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Karnataka High Court · body

2009 DIGILAW 798 (KAR)

Indo Swiss Jewels Limited v. HMT Watches Limited

2009-10-21

B.V.NAGARATHNA

body2009
Judgment : This Company petition her been filed under Section 433(e) & (f) read with Section 439 of the Companies Act seeking winding up of the respondent company, namely, HMT Watches Limited, under the provisions of the Companies Act. 2. According to the petitioner the respondent company was incorporated on 19.8.1999 under the provisions of the Companies Act as a Public Limited Company limited by shares having its registered and Corporate Office at No.59, Bellary Road, Bangalore. The authorized and paid up capital of the respondent company is Rs.10,00,000/-only divided into Rs.1,00,000/-equity shares of Rs.10/each. 3. The main objects of the respondent company are to acquire the assets and liabilities and take over the business of HMT limited now carried on under its watch business group as a going concern and to carry on the business of designing manufacture, selling exporting of all kinds of watches, time pieces, clocks, chronometers, horological instruments and other devices for measuring time and components, other scientific instruments and musical instruments, jewelry etc., and for that purpose to establish and promote factories and render assistant and services of every kind. The other objects of the respondent company are set out in the memorandum and articles of association which are produced as Annexure-E to the petition. 4. According to the petition by order dated 17.10.2001, passed by the Central Government, all the assets and liabilities of the watch business of HMT Limited has been transferred and is vested in the respondent company. The respondent various units in different places such as Bangalore, Tumkur, Srinagar, Ranibagh and that certain supplies were made by the petitioner to the aforesaid units and Srinagar Unit (HMT Chinar watches Limited) of the respondent to an extent of Rs.89,85,249/-as on 31.3.2002, in respect of which the payments are due for which the respondent is also liable to pay interest. 5. That in the year 1993-94 HMT Limited was on the verge of becoming a sick company and with an object of reviving and rehabilitating HMT Limited, there was re-organization of its business and that Central Government, the Banks and other financial institutions had given massive financial assistance to the respondent company, but notwithstanding the same, it has suffered heavy losses. The respondent has not filed annual report including audited balance sheet, profit and loss account since its inception in August 1999. The respondent has not filed annual report including audited balance sheet, profit and loss account since its inception in August 1999. Though the petitioner has been vigorously following up the payments and its dues at all levels and constituent units of the respondent company, the latter has neglected to pay the petitioner company’s debts and further on account of its inability, a legal notice under Section 434 of the Companies Act dated 17.11.2001 was issued seeking payment of entire dues amounting to Rs.71,41,925/-, a copy of which is annexed as Annexure-D to the petition. 6. In response to the same, the Executive Director of the respondent company called the Managing Director of the petition company for a discussion in order to find an amicable solution to the issue of payment of the amounts. Though the said amount is admitted by the respondent company a sum of Rs.68,60,607/-is liable to be paid by the respondent and the balance by the erstwhile Srinagar unit of HMT Limited. Although the Managing Director of the petition company was promised by the respondent company that every week from December 2001 to February 2002 a sum of Rs.2,00,000/-would be paid, the respondent company has miserably failed to keep up its part of the promise and instead a sum of Rs. 1,00,000/-only was paid by three cheques dated 12.11.2001, which however, were dishonoured on account of insufficiency of funds. Hence the petitioner company being entitled to Rs.89,85,249/-another legal notice dated 6.4.2002, under Section 434 of the Act was sent demanding the respondent company to settle the outstanding amounts within twenty-one days from the date of receipt of the same, a copy of which is annexed as Annexure-E to the petition. Once again the General Manager of the respondent unit at Bangalore called the Managing Director of the petitioner company for a discussion and three cheques dated 18.4.2002 for Rs.1,00,000/-were handed over, but the same were also dis-honoured. Another meeting was convened by the respondent company on 29.4.2002 of all the suppliers whose bills had remained unpaid and one more promise of payment on installment basis was made, but no action was taken by the respondent company. 7. The Tumkur unit of the respondent company confirmed outstanding amount of Rs.42,88,889/-, similarly the Bangalore Unit agreed with the figures in the stated in the invoices with regard to jewelry supplies and for supply of watch crystals. 7. The Tumkur unit of the respondent company confirmed outstanding amount of Rs.42,88,889/-, similarly the Bangalore Unit agreed with the figures in the stated in the invoices with regard to jewelry supplies and for supply of watch crystals. That Ranibagh unit had wrongly rejected jewels worth Rs.1,97,716/-. On 4.5.2002 respondent company issued a reply to legal Notice dated 4.6.2002 in response to which the petitioner gave its rejoinder on 15.5.2002, copies of which are produced as Annexure-H and J respectively and thereafter one more reply dated 27.5.2005 was issued by the respondent company as per Annexure-K. According to the petitioner, the respondent has failed to pay nearly sixty crores due to small suppliers like the petitioners. By advertisement dated 29.5.2002 issued in the “Times of India” by the Employees Provident Fund Organization, public awareness was given against the purchase of HMT properties and even according to the Central Government, the management of the respondent company lack both competence and honesty to resurrect and to make it commercially viable, The respondent company was planning to sell all its assets, as it has been saddled with debts and has become chronic defaulter and therefore, it is liable to be wound up on account of non-payment of admitted liability and also for just and equitable reasons. 