JUDGMENT - S.M. JHUNJHUNUWALA, J.:---This is a creditor's petition for winding up of The Khatau Dyes and Fibres Ltd., (hereinafter referred to as "The Company") under section 439 read with sections 433(e) and 434 of The Companies Act, 1956 (hereinafter referred to as 'The said Act') 2. The Company is a wholly owned subsidiary of The Khatau Kakanji Spinning and Weaving Co. Ltd. (hereinafter referred to as 'Khatau Mills'). The Company has been incorporated and registered under the provisions of the said Act having authorised capital of Rs. 10,00,000/- divided into 10,000 Equity Shares of Rs. 100/- each and the issued, subscribed and paid up capital of Rs. 1,00,000/- divided into 1000 Equity Shares of Rs. 100/- each with the object to carry on business of spinners and doublers of fibre substances, makers of bleaching, dyeing, printing and processing materials and of buying, selling, importing and exporting yarn, cotton and other cotton staple fibre, yarn, waste, silk, artificial silk, rayon, nylon, wool, jute and other fibre substance materials. Between the month of February, 1987 and June, 1987, the Company draw 47 D.A. Bills of Exchange amounting to Rs. 1,29,76,000/- which were duly accepted by one M/s. Fashion Prints Ltd. The said Fashion Prints Ltd. honoured only 14 D.A. Bills of Exchange out of the said 47 D.A. Bills of Exchange and paid only the sum of Rs. 33,00,000/- to the petitioners leaving the remaining 33 D.A. Bills of Exchange amounting to Rs. 96,38,013/- unpaid by them. The Company as drawer of the said 33 D.A. Bills of Exchange was bound and liable to pay to the petitioners the amounts of the said D.A. Bills of Exchange togetherwith interest thereon. Further, between the month of October, 1987 and December, 1987, the Company drew 20 D.A. Bills of Exchange on the said Khatau Mills amounting to Rs. 76,06,623/- which were duly accepted. The said Khatau Mills did not honour the said D.A. Bills of Exchange on their maturity and the Company as drawer the of was bound and liable to pay to the petitioners also the amounts of the said 20 D.A. Bills of Exchange together with interest thereon. The petitioners had granted a Cash Credit Hypothecation facility to the Company in respect whereof the sum of Rs. The petitioners had granted a Cash Credit Hypothecation facility to the Company in respect whereof the sum of Rs. 1,29,798.77 with further interest at the rate of 16.5% per annum was found due and payable by the Company to the petitioners as on 30th June, 1988. As on 30th June, 1988, an aggregate sum of Rs. 82,52,483/- together with further interest to be calculated at the rate of 17.5% per annum on Rs. 76,06,623/- as from 1st July, 1988, an aggregate sum of Rs. 1,16,67,341/- together with further interest to be calculated at the rate of 19.5% per annum on Rs. 52,97,631/- and at the rate of 17.5% per annum on Rs. 43,40,382/- as from 1st July, 1988 an aggregate sum of Rs. 1,29,798.77 in respect of the Cash Credit Hypothecation Facility granted to the Company with further interest thereon at the rate of 16.5% per annum to be calculated as from 1st July, 1988 because due and payable by the Company to the Petitioners. The petitioners several times and finally by their Advocates' letter dated 23rd September, 1988 called upon the Company to pay to the petitioners the said amounts. The Company despite having received the said letter dated 26th September, 1988 failed and neglected to make the payment of the said amounts to the petitioners. By its letter dated 28th November, 1988, the Company requested the petitioners to bear with it and assured that the payment of the dues of the petitioners would be shortly made. The Company did not pay the said amounts to the petitioners. Since the Company was unable to pay its debt, on 25th January, 1989, the petitioners presented this petition for the Company being would up under the provisions of the said Act. 3. On 7th August, 1989, the Company acknowledge and admitted that the sum of Rs. 2,30,43,588/- was due and payable by it to the petitioners as on 30th June, 1989 which the Company agreed to pay to the petitioners together with further interest thereon in instalments as provided for in the Consent Terms signed by the petitioners and the Company on 7th day of August, 1989 and filed in this Court on that day. On 7th August, 1989, Order in terms of the said Consent Terms was passed by this Court. On 7th August, 1989, Order in terms of the said Consent Terms was passed by this Court. As per the said Consent Terms, the Company became liable to pay to the petitioners the said sum of Rs. 2,30,43,588/- and interest in instalments as mentioned therein which the Company failed and neglected to pay. Neither the said Khatau Mills nor even Sunit Chandrakant Khatau made any payment on behalf of the Company to the petitioners under the said Consent Terms. The petition accordingly stood admitted and the same has been duly advertised. 