Judgment : Ajoy Nath Ray, J.: This is an appeal from a receiving order in a winding-up petition whereby the petitioner has been directed to be advertised unless the company, i.e. M/s. Dunlop India Ltd., furnishes a security to the extent of Rs. 50 lakhs. 2. The learned Judge in the Court-below proceeded on the basis that his Lordship had some doubt as to the defence raised by the company and thus his Lordship proceeded to secure partly the claim of the petitioning creditors on the basis of a certain dictum in the case of Ofu Lynx Ltd. vs. Simon Carves India Ltd. reported in AIR 1970 Cal. 418 , a decision of a single bench of this Court. 3. A few facts are necessary before we pass on to the law of the matter, regarding the circumstances under which a Company Court would be justified in ordering security for receiving a winding-up petition in default. 4. On February 4, 1987 M/s. Dunlop India Ltd. agreed with the petitioning creditor to obtain their services for the purpose of procurement of an order from one Neyveli Lignite Corporation Ltd. The value of the order ultimately turned out to be above Rs. 22 crore, and the commission for such procurement at the agreed 4½% would come to more than a crore of rupees. We accept that in today's commercial world such contracts are not immediately to be inferred as contrary to the law or contrary to public policy, but might well be accepted as one of the realities of modem trade. 5. The time period for the contract was fixed by a writing of February 4, 1987 to expire with December 1987. On November 4, 1987 the petitioning creditor wrote that they were unable to proceed with their job and sought for termination. Again, by a letter dated December 23, 1987 the petitioner sought for time extension till 31.3.88, which M/s. Dunlop India Ltd. refused by their letter of 4.1.88. 6. The matter should have ended there. But the matter did not end there. In spite of these letters showing an apparent cessation of the contract, M/s. Dunlop India Ltd. did go on to pay to the petitioning creditor, M/s. Anamika Udyog, a sum of Rs. 3 lakhs on July 11, 1988 and a sum of Rs. 7.41 lakhs on September 19, 1988. But the matter did not end there. In spite of these letters showing an apparent cessation of the contract, M/s. Dunlop India Ltd. did go on to pay to the petitioning creditor, M/s. Anamika Udyog, a sum of Rs. 3 lakhs on July 11, 1988 and a sum of Rs. 7.41 lakhs on September 19, 1988. The letter of intent from Nayveli had been received in May, 1988. The parties have disputed as to whether these were payments in full satisfaction of services rendered by M/s. Anamika Udyog for the period from February 4, 1987 till November 4, 1987, or whether these were merely part payments for the procurement work which had actually been undertaken by M/s. Anamika Udyog, though without a subsisting written contract to that effect. The case of the petitioning creditor further was, that though the letter of intent was received by Dunlop in May, 88, the same was conditional, and subsistence of the contract during fulfilment of these conditions also required the prop of the petitioner's liaison services. 7. The documents produced before us do not speak with a uniform voice. A voucher dated July 29, 1988 in respect of the sum of Rs. 7.41 lakhs definitely calls this as the final payment and the same is signed by Surendra Jain of M/s. Anamika Udyog. On the other hand, there are two confirmations of 26.9.89 signed by M/s. Dunlop India Ltd., wherein bill numbers of M/s. Anamika Udyog are mentioned and these copy-bills as produced by M/s. Anamika Udyog, would rather go to support the case that the two payments were not final payments. Surprisingly, the two confirmations signed by the financial accountant of Dunlop are both dated after the statutory notice. Dunlop has denied the receipt of the bills of Anamika, but has not satisfactorily explained why their officer's signature appears on two confirmations mentioning the two bills of Anamika. 8. The statutory notice dated September 5, 1989 was answered on November 28, 1989. In the answer thereto, Dunlop took the high and mighty stand that no claim by M/s. Anamika Udyog was entertainable, because claims of such nature, meaning presumably the claims for procurement agency commission, are not to be made on such a company as M/s. Dunlop. The reply did not mention the payment of Rs. 3 lakhs or Rs. 7.41 lakhs at all, which were no doubt such agency commission payments. 9. The reply did not mention the payment of Rs. 3 lakhs or Rs. 7.41 lakhs at all, which were no doubt such agency commission payments. 9. On this basis, if the claim, or the defence to the claim, is examined in a Company Court, there would be doubts both as to the claim and there would be doubts also as to the defence. The claim would be doubtful, because the contract has ended without an extension, and a signed voucher mentions final payment. The defence would be doubtful, because the stand of M/s. Dunlop India Ltd. is not consistent with all documents produced. 