8. After service of notice from this Court, the respondent company appeared and filed its statement of objections denying the averments made in the company petition by contending that there is no admission of liability towards the petitioner or is the company unable to pay its debts. That the respondent company has a turn over of Rs.100 crores and holding company and its subsidiaries are having annual turn over of Rs.700 crores. The respondent company is having 3400 persons and the holding company and its other subsidiaries together employed 12,000 personnel paying monthly salary of Rs.15 crores; that the respondent company pays a monthly salary of Rs.5 crores to its employees and that there is no question of the company being unable to pay its debts and nor it is just and equitable to be wound up. According to the respondent, since the company petition involves disputed questions of facts and detailed evidence, the appropriate forum has to be approached for seeking civil remedies and therefore, the company petition ought to be dismissed. According to the respondent, since the company petition involves disputed questions of facts and detailed evidence, the appropriate forum has to be approached for seeking civil remedies and therefore, the company petition ought to be dismissed. The petition is neither entitled to a sum of Rs.89,85,249/-as stated in the legal notice dated 31.3.2002 nor interest on the said amount. According to the respondent company Banks and financial institutions have come forward to offer facilities and assistance on commercial terms keeping in mind the potential growth of the industry. That the dishonour of cheques on account of insufficiency of funds by itself is not a ground for winding up of the respondent company. Certain supplies made by the petitioner have been rejected by different units of the respondent company and all averments regarding losses made by the respondent company are baseless. The petition’s averments that the Central Government had made an internal enquiry with regard to the commercial viability of the respondent company is not true. The other allegations made by the petitioner were also denied by the respondent company, which sought for a dismissal of the petition. 9. An additional affidavit in support of the counter statement was filed on behalf of the respondent company stating that the petition had filed original suit under Order XXXVII of CPC before the XXVI Addl.City Civil Judge, Mayohall Unit, Bangalore for recovery of a sum of Rs.1,16,47,250/-with interest and the same is numbered as O.S.No.15652/2003. The Trial Court has granted leave to defend the respondent company subject to the condition that it would furnish security to the extent of suit claim within one month from 9.12.2003 and being aggrieved by the said direction, respondent had filed W.P.No.16444/2002, which was disposed of by this Court on 5.7.2004 with a direction to the respondent to furnish a security within two weeks from the date of the said order and that the respondent has complied with the order by furnishing security by offering 10.1844 acres of land at Ranibagh valued at Rs.14,00,000/-per acre approximately. The order of the Learned Single Judge in the writ petition was challenged by the petition in W.A.No.3154/2004 which has been dismissed with a direction to the Trial Court to dispose of the original suit expeditiously. 10. The order of the Learned Single Judge in the writ petition was challenged by the petition in W.A.No.3154/2004 which has been dismissed with a direction to the Trial Court to dispose of the original suit expeditiously. 10. In response to this further affidavit a counter affidavit has been filed by the petitioner by stating that during the pendency of this company petition, the original suit has been filed and that the respondent filed a claim for payment of the amount in the company petition to an extent of Rs.61,23,608 in five by-monthly installments commencing from June 2004 and that there is no bar to entertain the company petition despite filing of the suit. 11. This Court by order dated 15.7.2002 had ordered notice on the company petition to the respondent and also to show cause why the petition should not be admitted and advertised. By order dated 26.2.2004, it is noted that the respondent company filed a memo indicating the mode of payment to the petitioner in this case as well as in company petition No.52 and 262/2003. Subsequently, on 5.9.2005, the company petition was admitted and by a reasoned order dated 22.9.2005 the company petition was posted for evidence dispensing with the requirement of advertising the petition. Sri.S.Anil Kumar, Advocate, Gandhinagar, Bangalore was appointed as the Court Commissioner to record the evidence and to submit the report and the report of the Court Commissioner dated 5.1.2007 after recording of evidence along with the respondent’s affidavit was taken on record. Thereafter the matter was posted for hearing. In the meanwhile since the suit between the same parties was at the final stage, this matter was adjourned and subsequently the original suit has been partly decreed against which the petitioner herein has preferred an appeal before this Court, but according to the respondent company no appeal before this Court, but according to the respondent company no appeal has been filed by it till date. In the meanwhile, the matter was adjourned from time to time, since the respondent intended to settle the matter and finally when there was no possibility of settlement between the parties, the company petition has been heard. 12. I have heard Sri.Prakash for M/s Lawyers INC Learned Counsel for the petitioner and Sri.Joshna Samuel Learned Counsel for M/s Cariappa and Company for the respondent company. 13. 12. I have heard Sri.Prakash for M/s Lawyers INC Learned Counsel for the petitioner and Sri.Joshna Samuel Learned Counsel for M/s Cariappa and Company for the respondent company. 13. Counsel for the respondent has submitted that the company petition is not maintainable in view of the original suit being filed and decreed in favour of the petitioner and in the face of an alternative remedy, an extra ordinary remedy of winding up of the respondent company cannot be resorted to. He has also stated that the two parallel proceedings cannot go on simultaneously and therefore in the face of the suit being decreed, the company petition cannot survive for further consideration. In support of his contention he has relied upon (2004) 1 Comp.L.J. 481 (MP) and (2001) 6 Comp.L.J 61 (Bom). 