VIKRAMAJIT SEN ( 1 ) IN winding-up proceedings it is necessary to keep the following conditions in perspective - (I) If there is a bona fide dispute and the defence is a substantial one, the Court will not wind-up the company. (II) Where the debt is undisputed the Court will not act upon a defence that the company has the ability to pay the debt but the company chooses not to pay it. (III) Where the defence of the company is in good faith and one of substance, and the defence is likely to succeed in point of law, and the company adduces prima facie proof of the facts on which the defence depends, the petition should be rejected. (IV) The Court may consider the wishes of creditors so long as these appear to be justified. (V) The machinery of winding-up should not be allowed to be utilised merely as a means of realising its debts. [for the above propositions see Pradeshiya Industrial and Investment Corporation of Uttar Pradesh Vs. North India Petro-Chemical Ltd. and Another, (1994) 2 comp LJ 50 (SC) in which the observation in Amalgamated Commercial Traders (P) Ltd. Vs. Krishnaswami, [1965] 35 Comp. Cas 456 (SC) and Madhusudan gordhandas and Co. Vs. Madhu Woollen Industries (P) Ltd. , [1972] 42 Comp. Cas. 125. (SC) have been paraphrased]. (VI) If the stance of the adversaries hangs in balance it is always open to the company Court to order the Respondent Company to deposit the disputed amount. This amount may be retained by the Court and be held to the credit of the suit, if any. [see Civil Appeal No. 720 of 1999 arising out of SLP (C) No. 14096 of 1998 - M/s. Nishal Enterprises Vs. Apte Amalgamations Ltd. . decided on February 5, 1999], IT appears to me that the following point of consideration may be added to the above. (VII) Generally speaking, an admission of debt should be available and/or the defence that has been adopted should appear to the Court to be dishonest and/or moonshine, for proceedings to continue. There is insufficient material in favour of the petitioners. The disputes appear to be essentially between the Petitioners and Respondents 2 and 3, and such disputes can be properly adjudicated in a regular civil suit. There is insufficient material in favour of the petitioners. The disputes appear to be essentially between the Petitioners and Respondents 2 and 3, and such disputes can be properly adjudicated in a regular civil suit. It is extremely helpful to draw upon the analogy of a summary suit under Order XXXVII of the Code of Civil Procedure. If the Company Court reaches the conclusion that, had it been exercising ordinary original civil jurisdiction it would have granted unconditional leave to defend, it must dismiss the winding-up petition. ( 2 ) KEEPING this legal position in perspective I shall now refer to the facts of the case. It has been stated that the Petitioner No. 1, who is a successful businessman and mine owner was interested in expanding his business activities particularly in the area of floriculture. Petitioner No. 2 is his son. In these circumstances they came across Respondents 2 and 3. Through subsequent contact and meetings these Respondents persuaded the Petitioners to acquire controlling" shares of M/s. Indo Holland Agro Exports Ltd. , which has changed its name to Trillenium Technologies Ltd. (Respondent No. 1 ). It is pleaded that Respondents 2 and 3 prevailed upon the Petitioners to loan different sums of money to the Company to take care of its immediate financial needs. Although Annexure P-3 does not state the total amount of the. loan, Mr. Mohanti, learned Senior Counsel for the Petitioners, states that it aggregates to rs. 1. 7 crores. The first loan is stated to have been given on 11. 1. 1997 and on several subsequent dates, up to 29. 3. 2000. A MOU was executed on 9. 4. 1997 whereby the parties agreed to sell/purchase controlling shares in Respondent No. 1. On 11. 4. 1997 Petitioner no. 1 was appointed as Chairman of the Respondent Company for a period of two years, and petitioner No. 2 as the Managing Director for a period of five years. It has next been stated that in addition to the loan granted the Petitioners have spent approximately a sum of rs. 1. 55 crores which were agreed to be treated as interest bearing loan to the Company, towards payment of salary and running expenses of the Company during the period March 1997 to April 2000. It has also been averred that between 31. 8. 1. 55 crores which were agreed to be treated as interest bearing loan to the Company, towards payment of salary and running expenses of the Company during the period March 1997 to April 2000. It has also been averred that between 31. 8. 1999 till 2000 the Petitioners spent by way of further loan to the Respondent Company approximately Rs. 25,00,000/- mostly on Randd work including salary of staff specially recruited and retained for software development and diversification. The loans granted are stated to have become due along with interest at the rate of 18 per cent on or before end February 2000, March 2000 and march 2001. Admittedly there is no written document evidencing the loans, or any of its terms. ( 3 ) THE defence that has been raised is that the amounts mentioned in Annexure P-3 were towards partial payment of supply of cut flowers/rose plants etc. made by the Respondent company to M/s. East Coast Flowers, W-111, Greater Kailash-1, New Delhi. A number of invoices together with delivery challans have been filed along with the Reply to the Petition. It has been vehemently submitted that no loan was ever granted to the Respondent Company by the Petitioners. Mention has also been made of the registration of an FIR in respect of the sale of immovable property of the Respondent Company by the Petitioners. ( 4 ) IN Rejoinder, Mr. Mohanti has submitted that the story of supply of cut flowers/rose plants etc. is a total concoction and that such a large volume could not have been supplied at w-111, Greater Kailash-1, New Delhi. It is submitted that the Petitioners will be able to prove their case by leading evidence. ( 5 ) HAVING carefully considered all the submissions made before me I am of the view that the present petition for winding-up must be rejected. The question of the alleged loan is not evident either by means of a document, or any acknowledgment of the Respondent. Essentially the disputes have quite clearly arisen between the Petitioners on the one side and Respondents 2 and 3 on the other side in respect of the sale/purchase of the controlling interests in Respondent No. 1. Disputes between these parties are receiving the attention of an Arbitrator appointed by Justice S. Ranganathan, a retired Judge of the Supreme Court. Essentially the disputes have quite clearly arisen between the Petitioners on the one side and Respondents 2 and 3 on the other side in respect of the sale/purchase of the controlling interests in Respondent No. 1. Disputes between these parties are receiving the attention of an Arbitrator appointed by Justice S. Ranganathan, a retired Judge of the Supreme Court. It is also the common case of the parties that five lakh shares of Respondent No. 1 (approximately. 33 per cent of the total equity) had been mortgaged to the Punjab National Bank. Even if payments were directly made to the said Bank by the Petitioners it does not immediately indicate that this was by way of loan. It is quite plausible that these amounts which were payable by the Respondent Company had been directly deposited with the Bank by the petitioners in partial liquidation of their liabilities on the purchase of cut flowers/rose plants etc. As has been rightly contended by Mr. Mohanti these matters can be substantiated only on the recording of evidence. Clearly the scope of such adjudication would not lie in summary proceedings such as winding-up petitions. In the absence of any clear cut evidence pertaining to the grant of the loan, this stand cannot be accepted in winding-up proceedings. In respect of the other sums of Rs. 1. 55 crores and Rs. 25 lacs, these are approximate figures, even as per the case of the Petitioners. No liquidated sum has been claimed. Accounts may have to be rendered by both sides. It must be borne in mind that winding-up proceedings are not replacements for the ordinary civil action for recovery of monies, and settlement of claims. ( 6 ) FOR these manifold reasons the petition is rejected. CA 33/2002 ( 7 )