4. On behalf of the Company, affidavit of the said Sunit Khatau has been filed in reply to the petition. Though the Company has admitted that the said amount is due and payable by the Company to the petitioners, the Company has resisted a winding up Order being passed against it. According to the Company, it is wholly subsidiary Company of the said Khatau Mills which is under a protective umbrella of Board of Industrial and Financial Reconstruction (hereinafter referred as 'BIFR') and as such, by reason of Order passed under section 22(3) of the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred as 'The said SICA Act'), no proceedings for recovery of any amount including winding up proceedings can lie or proceeded with either against the said Khatuau Mills or the Company. It is also the case of the Company that the said Khatau Mills being acceptors of the said Bills of Exchange is primarily liable to pay the amount and though the said Khatau Mills is solvent, in view of protective umbrella of BIFR, the Company is unable to recover from the said Khatau Mills and in its turn unable to pay to the petitioners and in the circumstances, it is inequitable and unjust to permit any winding up proceedings against the Company being proceeded with. It is also the case of the Company that at the time when the said Consent Terms were filed, it was in contemplation of the parties that the said Khatau Mills would be primarily be liable to pay to the petitioners and that the company would be secondarily liable for the payment and it is wholly reprehensible on the part of the petitioners to take advantage of the said Consent Terms and seek winding up of the Company. According to the Company securities have been agreed to be created in favour of the petitioners to secure the debt and the petitioners ought to have proceeded to have the securities created and/or realised in respect of amount due to the petitioners rather than to force the Company into liquidation. 5. On behalf of the petitioners, affidavit of one S.B. Malgi has been filed in rejoinder. According to the petitioners, the petitioners are neither concerned with the solvency of the said Khatau Mills nor with the Company being wholly subsidiary Company of the said Khatau Mills. The fact that the said Khatau Mills and the Company are two distinct and separate legally entities and that the Company is indebted to the petitioners and is unable to pay its debt is sufficient to have the Company wound up under the provisions of the said Act. According to the petitioners, the petitioners are also not concerned with as to what amount if any, is due by the said Khatau Mills to the Company. The petitioners have not been member of consortium of Banks and neither there was any waiver of interest nor any concession was granted by the petitioners to the Company otherwise than what is mentioned in the said Consent Terms. Since no security was created in favour of the petitioners. The question of the petitioners first getting the securities realised did not arise. The petitioners have denied that at the time when the said Consent Terms were filed it was in contemplation that the said Khatau Mills would be primarily liable to pay to or that the Company would be secondarily liable to pay to the petitioners. The petitioners have also denied that by reason of the said Khatau Mills being under the protective umbrella of BIFR as contended by the Company, no proceedings for recovery of any amount including winding up proceedings can lie or proceeded with against the Company. According to the petitioners, there is no bona fide dispute to the debt due and payable by the Company and the Company being unable to pay its debt, it is just and equitable that the Company should be wound up. 6. Mr. According to the petitioners, there is no bona fide dispute to the debt due and payable by the Company and the Company being unable to pay its debt, it is just and equitable that the Company should be wound up. 6. Mr. Cooper, the learned Counsel appearing for the Company, has submitted that the fact that the Company is unable to pay its debt, does not necessarily entitle the Court to order winding up of the Company as the discretion to pass such an order, even in the case of the inability of a Company to pay its debts, is by section 433 of the said Act vests in the Court. Mr. Cooper has further submitted that in the facts and circumstances of the case, even though the Company has not paid the amount payable to the petitioners, neither it can be deemed that the Company is unable to pay its debt nor it is equitable and fair to Order winding up of the Company. Alternatively, Mr. Cooper has submitted that the Order of winding up can, in the facts and circumstances of the case, be suspended till the said Khatau Mills is out of the protective umbrella of BIFR. In support of his submissions, Mr. Cooper has relied upon the following cases : i) (Jugalkishore Banarsidas v. South India Saw Mills (P) Ltd.)1, reported in (1975)45 Company Cases 273; ii) (Misrilal Dharamchand P. Ltd. v. B. Patnaik Mines P. Ltd.)2, reported in (1978)48 Company Cases 494; and iii) (Paramjit Lal Badhwar v. Prem Spinning and Weaving Mills Co. Ltd.)3, reported in (1986)60 Company Cases 420. 