14. In response to this Counsel for the petitioner has submitted that the suit was filed after the filing of the petition and that the judgment and decree in the suit will not affect the relief claimed in the company petitioner. On the other hand, since the suit has been decreed for a portion of the amount claimed, without prejudice, to that extent at least the liability of the company has to be taken as admitted since no appeal has been filed by the respondent company against the said judgment and decree. In support of his contention that the filing of a company petition would not be affected by any other remedy resorted to by a party. Counsel for the petitioner has relied upon ILR 1987 Karnataka 2673 (DB) and 1993 Comp.L.J.323 (Madras) & other decisions. 15. Before answering the said contention on the maintainability of the company petition it would be of relevance to advert to the position of law on the point. 16. A Division Bench of this Court in HEDGE & GOLAY LIMITED vs STATE BANK OF INDIA ILR 1987 Karnataka 2673, has stated that the pendency of a suit is no bar to the maintainability of a winding up petition, If the company fails to show that the debt is bonafide disputed, it would not render the claim any the more disputed or any the less just, merely because the creditor is driven to file suits for its recovery. Though the winding up petition is a mode for recovery of a just debt, the proceedings in winding do not partake of the nature of a suit and therefore, the incidents of Order II Rule 2 CPC are not attracted. 17. In the case of TUBE INVESTMENTS OF INDIA LIMITED vs RIM & ACCESSORIES (P) LIMITED (1990) 3 Comp.LJ 322 (Mad) it has been stated that if there is no bonafide dispute with regard to the sum payable towards the principal, it is open to the creditor to resort to both the remedies of filing of a civil suit as well as filing of a petition for winding up of the company. However, if there is the existence of bonafide dispute between the parties as regards the amount, then the company petition ought to be dismissed. 18. However, in the case of VIJAY INDUSTRIES vs NATL TECHNOLOGIES LIMITED (2009) 147 Comp Cases 490 (SC), the Apex Court has stated that Section 433 of the Companies Act does not state that the debt must be precisely a definite sum. Failure to pay agreed interest or the statutory interest would come within the purview of the word “debt”. If the amount of debt is not definite or ascertainable because of a bonafide dispute raised thereabout or a dispute as regards quantity or quality of supply or such other defences which are available to the purchaser, then the Company Court cannot make an order of winding up, but if the principal amount is admitted and the disputed is only with regard to the payment of interest as such or the rate of interest, then the petition for winding up cannot be dismissed. 19. In the case of M/s. MITSUGEN GLAZES LIMITED vs M/s. VARKEY OVERSEAS TRADING COMPANY PRIVATE LIMITED AND ANOTHER ILR 1999 Karnataka 3354, while referring to Section 433(e) & Section 434 of the Act, it has been stated that inability to pay its debt is itself a circumstance in which the company can be ordered to be wound up in view of the deeming provision in Section 434 of the Act. In the said decision the liability was admitted and the dispute was regarding the rate of interest only and therefore, the petition was admitted and an order for advertisement was made and the Official Liquidator was directed to take charge of the assets of the company. 20. In the said decision the liability was admitted and the dispute was regarding the rate of interest only and therefore, the petition was admitted and an order for advertisement was made and the Official Liquidator was directed to take charge of the assets of the company. 20. In the case of MADHUSUDAN GORDHANDHAS & Co., vs MADHU WOOLEN INDUSTRIES PRIVATE LIMITED AIR 1971 SC 2600 , it is stated that when ever the debt is undisputed, the Court will not Act upon a defence that the company has ability to pay the debt but the company chooses not to pay that part of debt. The principles on which the Court Acts are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law and thirdly the company adduces prima facie proof of the facts on which the defence depends. 21. In fact, after the enforcement of the recovery of debts due to Banks and Financial Institutions Act, 1993 if a proceeding is initiated under the said Act by a Bank against a debtor which is a company, then it is held that a winding up petition against the same debtor is not maintainable in the case of BANK OF NOVA SCOTIA vs RPG PRESUMPTION LIMITED (2003) 114 Comp Cases 764 (Delhi). However, a Division Bench of this Court has held that a company petition is maintainable despite a petitioner approaching a Civil Court to work out his remedies. 22. What emerges from the aforesaid decisions is that the pendency of a suit is not a bar to the maintainability of a winding up petition. However, the decision in the suit is a matter to be taken into consideration before an order of winding up can be made in the company petition since the filing of the suit for the recovery of money due from a company in which adjudication takes place after recording of an evidence would also be the very basis for filing of a company petition seeking winding up, on account of inability to pay debts or for just and equitable reason. The extent of relief or the nature of the decree passed in the suit would throw light on the bonafide dispute raised in the company petition. The extent of relief or the nature of the decree passed in the suit would throw light on the bonafide dispute raised in the company petition. If for instance, the relief claimed in the suit is fully granted by the Civil Court, that would be a matter to be taken into consideration while passing an order of winding up of the company. On the other hand, if the suit of the petitioner who has filed the petition for winding up is dismissed or only partly decreed, then that would also be a matter of consideration while rejecting a petition for winding up. Since the dicta in the above cases state that while considering the petition for winding up at very same facts would have a bearing when the company Court considers the petition for winding up, under the circumstances, it is held that the petition for winding up is maintainable particularly in view of the decision of the Division Bench of this Court in Hedge and Golay’s case, but as to whether the petitioner has made out a case for seeking an order for advertisement of the Petition will be considered or merits. 