court also gave an opportunity to the company to mention as to how much it would be able to pay now if at all, and the company expressed its inability to pay anything. This shows that throughout the company has been acting in a dilatory manner. The order dated 19th June, 1987, also speaks for itself and the conduct of the company would be apparent therefrom. It is significant that when the winding up petition was admitted several extensions were granted for filing the affidavit-in-opposition, but no affidavit-in-opposition, was filed and after the advertisements have been published, the self-same ground has been taken by the company to file its affidavit-in-opposition. The Court seems no reason to grant any further indulgence to the company and, as such the prayer for extension of time to file the affidavit-in-opposition is rejected. Accordingly, the Court has no option but to pass the order in terms of prayer (a) of the petition. All parties and the Official Liquidator are to act on the signed copy of this dictated order. . . . . . . . . . . . . . . . . . ". ( 8 ) THE matter again however travelled to the Court of Appeal and the Appellate Court in its order dated 21. 1. 88 recorded that the inadvertance of the lawyer appearing for the company as regards the filing of affidavit. By reason of a failure to draw the attention of the learned Company Judge in regard to the affidavit which was filed before the Company Judge at that stage after admission of the petition for winding up which contained the defence of the appellant to the claim of the petitioning creditor and it was not placed before nor considered by the learned Company Judge. In that perspective the order of the learned Company Judge was set aside and directed the matter to be heard on the basis of the affidavit already filed in the matter before the learned Company Judge for consideration of the matter afresh on merits. While passing the order however, the Appellate Court was pleased to appoint a Special Officer being a member of the Bar to make inventory of the assets of the appellant company with the assistance of the respective Advocate on record of the parties. While passing the order however, the Appellate Court was pleased to appoint a Special Officer being a member of the Bar to make inventory of the assets of the appellant company with the assistance of the respective Advocate on record of the parties. It would be pertinent to deal with the report of the Special Officer at this juncture. The Special Officer categorically recorded on the basis of the statement of one Sri S. P. Sharma, an accountant of the company and in the presence of one of the directors of the company that the company has to facory whatsoever and there is not a single asset in the registered office of the company nor even the furniture, fittings and fixtures. The Special Officer went on to observe that according to Mr. Sharma, the landed property at 11, Rowdon Street, Calcutta belongs to the company though however, the original title deeds has already been deposited with United Commercial Bank, Burrabazar Branch in connection with the amount of loan granted by the said bank to M/s. Birla Spinning Mills and Industries Ltd. against the equitable mortgage of the property. The Special Officer observed that the mortgage property as stated by Mr. Sharma has been agreed to be sold on 7th July, 1984 and the sale proceed to be deposited by the purchaser directly to the UCO, Bank against the mortgage. Though certain bank accounts have been mentioned but no particulars have been recorded in the report of the Special Officer. ( 9 ) THE above narration though longish in nature but has to be recorded since the background of the matter in issue at this stage of the proceeding ought to be noted in the matter of disposal of this application. It will thus be convenient to deal with the factual aspect at this stage. ( 10 ) THE petitioner company presented this petition for winding up on the ground of inability to pay the dues of the petitioning creditor amounting to Rs. 18,67,876/- arising out of a loan transaction between the petitioner and the respondent company. On the factual score, it appears that on 6th February, 1981, the petitioner at the request of the company lent and advanced a sum of Rs. 2,90,000/- repayable on demand with interest thereon at the agreed rate of 18% per annum. 18,67,876/- arising out of a loan transaction between the petitioner and the respondent company. On the factual score, it appears that on 6th February, 1981, the petitioner at the request of the company lent and advanced a sum of Rs. 2,90,000/- repayable on demand with interest thereon at the agreed rate of 18% per annum. Subsequently, however, the company on its part between 20th April, 1981 and 22nd December, 1981 paid a sum of Rs. 2,00,000/- by four several cheques drawn in favour of the petitioner herein. On 16th September, however, a further sum of Rs. 10 lacs was lent and advanced by the petitioner to the company with interest thereon at the agreed rate of 16% per annum. The payments were however made by 10 several cheques drawn on Punjab and Sind Bank for Rs. 1 lac each in favour of the company and all dated 16th September, 1985. The company, however, also