JUDGMENT : K.A. Puj, J. The petitioner-Company has filed this petition under Sections 433 and 434 of the Companies Act, 1956 for winding up of the Company on the ground that the has failed to discharge its liabilities towards the petitioner despite the statutory notice having been served upon the Company. 2. The notice was issued by this Court on 17.4.2007. The notice was sent through Registered Post A.D. and the same was returned with an endorsement 'refused'. This Court has, therefore, passed further order on 8.5.2007 giving direct service to the petitioner. Over and above the direct service, the petitioner was permitted to affix notice at the conspicuous place of registered office of the Company. Thereafter, Mr. Navin K. Pahwa, learned advocate filed his appearance on behalf of the Company. 3. It is the case of the petitioner that the petitioner Company was supplying aluminum products to the Company. The said raw material was used by the company for the purpose of its manufacture of aluminum extrusions circles etc. for sale. The petitioner was supplying material from time to time till 3.10.2003. After October, 2003, the company stopped making purchases from the petitioner Company. As on 31.3.2004, there was outstanding amount of Rs. 89,70,839/- including principal amount of Rs. 50,82,974/-. After giving credit of the payment made by the said Company on 7.10.2004, the total outstanding as on 30.11.2006 worked out to Rs. 83,66,605/-. The last part payments were made of Rs. 6,07,984/- under three different cheques. Thereafter, there was no payment. As the principal amount itself was not paid, interest was debited merely for the first year and for the subsequent years interest was not debited as the petitioner Company could not pay Income Tax on the amounts which were not realised due to the default of the company. The petitioner was entitled to charge interest at the rate of 2% per month as per the terms on the principal outstanding amount of Rs. 50,82,974/- till payment. 4. It is also the case of the petitioner that there was another Company called M/s.Pankaj Metals (P) Ltd., (PMPL for short) which again supplied aluminum products to the Company for which the moneys were due from the Company. 50,82,974/- till payment. 4. It is also the case of the petitioner that there was another Company called M/s.Pankaj Metals (P) Ltd., (PMPL for short) which again supplied aluminum products to the Company for which the moneys were due from the Company. This Company was merged into the petitioner Company under a scheme of amalgamation as provided under Sections 391 to 394 of the Companies Act and the amalgamation having been confirmed by the Bombay High Court vide its judgment and order dated 18.9.2003. Thus, on amalgamation this entitlement to receive dues stood transferred from PMPL to the petitioner Company. The has to pay the amount of Rs. 19,51,274/-as on 31.3.2004 which inter alia includes the principal amount of Rs. 17,98,975. Thus, the amount due from the Company to the petitioner for supply made by the petitioner Company as well as by PMPL worked out to Rs. 1,27,53,012/-. 5. It is also the case of the petitioner that dues to the petitioner Company were also shown in the balance sheet of the Company upto period ended 31.3.2006. The petitioner Company reminded the Company for payment of amount due on number of occasions, both orally and by telephone and by written communications. Since the directors of both the companies are closely connected, oral reminders were generally issued. The Company addressed a letter dated 8.9.2006 to the petitioner Company showing the amounts due as per its books and requested the petitioner Company to confirm the same. In the said letter, the amount due to the petitioner Company for supplies made directly and also the amounts due for supplies made by PMPL which was later on amalgamated into the petitioner Company was mentioned. Though the principal amount was correctly tallied, the company has not included interest amount in its said accounts. The confirmation was duly signed of the amount due from the company and was returned to it. The petitioner Company has also sent notice dated 13.12.2006. There was no reply to the said notice. The petitioner Company thereafter issued winding up notice on 18.1.2007, to which reply was sent by the Company on 8.2.2007 making false claims in the said reply. Instead of accepting its liabilities the Company raised a demand of Rs. 78,66,463/-in the said reply. 6. It is in the above background of the matter, the present petition is filed by the petitioner for winding up of the Company. 7. Instead of accepting its liabilities the Company raised a demand of Rs. 78,66,463/-in the said reply. 6. It is in the above background of the matter, the present petition is filed by the petitioner for winding up of the Company. 