23. Another point raised by the Counsel for the respondent is that the respondent company is a wholly owned subsidiary of HMT Limited and it is a Government company within the meaning of Section 617 of the Companies Act. Though the respondent is a company incorporated under the Provisions of the said Act, it is nevertheless a Government company controlled by the Central Government and though the petitioner need out make the Central Government a party, the company Court has to notify the Central Government before an order of winding up can be made. 24. Counsel for the respondent has taken me through the Memorandum and Articles of Association of the respondent company and also through the Provision of Industries Development & Regulation Act 1951 as well as the Government of India (Allocation of Business) Rules. 24. Counsel for the respondent has taken me through the Memorandum and Articles of Association of the respondent company and also through the Provision of Industries Development & Regulation Act 1951 as well as the Government of India (Allocation of Business) Rules. He has also stated that since the respondent company is a “state” within the meaning of Article 12 of the Constitution, it cannot be placed on the same footing as a public company or a private company as defined under Section 3 of the Companies Act and has also gone to the extent of submitting that a petition under Section 433(e) of the Act is not maintainable in respect of a Government company, as defined under Section 617 of the Companies Act. 25. Though the said contentions of the Counsel for the respondent shall be considered and answered, Counsel for the respondent company ought to have realized that these contentions are outside the scope of the specific jurisdiction of the Company Court dealing with the Companies Act and other allied acts. In the instant case, counsel for the respondent has mainly focused on the maintainability of the petition and the requirement of ordering notice on the Central Government rather than submitting on the merits of the case. This court would have been better assisted if the Learned Counsel for the respondent had also submitted in detail on the merits of ordering winding up of the respondent company rather than raising wholly irrelevant contentions. 26. At the outset it has to be stated that Article 12 of the Constitution of India is in the context of enforcement of fundamental rights whereas the present petition is filed under the provisions of the Companies Act and therefore, while the Government company can come within the scope of Article 12 of the Constitution, the same cannot be taken into consideration while dealing with the winding up of a Government Company. Section 617 of the Companies Act defines a Government company. It can be either under the jurisdiction of the State Government or under the Central Government. Section 617 of the Companies Act defines a Government company. It can be either under the jurisdiction of the State Government or under the Central Government. Since the respondent company is one coming under the jurisdiction of the Central Government and it is expected to Act in accordance with the guidelines and policies and instructions of the Central Government, in my view, it is not necessary that notice should be issued to the Central Government before passing an order of winding up, for the simple reason that the Central Government would not take a stand different from what the respondent company would take and vice-versa. 27. It is also a settled position that the respondent company is incorporated under the provisions of the Companies Act and therefore, the existence of the company as well as its winding up would necessarily come within the purview of the said Act and not under any other Act as such. There is no exception carved in respect of the companies incorporated under Section 617 of the Act in the matter of its winding up Section 617 of the Companies Act defines a Government Company wherein 51% or more of the shares are held by the Central and or any State Government and the said company becomes a Government Company and special provisions as to Government Companies in Goa, Daman and Diu and Jammu and Kashmir are made under Section 620B and 620C of the Act but there is no provision excluding the applicability of the provisions regarding winding up vis-à-vis Government Companies. In fact in the case of MARUTHI UDYOG LTD. vs HINDUSTAN PHOTO FILM MANUFACTURING COMPANY LTD. (2001) 103 Com Cases 960 Madras a Government Company was order to be wound up because of its inability to pay its debts, symbolized by the fact that it failed to honour the statutory notice. The Court said that a substantial Government shareholding does not by itself afford security to creditors since the company failed to produce any details of its financial position. This created a presumption of bad financial condition which was raised and an order of winding up was passed. The Court said that a substantial Government shareholding does not by itself afford security to creditors since the company failed to produce any details of its financial position. This created a presumption of bad financial condition which was raised and an order of winding up was passed. Therefore, the contention of the Counsel for the respondent that Government Company within the meaning of Section 617 of the Act falls outside the purview of winding up proceedings enunciated under the Companies Act under Section 433 read with Section 434 and other provisions is rejected. Under the circumstances, a petition under Section 433(e) of the Act for winding up of Government Company is maintainable and further it is not necessary to issue notice to the Central Government or the State Government as the case may be, while exercising jurisdiction in the matter of winding up of a Government Company. As already stated, Article 12 of the Constitution of India has no relevance with regard to the winding up of a Government Company. 28. Similarly, reliance is placed on the Government of India (Allocation of Business) Rules show that the respondent company comes under the Department of Heavy Industries of the Central of maintainability of the petition as also on the requirement of issuing notice to the Central Government. Therefore, all contentions with regard to the maintainability of this company petition are rejected. 