executed a promissory note for Rs. 10 lacs in favour of the petitioner dated 16th September, 1985 repayable on demand. On 9th December, 1985, a further sum of Rs. 4 lacs was also lent and advanced with the interest thereon at the agreed rate of 16% p. a and the company also executed a promissory note for Rs. 4 lacs as a collateral security in favour of the petitioner. From time to time, interest bills were raised as and by way of debit notes and the company also from time to time made payments on account of interest and after giving credit for all such sums paid, there remained a sum of Rs. 18,67,876/- due and payable upto January, 1987. Incidentally, it is to be noted that at no point of time, there was any dispute as regards debit notes issued by the petitioning creditor in favour of the respondent company and as a matter of fact, pay were made from time to time on the basis thereof as noted above. 18,67,876/- due and payable upto January, 1987. Incidentally, it is to be noted that at no point of time, there was any dispute as regards debit notes issued by the petitioning creditor in favour of the respondent company and as a matter of fact, pay were made from time to time on the basis thereof as noted above. In the counter affidavit by the company, it has however been stated that question of raising any debit note did not arise at all but no explanation whatsoever has been offered as regards the payment made on the basis thereof on account of interest and it is by reason of the failure to pay the dues of the petitioning creditor, this winding up of the company has been presented on the ground of inability to pay its dues. It is at this juncture the earlier orders as noted above ought to be considered. The petition was presented- matter was heard in the presence of the lawyers appearing for the company and the company for reasons best known to the company has chosen not to file any affidavit. The advertisements were also published. The learned Company Judge dealing with the matter at the initial stage allowed an opportunity to the company to pay its dues by instalments, some instalments have been paid though not fully by reasons wherefor advertisements were directed to be published. At the final hearing stage after advertisement, the company was directed to be wound up though the order for winding up was however set aside on the ground that the Trial Judge did not consider the affidavit which has already been on record. ( 11 ) LET us, therefore, now analyse as to whether the affidavit filed does disclose any defence or a bona fide defence so as to permit this Court to assume jurisdiction to assume direct winding up of the company. ( 12 ) MR. Mukherjee appearing in support of the petition strongly commented upon the statements in the affidavit and in my view rightly so by reasons of three several cases made out in the affidavits namely (a) allegation to the effect that on 16th September 1985 and 9th December, 1985, the, petitioner lent and advanced a sum of Rs. 10 lacs and a sum of Rs. 4 lacs to the company is a myth ; (b) the petitioner issued 10 several cheques of Rs. 10 lacs and a sum of Rs. 4 lacs to the company is a myth ; (b) the petitioner issued 10 several cheques of Rs. 1 lac each in favour of the company and simultaneously, on 16th September, 1985, itself at the request of the petitioner, 10 several bearer cheques of Rs. 1 lac each were issued and made over by the company to the petitioner. The 3rd case made out by the company is that the petitioner and the company and its other associates maintained the very cordial relationship till they fell out in 1986 and the petitioner in 1985, represented to the company that he was in dire need of cash money and he would deem it a great favour if the company could see its way to provide temporary accommodation to him so that a sum of Rs. 14 lacs could become available to him in cash. ( 13 ) DURING the course of hearing strong criticism was levelled on behalf of the company as regards the case made out by the petitioner to the effect that in the normal course of events no one would issue 10 several cheques. While it is true that there might be some justification of such comments in regard to the aforesaid, but the fact remains issuance of the cheques were not disputed on the contrary, it has been stated that the money was repaid by 10 several self-bearer cheques of Rs. 1 lac each by the company to the petitioner. The company came out with a definite case to the effect that self-bearer cheques were made over and money encashed thereon by one P. K. Khandelwal being an employee of the petitioner herein. ( 14 ) INCIDENTALLY it is to be noted that certain cheques were produced before the Court at the hearing from the custody of the Punjab and Sind Bank through sub-poena wherefrom it appears that the company has in fact issued a good member of self-bearer cheques on which the encashment was effected by P. K. Khandelwal much before the payment of Rs. 14 lacs were effected by the petitioner to the company. Another redeeming feature that emerges from out of cheques in Court that P. K. Khandelwal was entrusted to encash the self-bearer cheque for the company only in the event of the amount being on higher side. 14 