10. On the basis of the above facts, placing reliance upon the two payments made after expiry of the written contract period his Lordship in the Court below passed the security order. We must examine at this stage the true principles upon which the Company Court is to pass an order for security. 11. It is well known that if a debt is bona fide disputed, a winding-up application would not at all lie. If on the other hand, the disputes raised are mere sham disputes, then the debts would not become disputed merely by those being called disputed debts by the company. 12. But there may be borderline cases, as there often are, where the defence might appear to be not wholly sound. But the unsoundness of the defence cannot be pronounced upon there and then. It is felt that the matter will have to await trial. There is, in other words, a doubt about the ultimate possibility of success of the defence in the suit to be filed, if any. 13. In our opinion, if the Court is to order security in such cases of doubtful defence, then it would militate against the basic and first principle that in case of disputed debts the winding-up application is not an appropriate remedy at all. Whether the defence would ultimately succeed at trial or not, is not a question upon which the Company Court would embark at the receiving stage. If the defence appears to be a defence which might succeed at trial in relation to the whole of the claim, then the winding-up application is not to proceed any further at all. 14. Whether the defence would ultimately succeed at trial or not, is not a question upon which the Company Court would embark at the receiving stage. If the defence appears to be a defence which might succeed at trial in relation to the whole of the claim, then the winding-up application is not to proceed any further at all. 14. Coming to the dicta in the case of Ofu Lynx Ltd., with the greatest of respect to the learned Judge deciding it, those dicta are somewhat at variance with what we have said above.-Before reverting to these differences it would be better to deal with the case of Machalec Engineers & Manufacturers vs. Basic Equipment Corporation, reported in AIR 1977 SC 577 . This was not a case relating to a company petition, but questions regarding direction for securing of claims were discussed in relation to ordinary grants of leave to defend in a regular summary suit. Mr. This was not a case relating to a company petition, but questions regarding direction for securing of claims were discussed in relation to ordinary grants of leave to defend in a regular summary suit. Mr. S. B. Mukherjee, appearing for the company, placed the headnote and the following five tests are set out therein: (also in the judgment, quoting at para 8):- "(a) If the defendant satisfies the court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the defendant is entitled to unconditional leave to defend; (b) If the defendant raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the defendant is entitled to unconditional leave to defend; (c) If the defendant discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shews such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the plaintiff is not entitled to judgment and the defendant is entitled to leave to defend but in such case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into court or furnishing security; : (d) If the defendant has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the plaintiff is entitled to leave to sign judgment and the defendant is not entitled to leave to defend; (e) If the defendant has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the plaintiff is entitled to leave to sign judgment, the Court may protect the plaintiff by only allowing the defence to proceed if the amount claimed is paid into court or otherwise secured and give leave to the defendant on such condition, and thereby show mercy to the defendant by enabling him to try to prove a defence." 15. It appears from the fifth of the above tests that in case the defendant is unable to disclose facts spelling out a defence, even then the Court might allow the trial of the suit, thinking in its mercy and surely in its discretion, that there yet might arise a contingency whereby the claim of the plaintiff might not wholly succeed; the Court might then order furnishing of security. 16. This test as to furnishing of security does not talk about weighment of the strength of the defence at all. In other words, if the affidavits show that there is a defence, however thin, which is arguable and is reasonable to go to trial, then and in that event an unconditional leave is the rule. An order for payment of security can be made only when the defendant shows no issue whereby he might be able to resist the claim at the trial, but still the Court entertains some doubt, and thus feels some mercy, whereupon it stays its hands from passing a final decree there and then but passes instead an order for security. 