7. Mr. A.C. Gandhi, learned advocate appearing for the petitioner has submitted that the company has failed to discharge and/or neglect to pay its dues to the petitioner. The stand taken by the Company in its reply dated 8.2.2007 is baseless, false and frivolous. The counter claim made by the Company is also false. This was an after thought only for evading the liabilities. No such supply was ever made by the Company to the other Company. The Company has deliberately and wantonly refused to make the payment only because it has assumed that no action will be taken by the petitioner Company because of close relationship between the parties. The conduct of the Company demonstrates that there is total negligence on its part. He has, therefore, submitted that this is a fit case for winding up of the Company. 8. An affidavit-in-reply is filed by the Company. Mr.Navin K. Pahwa, learned advocate appearing for the Company has submitted that the petition for winding up is not maintainable inasmuch as the Company is fully commercially solvent and is a going concern. He has further submitted that the turn over of the Company for the year ending 31.3.2005 was to the tune of Rs. 79.70 crores and the same has been increased to Rs. 98.65 crores as on 31.3.2006. He has further submitted that the Company employs 217 persons as direct employees and about 102 persons are working in the Company through the contractor pay roll. The Company paid excise duty of about Rs. 11.18 crores and about Rs. 12 lacs towards other Government dues as on 31.3.2007. He has, therefore, submitted that the present petition for winding up against the Company is not maintainable. 9. Mr. Pahwa has further submitted that the present petition is not maintainable even on the ground that the debt claimed by the petitioner against the Company is seriously disputed by the Company. 12 lacs towards other Government dues as on 31.3.2007. He has, therefore, submitted that the present petition for winding up against the Company is not maintainable. 9. Mr. Pahwa has further submitted that the present petition is not maintainable even on the ground that the debt claimed by the petitioner against the Company is seriously disputed by the Company. He has, therefore, submitted that the debt in question is not a debt which is due within the meaning of Section 434(1)(a) of the Companies Act, 1956 and non payment of such disputed bonafide debt cannot be termed as 'neglect to pay' so as to incur the liability under Section 433(1)(e) read with Section 434(1)(a) of the Act. 10. Mr.Pahwa has further submitted that the petitioner has not correctly stated the facts while filing the present winding up petition before this Court. Only with a view to place the correct facts before the Court, he has submitted that one Shri Harakchand N. Shah and his four brothers and their respective families belong to the joint family and were jointly running various business activities since 1965 under Pankaj Group of Companies. The business comprised trading and manufacturing units. These units were controlled through cross-holding by all the five brothers. The operation and management control of the respective units/companies were divided amongst brothers/sons according to their respective experience and skills. A family settlement took place with effect from 1.4.2003 between the five brothers who mutually agreed to divide the group companies/units and the respective assets. All inter group companies transactions were stopped and all the accounts were frozen. The brothers agreed to have separate business without having any inter connection whatsoever. Since certain issues as to accounts were not settled mutually, the family appointed arbitrators to resolve the disputes. The arbitrators gave an award on 2.7.2005. However, while implementing the award, the brothers felt certain difficulties in settling the issues with respect to assets and companies. Certain issues as to the accounts also remained unsettled. Amongst other issues, the issue as to settlement of inter group companies accounts and valuation/transfer of shares are pending adjudication before the arbitrators. The brothers, therefore, have once again referred the disputes to arbitrators in July, 2006. 11. Mr.Pahwa further submitted that the petitioner is claiming past outstanding amount for the transactions carried out before the year 2003. The inter group transactions were common. The brothers, therefore, have once again referred the disputes to arbitrators in July, 2006. 11. Mr.Pahwa further submitted that the petitioner is claiming past outstanding amount for the transactions carried out before the year 2003. The inter group transactions were common. Group support and capital to manufacturing companies were given as a part of supply of material from trading companies within the group. However, since separation of business in the year 2003, all such transactions have stopped. He has, therefore, submitted that it is only because of these facts, the petitioner has not produced any document evidencing execution of the transaction between the petitioner and Respondent. 