7. Mr. Mehta, the learned Counsel appearing for the petitioners, has submitted that so far as the debt due and payable by the Company is concerned, the petitioner are not concerned with the said Khatau Mills and since no bona fide dispute is raised regarding the liability of the Company to pay the debt to the petitioners, the winding up ought generally to follow in the public interest, so that the public does not unwarily deal with the Company and jeopardise its interest. In support of his submission, Mr. Mehta has put reliance on the case of (Bombay Metropolitan Transport Corporation Ltd. v. Servants of BMTC (CIDCO) And other)4, reported in (1991)2 Company Law Journal 357 (Bom.). 8. In support of his submission, Mr. Mehta has put reliance on the case of (Bombay Metropolitan Transport Corporation Ltd. v. Servants of BMTC (CIDCO) And other)4, reported in (1991)2 Company Law Journal 357 (Bom.). 8. In the said Consent Terms filed on 7th August, 1989, the Company has in terms admitted its liability to pay to the petitioners the sum of Rs. 2,30,43,588/- together with further interest thereon to be calculated at the rate of 17.5% per annum from 1st July, 1989 with quarterly rests. The payment of the said amount by the Company has not been subjected to any condition such as the receipt thereof by the Company from the said Khatau Mills or the petitioners first realising the same by enforcing any securities. It is an admitted position that the Company has not paid any amount to the petitioners after filing of the said Consent Terms, in this Court. Since neither the said Khatau Mills nor the said Sunit Khatau has paid any amount to the petitioners on behalf of the Company, the question of the petitioners giving credit to the Company in respect of the amount due and payable by the Company to the petitioners did not arise. It is not borne out from the said Consent Terms that at the time of filing of the same, it was in contemplation of the parties thereto that the said Khatau Mills would make payment of the amount due thereunder in the first instance and that the Company would only be secondarily liable for payment of the same. Although the Company is a Subsidiary Company of the said Khatau Mills in respect whereof a reference has been made to the BIFR and an enquiry is pending, and, as a result whereof, all proceedings for winding up or execution in respect of any properties of the said Khatau Mills, and for appointment of a receiver of the property or undertaking of the said Khatau Mills has been suspended under the provisions of section 22 of the said SICA Act, yet the various provisions of the said Act dealing with holding companies and their subsidiaries maintain the distinction between the two as separate legal entities. The Company is a separate legal entity than the said Khatau Mills and the existing protective umbrella of BIFR over the said Khatau Mills is not extended to and does not cover the company. The Company is a separate legal entity than the said Khatau Mills and the existing protective umbrella of BIFR over the said Khatau Mills is not extended to and does not cover the company. The Company being not under the protective umbrella of BIFR, proceedings for winding up of the Company are not suspended by reason of the said Khatau Mills being under the protective umbrella of BIFR. 9. Undoubedetely, the power to be exercised under section 433 of the said Act is a discretionary one and it is competent for the Court in consideration of the circumstances in a given case to refuse to pass as order of winding up even if the Company is unable to pay its debts. It is equally open to the Court in its discretion to make a conditional order. From a discussion of precedents, the following principles can be culled out : i) The Court's jurisdiction under section 433(e) of the said Act is discretionary; ii) An Order of winding up is ordinarily made when it is shown that the Company is commercially insolvent and it is not just and proper to allow such an insolvent Company to be in existence in the broader interests of commercial morality; iii) A Company may have liabilities more than its assets, but still may have in particular circumstances, the