17. On the other hand, the learned single Judge deciding the case of Ofu Lynx Ltd., laid down the following test:- "If in particular cases the court is in some doubt as to whether the disputes are bona fide or not and is not in a position to come to any definite conclusion that the disputes are mala fide and manufactured only to create a defence to the winding-up petition, the court may stay the winding-up proceeding and relegate the parties to an action on terms as to security or otherwise". 18. If this test is to be followed, then the winding-up court would be called upon to test the strength of defence even when it is satisfied that there is an issue to go to trial. In our opinion, again with the greatest of respect to the learned Judge deciding the case, this is not an appropriate test. 19. Mr. P.C. Sen, appearing on behalf of the petitioning creditor, stated that the tests regarding security and grant of leave to defend in summary suits is different from the test regarding grant of security and admission of winding-up petitions in a company matter. With due respect to him, we are unable to agree. 19. Mr. P.C. Sen, appearing on behalf of the petitioning creditor, stated that the tests regarding security and grant of leave to defend in summary suits is different from the test regarding grant of security and admission of winding-up petitions in a company matter. With due respect to him, we are unable to agree. If anything, the Company Court should be even slower to order security in 'bad' cases, because it is not a debt collecing Court. 20. However, a company application presented for winding-up on the basis of a money claim is initiated by a creditor just like he initiates an ordinary money suit. It is often, like here, not a secured claim. The money, allegedly, is simply due from an ordinary defendant, or an ordinary company, without any security. An interlocutory application for conversion of an unsecured money claim into a secured claim will not as a rule lie. A creditor cannot take advantage of the company being a defendant and thereby choose a separate remedy whereby it would be able to convert its unsecured claim into a secured claim in case the defence is not so strong as fully to satisfy the Company Court even at the stage of admission of the winding-up application. If this were the law, then the choice of remedy would produce different results. If the petitioning creditor goes for a suit he awaits trial without security. If on the other hand the petitioning creditor presents a winding-up application he obtains an order for security because the defence, so to speak, is somewhat watery. In our opinion, this distinction in law even if there now, should not any longer remain. Forms of action have long been buried, and so far as practicable, they should remain buried. 21. It was further stated in the case of Ofu Lynx Ltd. as follows:- "...... ...In any case where the court entertains some doubt as to the bona fides of the disputes sought to be raised and has suspicion about the true nature thereof, the Court may direct the company to furnish security to prove its bona fides and solvency and relegate the claimant to a suit on such security being furnished.........". 22. Again here, a difference in principle is being sought to be made between a regular suit and a winding-up application. 22. Again here, a difference in principle is being sought to be made between a regular suit and a winding-up application. No defendant is ordinarily asked to furnish security for showing solvency and the directions for furnishing security are governed by the strict terms of the Code. Nor is a defendant asked to furnish security in interlocutory matters to prove its bona fides. If in a summary proceeding the defendant raises a point to go to trial, then the questions of bona fides and solvency would become wholly secondary questions and leave to defend would be granted on the basis of the issue raised, even in a summary suit. 23. We venture to say, again with respect, that in a company matter security is to be granted or ordered not for calling upon the company to show its bona fides or solvency. On the other hand, security is to be ordered when the Company is unable to disclose a defence that might be ultimately successful and yet the Court is not willing, having some contingency in its mind, immediately to pass a receiving order n case of nonpayment of the full debt claimed. In such cases, the Court should always express such contingency, whether it wishes to show mercy to the defendant and if so why, or