29. The next question that would arise for my consideration is whether the petitioner has made out a case for advertisement of the petition. 30. According to the Counsel for the petition with regard to the supply of watch parts, a sum of Rs.89,85,249/-is due and Ex.P178 is the legal notice dated 6.4.2002 which was sent by the petitioner, in response to which reply as per Ex.P185 was sent admitting liability of Rs.69,95,542/-That in this petition respondent company filed a scheme for repayment as per Ex.P194 wherein it admitted Rs.61,23,608/-, but even this amount has not been cleared. Thereafter statement of objections was filed admitting supply, but denying the liability. Despite this, respondent company took time to make payments as per Ex.P200 and P201. There is no challenge made to Ex.P2 to P115 which pertains to Tumkur Unit of respondent or Ex.P116 to P145 which pertain to Ranibagh Unit. Thereafter statement of objections was filed admitting supply, but denying the liability. Despite this, respondent company took time to make payments as per Ex.P200 and P201. There is no challenge made to Ex.P2 to P115 which pertains to Tumkur Unit of respondent or Ex.P116 to P145 which pertain to Ranibagh Unit. The petitioner has examined the Managing Director of the petitioner company and the respondent examined the General Manager (Finance) and as per the evidence on record a case for inability of payment of debt by the respondent company has been proved by the petitioner and therefore, this is a fit case where an advertisement has to be ordered as the petition has already been admitted. 31. Per contra. Counsel for the respondent company submits that even though a scheme for repayment was filed in this petition, it was without prejudice to its rights and since the petitioner did not accept the same, it was not given effect to. After filing of the scheme the petitioner filed a summary suit for recovery of Rs.1,20,00,000/-and while ordering leave to defend the suit, security by way of immovable property worth of Rs.1,48,00,000/-has been given by the respondent company. The suit was decreed in may 2008. No execution has been preferred by the petitioner and instead this petition is being prosecuted when there is an alternative remedy available which is an abuse of the process of the Court. Therefore, he submits that the petition lacks merits and ought to be dismissed. 32. In reply, Counsel for the petitioner has stated that the Original Suit was filed after filing of the company petition and the Judgment and Decree in the suit would not affect the relief claimed in this petition, the company petition has been admitted and advertisement was deferred and instead an enquiry was held and evidence has been recorded. That in the annual returns of the respondent company, the amount due to the petitioner both in principal and interest is shown. The respondent company did not reply to the statutory notice and did not produce any evidence to show that the company is doing well. The reliance placed by the Counsel for the respondent on Section 434(1)(b) is mis-placed, as the same can be applied after a decree is obtained. The respondent company did not reply to the statutory notice and did not produce any evidence to show that the company is doing well. The reliance placed by the Counsel for the respondent on Section 434(1)(b) is mis-placed, as the same can be applied after a decree is obtained. But in the instant case, despite there being a decree against the respondent company and that same not being appealed against and in the absence of payment of the petitioner’s dues, the case would squarely fall under the category of inability to pay debts. That the evidence of the respondent goes to show that the respondent company is not in a position to pay the debts of the petitioner company. Both sides have relied upon certain decisions which shall be adverted to. 33. From the material on record, it is not in dispute that the petitioner company had certain transactions with the respondent company and the petitioner had made supplies to Unit-I & II located at Bangalore Unit, there units at Srinagar, five unit at Ranibagh, 6 units and two specialized watch case division located at Bangalore. A sum of Rs.71,41,925/-was claimed by the petitioner company in the notice and the respondent company had admitted its liability to an extent of Rs.68,06,607/-after excluding the amount due from the Srinagar Unit of HMT Limited which is a separate entity called HMT Chinar Watches Limited. That another legal notice dated 6.4.2002 was issued by the petitioner company and after discussions held, proposal of for payment of the dues was promised by the respondent company, but the respondent company failed to keep up its promise. In its letter dated 4.5.2002 the respondent company admitted that petitioner company had maintained the supplies despite the respondent company failed to keep up its promise. The various units of the respondent company have confirmed their dues to the petitioner. In the meeting held on 8.10.2003 with a representative of the petitioner, respondent admitted its liability to the petitioner to an extent of Rs.76,84,000/-which figure however, was not verified by the Chief General Manager of the respondent company when it was brought to the notice of the respondent that there was certain omissions in the accounts. 34. According to PW.1, in view of the categorical admission by the respondent, respondent is liable to pay interest on delayed payments. 34. According to PW.1, in view of the categorical admission by the respondent, respondent is liable to pay interest on delayed payments. The respondent has a chronic working capital shortage, which has forced it to scale down its operations to uneconomical and unviable levels. All the payments made so far have been made without indicating specifically the invoices against which the payments were made but the said payments had been adjusted to the outstanding bills and invoices prior in date and the payment made by the respondent company have been given credit and they have not been included in the claim statement. According to PW.1 since the respondent is unable to pay its debts the relief prayed for by the petitioner ought to be granted. 