12. An affidavit-in-rejoinder is filed on behalf of the petitioner Company. Based on this rejoinder affidavit, Mr. A.C. Gandhi, learned advocate, has submitted that as per the decisions of various Courts, a Company, which may be commercially solvent still cannot neglect to pay its dues to the creditors. The amount lawfully due to the petitioner has not been paid. With regard to the defence of the settlement taken by the Company, Mr.Gandhi has submitted that the petitioner's claim against the is the claim of one legal entity against other legal entity and, therefore, to bring the aspect of settlement in the present petition is wholly irrelevant. The has introduced the same only to cause confusion. He has also denied the contention raised on behalf of the Company that all inter group company's transactions were stopped and all the accounts were frozen with effect from 1.4.2003. He has submitted that what was frozen as on 1.4.2003 was the valuation of the companies for the purpose of family division as per award of arbitrators. The transactions, which have taken place between the petitioner and are admitted by the itself in its statement of accounts. He has further submitted that the petitioner has produced the statement of accounts and letter of confirmation sent by the itself and, therefore, the question of petitioner not producing any documents evidencing execution of the transaction between the petitioner and does not arise. Mr.Gandhi has further submitted that the filing of winding up petition against the Company could not amount to causing harassment and prejudice to the and its management. The other allegations regarding transfer of shares of Shri Harakchand N. Shah and family are not relevant for consideration of the present petition. Mr.Gandhi has further submitted that the filing of winding up petition against the Company could not amount to causing harassment and prejudice to the and its management. The other allegations regarding transfer of shares of Shri Harakchand N. Shah and family are not relevant for consideration of the present petition. He has, therefore, submitted that since there are admitted dues and no bonafide defence is raised by the Company the petition is required to be admitted and order of admission and advertisement deserve to be passed accordingly. 13. An affidavit in sur-rejoinder is filed on behalf of the Company wherein the reference to the proceedings of Company petition filed by Shri Harakchand N. Shah and others before the Company Law Board, Mumbai under the provisions of Section 111A(2),(3) and (4) of the Companies Act, 1956 against the petitioner Company and its directors seeking various relief was made. A counter affidavit was filed by the petitioner and its directors to the Company petition pending before the Company Law Board. In the said counter affidavit it was admitted that there has been division of the Companies and firms by all the brothers under mutual discussion and under a family settlement which was effective from 31.3.2003. All the five brothers including the Director of present company and Shri Dineshbhai Shah together with the respective family members sat together on 10.4.2003 and agreed to distribute Pankaj Group of companies amongst themselves as per the details given in the said counter affidavit. It was admitted in the said counter affidavit that the distribution of the companies in terms of ownership and management was complete in all respects. It was also stated that on the question of preparation of statement of assets and liabilities and statement of accounts, a reference was made to arbitration vide agreement dated 20.6.2005. It was further stated that an award was given on 2.7.2005 by the arbitrators. However, the brothers felt that certain issues with respect to matters arising from accounts and valuation of transfer of shares were to be clarified. Hence, further reference was made to the arbitrators. An undertaking was drawn up dated 6.9.2006 signed by all the brothers referring the issues to the arbitrators. Based on the said proceedings, it has been contended that there has been complete partition/division of assets and management of the companies between five brothers with effect from 1.4.2003. Hence, further reference was made to the arbitrators. An undertaking was drawn up dated 6.9.2006 signed by all the brothers referring the issues to the arbitrators. Based on the said proceedings, it has been contended that there has been complete partition/division of assets and management of the companies between five brothers with effect from 1.4.2003. There has been no business transactions between the group companies after 1.4.2003. The petitioner has not made any claim with respect to the claims made in the present winding up petition which is filed on 2.4.2007 i.e. after a period of 4 years from the effective date of family settlement. The petitioner has already agreed to make a further reference to arbitrators by filing a reference dated 6.9.2006. In respect of the transactions prior to 31.3.2003, there is a need to prepare the account statement as on 31.3.2003. The petitioner also agreed that a team of three accountants drawn from Pankaj Group of Companies have been asked to prepare the statement of assets and liabilities of the Group Companies and the individual brothers of the Pankaj Group. While preparing these statements, the three accountants have raised certain issues and sought clarification from the arbitrators to enable them to prepare proper statement of assets and liabilities of each group company and for each brother of the Pankaj Group. The arbitrators have given an award on 25.1.2008. The award however has been challenged by the Directors of the Company before the competent District Court under the provisions of Section 34 of the Arbitration & Conciliation Act, 1996 and the same is pending after issuance of notice. 