whether it feels some doubt about the plaintiff's or the petitioner's case even though such doubt is not the result of anything that the defendant or the respondent has pleaded or said. Reserving such a discretion to Court will often further the cause of justice, say in a case where the plaintiff has a very good lawyer and the defendant a very bad one. 24. To repeat, in such cases, the plaintiff or the petitioning creditor, as the case might be, does not succeed in obtaining a summary decree or a straight receiving order, as the case might be, but has to be satisfied with a security. It is not, therefore, the rule to order security where the Court feels that there is some doubt as to the defence. The true rule, we venture to think, would rather be that the Court is to order security when it entertains some doubt as to the claim of the petitioning creditor even though such doubt is not raised by reason of the pleadings in the affidavit of the company. 25. Mr. The true rule, we venture to think, would rather be that the Court is to order security when it entertains some doubt as to the claim of the petitioning creditor even though such doubt is not raised by reason of the pleadings in the affidavit of the company. 25. Mr. P.C. Sen submitted that the principles laid down in the case of Ofu Lynx Ltd. have been accepted by a Delhi Division Bench in the case of Ambala Bus Syndicate (P) Ltd. vs. Bala Financiers (P) Ltd. (in liqn.) reported b 59 Co. Cas. 838 at 849, alternatively reported in 1984(2) CO. L.J. 372. Mr. Sen also relied upon the Calcutta Division Bench judgment in the case of J. N. Chowdhury (Traders) Ltd. vs. Jainti Enterprises., reported in 61 Co. Cas. 504, alternatively reported in (1987) 2 CO. L.J. 82, where the judgment was delivered by one of us (Prabir Kumar Majumdar, J.). I have had a consultation with his Lordship and we are both agreed that the case did not decide upon the principles on which a Company Court is to order security. With respect, our decision remains the same even after having considered the above quoted Delhi authority 26. Mr. Sen also relied upon 7 Halsbury's Laws of England 1004 (Lord Hailsham edition), wherin it is stated that in relation to winding-up petitions the Court may order the amount of the alleged debt to be paid into court. That jurisdiction to secure, no doubt, resides in the Company Court but is to be exercised when the nature of the debt appears to the Court to be real, indisputable by the company, and yet the Court, for some articulate reason shrinks from accepting the same wholly there and then. That however, is not on the basis of any defence raised by the company but on the court's own use of discretion for example, when it feels for some expressed reason that the petitioning creditor might not be successful in ultimately realising the full debt or a substantial part of it if asked to go to trial. 27. If the above principles are applied, then in the instant case before us, it cannot be said that M/s. Dunlop India Ltd. have not disclosed such facts as could not, in any view of the matter, be a possible complete defence at trial. 27. If the above principles are applied, then in the instant case before us, it cannot be said that M/s. Dunlop India Ltd. have not disclosed such facts as could not, in any view of the matter, be a possible complete defence at trial. After all, it might appear at trial that M/s. Anamika Udyog took Rs. 3 lakhs and Rs. 7.41 lakhs in full satisfaction. That, on the other hand, it might also appear at trial that M/s. Dunlop India Ltd. is trying to hush up a contract orally extended is a factor which, on the above principles, would not justify the grant of an order for security in a winding-up application. 28. For the above reasons, with the greatest of respect to the learned Judge deciding the matter in the Court-below, the appeal has to be allowed because of application of incorrect legal principles to the facts of this case. 29. We set aside the order of the Court of first instance, relating to the order for furnishing of security and admission. The winding-up application shall remain permanently stayed. 30. We are not, however, interfering with the order whereby the petitioning creditor was relegated to a suit. 31. Mr. Sen, appearing for the petitioning creditor, submits that the now continuing order of injunction restraining the petitioning creditor from instituting a suit may be continued for a further period of three weeks. On such prayer, the order of injunction restraining the petitioning creditor from instituting the suit will continue for a further period of three weeks from to-day. 32. There will be no order as to costs. 33. In view of the above order, there need be no separate order on the cross-objection filed by the respondent, which is also disposed of on the above terms. I agree. Appeal allowed.