35.In support of his evidence PW.1 has produced various purchase orders, invoices with regard to the various transactions made with the units of the respondent company, cheques issued by the respondent company and the endorsement of the Banks with regard to their dishonour and letters confirming the balance payment to be made to the petitioner and documents with regard to re-conciliation of accounts. Ex-P1 is the affidavit filed by PW.1 in examination-in-chief. Ex.P2 to P193 are invoices, purchase orders, vouchers and confirmation of balance. Ex.P94 is with regard to re-conciliation of accounts of the Tumkur Unit of the respondent company which has been confirmed and Ex.P195 to P214 are correspondence, dispatch vouchers, delivery challans fax message and the scheme filed in the High Court. 36. In his cross-examination. Pw.1 has stated that it started making supplies to the respondent company sometime in the year 1981-82 and after 2002 there have been no supplies. He has also admitted that certain payments have been received since 1982 in respect of which no claim has been made in the petition. He has also stated that as on 31.3.2003 the claim made in the company petition is Rs.89,85,249/-. He has also stated that the claim made in the company petition is the subject matter of the summary suit initiated in the Civil Court and leave to defend the same was granted to the respondent company subject to furnishing security to the suit amount and the claim made in the civil suit is about Rs.85,00,000/-for the Principal amount and Rs.32,00,000/-towards interest up to 31.3.2003 with further interest and cost. Though he has admitted that the respondent company is a Government of India Enterprise, according to PW-1 as per the Auditors, the respondent company is not a profit making company. He has further admitted that re-conciliation of accounts has been done, but no re-conciliation accounts have been produced and that no amounts have been received by the petitioner. 37. As opposed to this evidence, the General Manager (Finance) of the respondent company filed his evidence by way of examination-in-chief stating that the respondent company is neither commercially insolvent nor is incapable of paying its debts and neither the liability of the company exceed the assets of the company. That in O.S.No.15652/2003 filed by the petitioner before the Civil Court the respondent company has given unencumbered immovable property of the company by way of security and that the filing and pursuing the winding up petition is to prejudice the respondent company and is an abuse of process of law. The transaction in question do not stipulate any rate of interest and exorbitant rate of interest has been claimed. Since 1.4.2000 all the assets and liabilities pertaining to watches group of HMT Limited was transferred to the respondent company except the unit at Srinagar which has continue to do independent business. Since the year 1994 due to market conditions and slowdown in the economy, the business of the watch group became affected and the petitioner was directed to restrict his supplies and in fact it had made surplus supplies of watch parts which have remained unutilized since the manufacturing of watches have slow down due to market conditions. Some supplies made by the petitioner have been reject as they are not per the specifications and quality agreed which has put the respondent company to suffer hardship. That certain supplies were not made by the petitioners though purchase orders were taken and as a result the respondent had to out source the said supplies from the other agencies which has resulted in manufacturing delay and consequential losses. There are discrepancies with regard to the account maintained by the petitioner with the units of the respondent company and the petitioner has failed and neglected to come forward for re-conciliation of accounts. 38. There are discrepancies with regard to the account maintained by the petitioner with the units of the respondent company and the petitioner has failed and neglected to come forward for re-conciliation of accounts. 38. In his cross-examination RW.1 has stated that the claim of the petitioners company against the respondent company is approximately a crore and he has admitted that he is liable to pay the outstanding amounts to the petitioner, not as a lump sum but in installments. He had also stated that the Provident fund dues of HMT have been cleared and that though the company is running under a loss, it has submitted a revival plan to the Government of India and has also sold properties to discharge long term liabilities of the company. He has also stated that in the annual report showing names of SSI Units to whom the amounts are due, no provision for payment of interest in the said accounts have been made, though the accounts for the year 2005-06 reflect the outstanding, if any, to the petitioner. Though RW.1 has admitted that respondent is due to the petitioner more than a sum of Rs.1,16,00,000/-he has stated that the amount is subjected to re-conciliation and that he has also stated that the respondent company is in a position to pay its debts. The amount shown in the books of accounts for the year 2005-06 as outstanding to the petitioner is a subject matter of a civil suit. 39. From the above evidence what becomes apparent is the fact that the supplies that were made by the petitioner and which were accepted by the respondent company have been paid in part by the respondent and that in respect of the outstanding dues, a civil suit was filed which has also been partly decreed. 39. From the above evidence what becomes apparent is the fact that the supplies that were made by the petitioner and which were accepted by the respondent company have been paid in part by the respondent and that in respect of the outstanding dues, a civil suit was filed which has also been partly decreed. Though it has been stated at the bar that an appeal has been filed by the petitioner with regard to that portion of the claim which was not decreed by the Trial Court the respondent company has not filed any appeal challenging the Judgment and Decree of the Trial Court, nevertheless the fact remains that the claim made by the petitioner is not definite or ascertainable since there is a bonafide dispute raised by the respondent company with regard to the quality or quantity of supply and also this fact is supported by the Judgment and Decree of the Trial Court decreeing only a portion of the claim made by the petitioner. 