14. Based on these facts, it is submitted by Mr.Pahwa that though there has been no claim whatsoever made by the petitioner in respect of the amounts which are claimed for the first time in the present winding up petition at any time for a period of 4 years, a general reference was made to the arbitrators which included issues concerning statement of accounts for the period prior to 1.4.2003 which were based on the queries raised by three accountants. That the award has already been given by the arbitrators which however is subject to the outcome of the proceedings pending before the competent District Court wherein the award is challenged under Section 34 of the Arbitration & Conciliation Act, 1996. That the award has already been given by the arbitrators which however is subject to the outcome of the proceedings pending before the competent District Court wherein the award is challenged under Section 34 of the Arbitration & Conciliation Act, 1996. He has, therefore, submitted that though the claims made by the present petitioner are after thought and are barred by limitation, issues arising from accounts of the group companies in respect of the transactions upto 1.4.2003 are the subject matter of the award given by the arbitrators and now subject matter of proceedings before the competent District Court. He has, therefore, submitted that the Court should not entertain the present winding up petition. 15. Apart from the above facts, as per the say of Mr.Pahwa the Respondent - Company has huge claim against the petitioner Company. The Company is entitled to recover an amount of Rs. 78,66,463/-from the petitioner. The Respondent - company is also entitled to recover back the fixed deposit receipts with Bank of Baroda under lien account given by Shri Harakchand Shah, the Managing Director of the Company as collateral security for securing the repayment of the dues of the petitioner to the Bank. The said amounts as of 31.3.2008 is equivalent to Rs. 1 crore. Since the petitioner has not provided adequate alternative securities as desired by the Bank, the collateral securities to the extent of Rs. 1 crore were not returned back by the Bank in favour of Directors of the Respondent - Company. Considering all these facts Mr.Pahwa has strongly urged that the petition deserves to be dismissed with costs. 16. In support of his submission Mr.Pahwa has relied on the decision of Madhya Pradesh High Court in the case of ICDS Ltd. Vs. Kamar Trading Company Pvt. Ltd., reported in 2005 (128) Company Cases 849 for the proposition that having invoked the provisions of the Arbitration Act, the winding up petition is not maintainable. He also relied on the decision of Delhi High Court in the case of Messrs Pioneer Polyfeb Ltd. Vs. Messrs Goyal MG Gases Ltd. reported in 2005(CC3) GJX 155 (Del.) for the proposition that dispute covered by the arbitration cannot be allowed to be raised in the winding up petition and as such the winding up petition is not maintainable. 17. He also relied on decision of Delhi High Court in the case of Jubilian Organosys Ltd. Vs. Messrs Goyal MG Gases Ltd. reported in 2005(CC3) GJX 155 (Del.) for the proposition that dispute covered by the arbitration cannot be allowed to be raised in the winding up petition and as such the winding up petition is not maintainable. 17. He also relied on decision of Delhi High Court in the case of Jubilian Organosys Ltd. Vs. DCM Shriram Industries Ltd., reported in 2006 (68) SCL 380 (Del). for the proposition that when there is a counter claim, the winding up petition should not be entertained. 