capacity to meet the demands from its creditors; and iv) On an application to wind up a Company on the ground that it cannot meet its debts, what has to be ascertained is not whether the Company, if it converted all its assets into cash, would be able to discharge its debts but whether in a commercial sense Company is solvent. Following the decision in the case of (Alluminium Corporation of India Ltd. v. Lakshmi Ratan Cotton Mills Co. Ltd.)5, reported in (1970)40 Company Cases 259 (All.) in the case of Paramjit Lal Badhwar v. Prem Spinning and Weaving Mills Co. Ltd., (supra) the Allahabad High Court has held that the word 'may' used in the opening part of section 433 of the said Act clearly indicates that even if the Company sought to be wound up is unable to pay its debts, it is a matter of discretion for the Court whether, in the circumstances of the case, it would be in the interest of justice to wind up the Company. It is true that in the case of J. Banarsidas v. South India Saw Mills (P) Ltd., (supra), the Kerala High Court as held as under: "The provisions of section 434(1) determine when the requirements of section 433(e) will be deemed to be fulfilled, but they do not lay down when a winding-up order must necessarily be passed. It is true that creditor is not bound to wait and give time to the Company beyond the time prescribed after the statutory notice, before filing his petition. But the Court may, if there are sufficient counter-balancing equitable grounds, deny an immediate winding up order, or, in appropriate cases, even refuse it altogether in spite of the proved inability of a Company to pay its debts. Exercise of such discretionary power must necessarily be governed by justice and equity." However, the discretion has to be exercised judicially. 10. The Orissa High Court, in the case of Misrilal Dharamchand P. Ltd. v. Patnaik Mines P. Ltd., (supra) has, on the facts of the case before it, thought it appropriate to direct the winding up of the Company but to stay its enforcement for a period of six months from the date of the order to enable the Company to pay up the dues of the petitioning Company therein. However, in the instant case, although according to Mr. Cooper, the Company is solvent, since 7th August, 1989 i.e. the day when the said Consent Terms were filed in this Court and the Company in terms admitted its liability to pay to the petitioner the sum of Rs. 2,30,43,588/- together with interest in instalments as provided for therein, the Company has not paid any amount to the petitioners. The Company has not been able to satisfy the demands of the petitioners for many years and definitely for more than three years after the statutory demand. By reason of self operative order passed on 7th August, 1989, the petition to wind up the Company stood admitted on 1st October, 1990. The outstanding feature that even during the one and half years that this petition has been pending in this Court, the Company has not been able to offer to pay up the amount offers sufficient basis to hold that the Company is not able to pay its debts. The outstanding feature that even during the one and half years that this petition has been pending in this Court, the Company has not been able to offer to pay up the amount offers sufficient basis to hold that the Company is not able to pay its debts. In the facts and circumstances of the case, it is neither appropriate nor in the interest of justice or the creditors of the Company to stay or postpone the enforcement of orders to wind up the Company which I propose to pass. 11. The Company is a Trading Company. The debt due by the Company to the petitioners is not disputed. It is not enough that the Company has ability to pay the debt but if the Company chooses not to pay debt due to the petitioners, the Court will have no choice but to pass an Order of winding up of the Company. By non-payment of undisputed debt within the period of statutory demand, the Company is deemed unable to pay its debts and where the Company is unable to pay its debts, winding up ought generally to follow in the public interest, so that the public does not unwarily deal with the company and jeopardise its interests. The petitioners have established that the debt is clear, valid in law, unimpeachable and undisputable and are entitled to a winding up order ex debito justitiae. In my opinion, the petitioners are not acting unreasonably in having the Company wound up. On the facts and in the circumstances, it is just and equitable that the Company is wound up. The petition is made absolute in terms of prayers (a), (b) and (c). 12. At the request of Mr. Cooper, the operation of this order has been stayed for a period of three weeks. Certified copy to be issued expeditiously. Order accordingly. -----