40. From the evidence on record it is also apparent that though there was re-conciliation of the accounts, the accounts which were the subject matter of the re-conciliation were not produced in evidence. In fact the respondent company has admitted its dues to the petitioner, but the same are not ascertained. The respondent has also admitted that its ability to pay the dues of the petitioner in installments though not in a lump sum. There is also material on record with regard to rejection of a portion of the supply made by the petitioner and the petitioner has admitted that in respect of the supplies made, some amounts have been received though they are not the subject matter of this petition or the suit. It has also come in the evidence that though the respondent company was suffering loss and a revival plan has been submitted to the Central Government and that there is a scope for recovery with the aid of the Central Government which would ultimately assist in paying the outstanding dues of the respondent company including payment to be made to the petitioner. Though the company petition has been admitted by order dated 5.9.2005 and it is noted that the respondent has admitted its dues to the petitioner to an extent of Rs.61,23.608/-it disputes the correctness of the balance claimed. 41. Though the company petition has been admitted by order dated 5.9.2005 and it is noted that the respondent has admitted its dues to the petitioner to an extent of Rs.61,23.608/-it disputes the correctness of the balance claimed. 41. What is of significance is the fact that O.S.No.15652/2003 which was filed by the petitioner after the initiation of the petition for winding up has been decreed and in respect of the amount decreed, no steps have been initiated by the petitioner for realization of the decretal amount whereas the respondent company has offered security for the suit claim by way of immovable property. The fact that the entire suit claim has not been decreed by the Trial Court prima facie leads to the conclusion than the claim made by the petitioner either before the Trial Court or before this Court is not fully payable by the respondent company. When the respondent company has stated that a revival plan is under way and that the Government of India would come to its rescue and considering the fact that the claim of the petitioner has been crystallized by way of decree of the Trial Court only with regard to a portion and in the absence of any stay on the decree from any appellate forum as the respondent company has not filed any appeal against the same, the petitioner has an effective remedy of realizing the amounts due to it by executing the said decree while it has challenged for the balance not decreed in the suit by way of appeal pending before this Court, where the company has a bona fide dispute, the petitioner cannot be regarded as a creditor of the company for the purpose of winding up. Bona fide dispute implies the existence of the substantial ground for the dispute raised. Where the Court is satisfied that the debt upon which a petition to wind up is founded is hotly contested debt and also doubtful, then the Court cannot make a winding up order based upon such a debt. In fact, the Company Court has to go into the causes of refusal by the company to pay. Before drawing the presumption of inability, the Court is required to ascertain whether the company’s refusal is supported by a reasonable cause or a bona fide dispute where the dispute can only be adjudicated by a Trial Court in a Civil Court. In fact, the Company Court has to go into the causes of refusal by the company to pay. Before drawing the presumption of inability, the Court is required to ascertain whether the company’s refusal is supported by a reasonable cause or a bona fide dispute where the dispute can only be adjudicated by a Trial Court in a Civil Court. Under the above circumstances I do not find any good reason to order an advertisement of this petition. 42. It is also necessary to bear in mind the fact that a petition for winding up with a view to enforcing payment of a disputed debt is an abuse of the process of the Court. It cannot be gain said that an order admitting a winding up petition and resultant order for inviting claims from the respective parties by public notice, is in many cases from commercial point of view, the business point of view, from the marketability point of view and also taking into consideration the interest of the work force not less injurious than an order of winding up. Moreover, when a creditor is fully secured as in the case of the petitioner he cannot be allowed to contend that the company is unable to pay its debts as the secured creditor can always realize his securities to satisfy his debts. In the instant case immovable property has been given by way of security by the respondent company to the petitioner during the pendency of the suit at the time of allowing an application for leave to defend filed by the respondent. Though the said undertaking was given during the pendency of the suit proceeding, in the absence of any material being placed as to whether the said undertaking is in the nature of an attachment before Judgment and Decree being passed in the said suit, dispute the dismissal of this company petition, the respondent company cannot dispose of or transfer or part with the possession of the immovable property given by way of security until the Judgment and Decree attains finality without the leave of the Court. In view of the pendency of civil disputes between the parties as to the adjudication of the claim and liability, it cannot be inferred that a prima facie case has been made out that the respondent company is unable to pay its debts, as there is no ascertained debt. 43. In view of the pendency of civil disputes between the parties as to the adjudication of the claim and liability, it cannot be inferred that a prima facie case has been made out that the respondent company is unable to pay its debts, as there is no ascertained debt. 43. The machinery for winding up will not be allowed to be utilized merely as a means for realizing debts due from a company. In fact in AMALGAMATED COMMERCIAL TRADERS (P) LTD. vs KRISHNASWAMY (A.C.K) (1965) 35 Comp Cases 456 SC the Supreme Court has quoted with approval the following passage from Buckley on the Companies Acts by stating that if the debt was bonafide disputed, there cannot be ‘neglect to pay’ within the meaning of Section 434(1)(a) of the Companies Act. If there is no neglect, the deeming provision does not come into play and the ground of winding up, namely, that the company is unable to pay its debts is not substantiated. Therefore, winding up petition is not a legitimate means of seeking to enforce payment of a debt which is bonafide disputed by the company as in such a case the petition filed would be only to exercise pressure upon the company to settle the matter which would have to be dismissed by the Court. 