18. Having heard learned advocates appearing for the respective parties and having perused the petition, affidavit-in-reply, rejoinder affidavit as well as sur-rejoinder affidavit and the documents attached therewith, the Court found that the present petition is filed by the petitioner under the provisions of Section 433 and 434 of the Companies Act, 1956 against the Respondent - Company for winding up on the ground that the Respondent - Company is unable to pay its debt and that there has been negligence on the part of the Respondent - Company to make payment of the debts due in favour of the petitioner. From the above affidavit-in-reply filed on behalf of the Respondent - Company it is revealed that the Company is fully commercially solvent and is a going concern. The Company has mentioned figures of value of fixed assets which is about Rs. 26 crores as per the balance sheet as on 31.3.2006. The paid up share capital of the company is Rs. 8 crores and the reserves are Rs. 11 crores. The total net worth of the company is thus Rs. 19 crores. The Respondent Company enjoys working capital and term loan facilities of Rs. 11 crores which are secured by charge over the current assets and fixed assets of the Company. The turn over of the Company as on 31.3.2006 is about Rs. 98.65 crores. It is further revealed that the Respondent company employs about 217 persons as direct employees and about 102 employees are working through contractor pay roll. The Respondent - Company has paid excise duty of about Rs. 11.18 crores and about Rs. 12 lacs towards other Government dues as on 31.3.2007. 19. 98.65 crores. It is further revealed that the Respondent company employs about 217 persons as direct employees and about 102 employees are working through contractor pay roll. The Respondent - Company has paid excise duty of about Rs. 11.18 crores and about Rs. 12 lacs towards other Government dues as on 31.3.2007. 19. As far as merits of the matter is concerned, the petitioner and the Respondent - Company both formed part of Pankaj Group representing five families which include the family of Shri Dineshbhai N. Shah which owns and controls the petitioner Company and Shri Harakchand N. Shah which owns and controls the Respondent - Company. Shri Harakchand N. Shah is the elder brother. These five families decided to have a family settlement and distribute the companies, firms assets and liabilities amongst different families. Accordingly, a reference was made to arbitrators while keeping the cut of date as 31.3.2003. It is recorded in the final award dated 25.1.2008 rendered by the arbitrators that the five brothers have operated all the group companies and managed the group assets and liabilities as one unit, undivided upto 31.3.2003. They have conducted the business of group companies jointly till 31.3.2003. All the brothers have equal share in the assets of the Companies or firms and it has been agreed that all the assets and liabilities have to be shared between them at 20% for each family described therein. The award also records that, "it was further decided that the capital, reserves and surplus, secured and unsecured loans, creditors, fixed assets, debtors, loans and advances, doubtful and bad debts, etc. of each company as on 31.3.2003 shall be taken into consideration to arrive at the value of these companies and such value arrived at shall be taken into consideration to prepare the statement of assets and liabilities allocated to each brother." Thus, it is crystal clear that while working out value of each companies including both the petitioner Company as well as the Respondent - Company, all the assets and liabilities including loans and advances, creditors, doubtful and bad debts were to be taken into consideration. Thus, all assets and liabilities as on 31.3.2003 were required to be considered for the purpose of working out value of each companies. Admittedly, the claims made by the petitioner in the present petition is for the period prior to 31.3.2003. Thus, all assets and liabilities as on 31.3.2003 were required to be considered for the purpose of working out value of each companies. Admittedly, the claims made by the petitioner in the present petition is for the period prior to 31.3.2003. The so-called dues therefore would have been considered in the statement of claims while considering valuation of respective companies. It is for this reason that though the dues are for the period prior to 31.3.2003, the petitioner has not lodged the alleged claim anywhere until filing of the present petition in the year 2007. 20. It is also revealed from the record that the arbitrators gave an interim award on 2.7.2005. However, as certain issues were still not settled, reference was again made to the arbitrators in July, 2006. All the brothers have submitted undertaking before the arbitrators stating that they will abide by the decision of arbitrators. The undertaking also records that a team of three accountants drawn from Pankaj Group of Companies have been asked to prepare the statement of assets and liabilities of the group companies and the individual brothers of the Pankaj Group. While preparing these statements, three accountants have raised certain issues and needed clarification from the arbitrators to enable them to prepare proper statement of assets and liabilities of each group company and for each brother of Pankaj Group. 