lacs were effected by the petitioner to the company. Another redeeming feature that emerges from out of cheques in Court that P. K. Khandelwal was entrusted to encash the self-bearer cheque for the company only in the event of the amount being on higher side. The cheques for small amounts were usually encashed by other employees but not for larger amounts. ( 15 ) THE learned Advocate appearing for the company further submitted that it was in fact book adjustment only that was effected since the parties were well known to each other. But as regards the promissory notes the only submission made is that had it been in the usual course of business, the loan would have been caned up and steps would have been taken earlier. The fact remains that there exists two promissory notes one for Rs. 10 lacs and another for Rs. 4 lacs. In the counter affidavit, it has been stated that the promissory note was given only to give a colour of genuine transaction and in fact no consideration passed therefore. The Company came out with the further defence that it was represented by the petitioning creditor that the promissory note would not be utilised and believing on such a representation, the company executed two promissory notes as above. Incidentally, it is also to be noted that in the counter affidavit, the company further stated as follows : -". . . . . . . . . (j) On the date of execution of the promissory notes of Rs. 10,00,000/- i. e. on 16th September, 1985, the company had in its bank account held by in with Punjab and Sind Bank, Old Court House Street Branch only a sum of Rs. 4,213. 11p. The company had no over draft facility with the Punjab and Sind Bank, Old Court House Street Branch of which the petitioner was fully aware of and had knowledge". ( 16 ) ON this state of facts, can it thus be said that the defence raised by the company in this petition for winding up bona fide ? In my view, the answer is in the negative. If one has to give credence to the defence raised by the company, following enquiries immediately come up for consideration: (a) Why would a person issue 10 several cheques which were duly encashed by the payee but obtain payment immediately thereafter. In my view, the answer is in the negative. If one has to give credence to the defence raised by the company, following enquiries immediately come up for consideration: (a) Why would a person issue 10 several cheques which were duly encashed by the payee but obtain payment immediately thereafter. (b) A person having a sum of Rs. 4,213. 11p. in a particular bank account would issue 10 several cheques for Rs. 1 lack each. (c) A die-hard businessman would leave the promissory note for Rs. 14 lacs with another even after payment assuming payment has been made. These questions on this state of facts remain unanswered. In my view, promissory notes worth Rs. 14 lacs would be left outstanding on the representation that the same would not be dealt with is rather difficult to accept. Similar is the position in regard to the case made out by the company for issuance of 10 several cheques on the same day and 4 several cheques on another occasion immediately after the issuance of the cheques by the petitioning creditor. It is at this juncture, also that the earlier stages of the proceedings to be noted namely payment of instalment at least some by the company in terms of the order of this Court. Reading the affidavit as a whole, in my view, no credence can be placed thereon nor the case made out can be accepted as raising a dispute far less a bona fide dispute. In my view, the company has failed to establish any defence which can be termed to be of serious nature for being adjudicated on further evidence in a properly constituted suit. The defence cannot but be stated to be sham. The case put up by the company is not worth any consideration neither the attempted explanation does stand to reason and as such cannot be accepted. ( 17 ) BUT since the company has paid certain money and produced a pay order in terms of the order of the Court and being kept with the Advocate-no-record of the company, in my view, a further opportunity ought to be given to the company to pay its debts and in that view of the matter, I direct that the company to pay all outstanding dues of the petitioning creditor together with the agreed rate of interest at the agreed rate of 16% per annum. The Advocate-on-record for the company is directed to make over the pay order for Rs 3 lacs, held by him in terms of the order of this Court within a period of 4 days from date. After adjustment of the above-noted sum of Rs. 3 lacs, the balance amount together with interest as above be paid by monthly instalment of Rs. 1 lac each. In the event however, upon calculation of interest, the last instalment falls short of Rs. 1 lac, then and in that event the last instalment be paid by 15th January 1990, and all subsequent instalments by the 15th of each succeeding month. In default of payment of any one of the instalment however, there shall be an order in terms of prayer (a) of the petition. All parties and the Official Liquidator, the Advocate-on-record of the company are to act on a signed copy of the operative portion of this order. Application disposed of.