44. It is also settled position in law that a winding up petition cannot be treated as an alternative to a suit or the legal process of the suit. Certain controversies as in the instant case can only be properly adjudicated in the proceedings other than winding up. In the present case admittedly, the claim of the petitioner has crystallized in the form of a decree although the said decree is challenged by the petitioner seeking enhancement in the claim amount and the appeal is pending before this Court. In fact the provisions of Sections 433 and 434 of the Companies Act do not vest any right in the petitioner but the cases have to be considered on their own merits and discretion in accordance with the established on their own merits and discretion in accordance with the established principles have to be exercised, keeping in mind the facts and circumstances of each case by the Court. 45. The circumstances in which winding up is refused even where debt is proved and inability to pay established are well recognized and constitute exceptions. 45. The circumstances in which winding up is refused even where debt is proved and inability to pay established are well recognized and constitute exceptions. Though it is often said that once the petitioning creditor shows the existence of debt and inability of the company to pay the debt, there is no general, indefinite, discretionary jurisdiction to refuse winding up. On the other hand, it has to be kept in mind that despite a presumption of commercial insolvency against a company there is scope for exercise of discretion to refuse winding up under exceptional circumstances such as where a debt is bonafide disputed by the company or the company has paid or tendered the petitioner’s payment of debts. In the instant case since there is a bonafide dispute regarding the debt, it is not a fit case to order winding up of the company. 46. I am supported in the above view by the following decisions: TATA IRON & STEEL CO. LIMITED vs MICRO FORGE (INDIA) LIMITED (2001) 104 Comp Cases 533, MANIPAL FINANCE CORPORATION LIMITED vs CRC CARRIER LIMITED (2002) I Comp LJ 71 (Bom); KCP LIMITED vs PRUDENTIAL SUGAR CORPORATION LIMITED (2005) 127 Comp Cases 66 (AP). TALWAR BROTHERS (P) LIMITED vs PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORTION LIMITED 12 DECIDED ON 13-5-1999 (P & 11). 47. The following decisions are however not applicable to the present case: In the case of P.Y.PARRY vs M/s. CYNOTECH BIOPRODUCTS PRIVATE LIMITED, BANGALORE & OTHERS (1999) 3 KLJ 68 it has been stated that where a dispute is raised by a company regarding amount of debt is not on substantial ground and is only a cloak to hide its inability to pay its debt, the creditor is prima facie entitled to an order of winding up of company. In the instant case since the Trail Court has not decreed the entire claim of the petitioner which is also a subject matter of this company petition in which the liability is not fully admitted, it cannot be said that the dispute with regard to the debt is not bonafide. In the instant case since the Trail Court has not decreed the entire claim of the petitioner which is also a subject matter of this company petition in which the liability is not fully admitted, it cannot be said that the dispute with regard to the debt is not bonafide. In the case of VIJAY INDUSTRIES vs NATL TECHNOLOGIES LIMITED (SUPRA), distinction has been made between a dispute as regards quantity or quality of supply or such other defences which are available to the purchaser and a case where no such disputes are raised but the question is only with regard to the rate of interest that would be applicable. In the instant case the former situation is applicable to the facts of the present case. 48. In the instant case, in view of the civil disputes between the parties and particularly when the petitioner is not satisfied with the decree passed in his favour and has even preferred an appeal before this Court and in the face of there being a security for the outstanding dues of the petitioner given by the respondent, I am of the view that the case falls under an exception and no discretion can be exercised in favour of the petitioner under Section 433(e) of the Act. 49. It is also necessary to note that the respondent company is a subsidiary of a public sector undertaking which employs more than 3000 personnel having a net worth much more than its liabilities and therefore causing advertisement of the petition would not only affect the production and business of the company, but would cause impairment to its reputation since the respondent company has the potential to earn profits in view of the revival plan submitted by it to the Central Government which is evident from the deposition of RW.1. 50. As far as Section 434 of the Act is concerned which deals with a just and equitable ground for winding up of the company is concerned, it has to be observed that the words just and equitable are of wide ambit and can only be explained by illustrations. 50. As far as Section 434 of the Act is concerned which deals with a just and equitable ground for winding up of the company is concerned, it has to be observed that the words just and equitable are of wide ambit and can only be explained by illustrations. Though the just and equitable clauses can be pressed into service for winding up of a company where substratum of the company has gone or where the company is formed for the purpose of fraud or where full investigation is necessary or where there is a complete deadlock in the management of the company on account of internal strife, none of the above situations exists in the instant case and neither has the petition made out a case on this ground. On the other hand, what is of significance is that the respondent is a company in the realm of public sector coming under the Ministry of Heavy Industries, Government of India supported by the Central Government and having a huge work force and was one of the top public sector companies once upon a time. Though presently the company is in a difficult financial situation, would not mean that it is just and equitable to wind up the said company. 51. For the aforesaid reasons, the company petition is dismissed. Parties to bear their own costs.