21. It is true that the arbitrators have given the final award on 25.1.2008. In the concluding part of this award, the Arbitrators issued certain directions for accounts and payments. All the three Accountants representing the five brothers were directed to prepare their final account as per the directions given in earlier award dated 2.7.2005 and in the subsequent award dated 25.1.2008 upto date and get it confirmed among themselves on or before 15.2.2008 and forward the same to the Arbitrator. On final confirmation of accounts the necessary modalities for settlement of payments between the brothers were to be done. Settlement of all the payments were directed to be completed on or before 31.3.2008. Since the final accounts have not reached to the Arbitrators they could not finalise the award. They were of the view that parties to the arbitral proceedings have not cooperated whole heartedly. They have, therefore, cancelled their earlier directions given on 25.1.2008 and all other decisions, awards discussions etc. Hence the said proceedings were stated to be null and void. Since the final accounts have not reached to the Arbitrators they could not finalise the award. They were of the view that parties to the arbitral proceedings have not cooperated whole heartedly. They have, therefore, cancelled their earlier directions given on 25.1.2008 and all other decisions, awards discussions etc. Hence the said proceedings were stated to be null and void. All the three Arbitrators had resigned from the arbitral proceedings. Shri Harakchand N. Shah has challenged the award by filing Arbitration Petition No.334 of 2008 in the High Court of judicature at Bombay under Section 34 of the Arbitration & Conciliation Act, 1996. The matter is thus subjudice before the Bombay High Court vis-a-vis the claims/counter claims of the respective parties arising from the settlement concerning the companies including the petitioner company and the Respondent - Company Since the disputes are covered by the family settlement and/or arbitration proceedings which have been finally culminated into the interim award as also the final award and now it is subject matter of petition before Bombay High Court and hence it cannot be said that the defence of the Company is moonshine or is not bonafide. 22. In the case of Ficom Organics Ltd. Vs. Laffans Petrochemicals Ltd., 1999 (034-CLA 0416 (Guj.) the Court has held that in order to examine as to what is a bonafide defence, the Court is required to come to the conclusion that the defence raised by the company is not only not bonafide but the defence is reeking with malafides or the Company's conduct leading to the dispute was dishonest. Considering the pleadings of the parties it cannot be said that the defence of Respondent - Company is not bonafide or that the defence is reeking with malafides. 23. In the case of Videocon Leasing & Industrial Finance Ltd., this Court has dismissed the Company Petition on the ground that the Civil Suit was pending before the competent Court. Similar view is taken in the case of IndusInd Bank Ltd. Vs. Gujarat Ambuja Exports Ltd. In the case of ICDS Ltd. Vs. Kamar Trading company Pvt. Ltd., Pioneer Polyfab Ltd. Vs. Goyal M.G. Gases Ltd and Jubiliant Organosys Ltd. Vs. Similar view is taken in the case of IndusInd Bank Ltd. Vs. Gujarat Ambuja Exports Ltd. In the case of ICDS Ltd. Vs. Kamar Trading company Pvt. Ltd., Pioneer Polyfab Ltd. Vs. Goyal M.G. Gases Ltd and Jubiliant Organosys Ltd. Vs. DCM Shree Ram Industries Ltd (Supra) a view was taken that whether arbitration proceedings are pending or ultimately culminated into award, winding up petition may not be entertained by the Court under Sections 433 and 434 of the Companies Act, 1956. 24. It is true that there is reference in the balance sheet of the amounts claimed by the petitioner. However, Clause 19 provided that "any receivables from any group company cannot be written off for settlement purpose. The fact still remains that all the claims made by the petitioner are covered by arbitration and/or family settlement and, therefore, the winding up petition for such claims is not maintainable. 25. It is also revealed from the fact that the Respondent company has counter clams against the petitioner Company to the tune of Rs.78,66,463/-. In addition, the Respondent Company is also required to recover fixed deposit receipts given by Shri Harakchand N. Shah to Bank of Baroda under lien account on behalf of the petitioner company which is equivalent to Rs. 1 crore. Considering all these aspects of the matter, it cannot be believed that the defence taken by the Company is not bonafide defence. 26. In view of the above discussion and decided case law on the subject, the Court is of the view that the claim made by the petitioner Company in the present winding up petition cannot be said to be an undisputed or admitted claim. It is part of family arrangement and it was the subject matter of arbitration and arbitrator's award is pending before the Bombay High Court. In this view of the matter, merely on the basis of the petitioner's claim, the Court cannot admit the present petition and pass the order regarding advertisement. The claim is required to be proved before the competent forum. 27. In view of the above discussion, the petition is dismissed without any order as to costs. Notice is discharged. Petition dismissed.