Judgment : In this petition under Sections 433(3) & (f) and 439[c] of the Companies Act, 1956 (for short, 'the Act') and Rule 95 of the Companies (Court) Rules, 1959, the Company incorporated under the Act namely Inox Air Products Limited (for short, 'the petitioner-Company') prays that Kalyani Gerdau Steels Limited (formerly known as SJK Steel Plant Limited) (for short, 'the respondent-Company'), a Company incorporated under the Act, be wound-up as it is unable to pay its debts. 2. The case of the petitioner-Company is that the petitioner-Company has entered into a supply agreement with the respondent-Company with regard to supply of gas continuously without any interruption and terms of supply agreement were reduced into writing on 04.09.2003. The recitals of the supply agreement are self-explanatory. Pursuant to the said terms of supply agreement, the petitioner-Company installed and erected Cryogenic Air Separation Plant/s at the plant of the respondent-Company. As the respondent/Company defaulted to clear the outstanding dues for the supplies made, the petitioner-Company filed O.S.No.132 of 2006 on the file of II Additional Chief Judge, City Civil Courts, Hyderabad, on 19.04.2006 for recovery of money. The petitioner-Company secured certain interim orders and thereupon, the respondent-Company filed CRP No.6582 of 2006 aggrieved by an order dated 15.09.2006 passed in I.A.No.2824 of 2006 being an application filed under Order 8, Rule (1) of the Arbitration and Conciliation Act, 1996, seeking reference to the arbitrator to resolve the disputes between the parties arising in the suit. Ultimately, the respondent-Company paid a sum of Rs.9,11,00,000/- as full and final settlement of the dues and accordingly, the suit filed by the petitioner-Company against the respondent-Company ended in dismissal as withdrawn. A memorandum of understanding, dated 15.01.2008, came to be entered into between the two companies. As per the terms of the memorandum of understanding, the original supply agreement, dated 04.09.2003, came to be amended/revised wherein the respondent-Company agreed to pay basic facility charge, a sum of Rs.2,01,915/- per day from 08.04.2008 to 31.07.2010. As per the terms of the agreement of modification, the respondent-Company during the currency of the agreement would not be entitled to purchase the required gas from any other company. Since the respondent-Company failed to pay the basic facility charges, the same came to be accumulated to an extent of Rs.3,91,69,885/-as on 31.03.2009. As per the terms of the agreement of modification, the respondent-Company during the currency of the agreement would not be entitled to purchase the required gas from any other company. Since the respondent-Company failed to pay the basic facility charges, the same came to be accumulated to an extent of Rs.3,91,69,885/-as on 31.03.2009. The petitioner Company issued a statutory notice under Section 434 of the Act demanding payment of the afore said amount. The respondent-Company, after receipt of the notice, neither paid the money nor gave any reply to the notice. When the respondent- Company has chosen to place orders for supply of gas from third parties, the petitioner-Company filed an application in the High Court of Judicature of Bombay under Section 9 of the Arbitration and Conciliation Act, 1996, to enforce the negative covenant in the agreement of modification. The respondent-Company filed counter in the said Arbitration Petition No.170 of 2009. The respondent-Company stated in the counter that due to economic slowdown and other factors, it was constrained to shut down manufacturing activities in the steel melting shop from September, 2008 to December, 2008 and once again from April, 2009. The petitioner-Company supplied the gas to the respondent-Company and against the said supplies, Debit Notes and/or its Invoices have been raised on the respondent-Company with effect from 08.04.2008. The aggregate amount thus payable by the respondent-Company to the petitioner-Company comes to Rs.3,91,69,885/- along with interest @ 15.25% upto 18.01.2009 and @ 14.75% from 19.01.2009 to 31.03.2009. As the respondent-Company failed and neglected to pay the outstanding amount of Rs.3,91,69,885/-along with interest, the respondent- Company deserves to be wound-up under the Companies Act, 1956. 3. Notice to the respondent has been ordered on 16.07.2009. The respondent-Company entered appearance through a counsel and filed counter-affidavit. 4. One J.Visvanathan, Vice President, Finance, of the respondent-Company has sworn to the counter-affidavit. Existence of supply agreement and filing of O.S.No.132 of 2006 on the file of II Additional Chief Judge, City Civil Courts, Hyderabad, and subsequent dismissal of the suit as withdrawn are not disputed. The respondent-Company disputed its liability to pay basic facility charges for the shutdown period. One J.Visvanathan, Vice President, Finance, of the respondent-Company has sworn to the counter-affidavit. Existence of supply agreement and filing of O.S.No.132 of 2006 on the file of II Additional Chief Judge, City Civil Courts, Hyderabad, and subsequent dismissal of the suit as withdrawn are not disputed. The respondent-Company disputed its liability to pay basic facility charges for the shutdown period. It is also stated in the counter-affidavit that arbitration application filed by the petitioner-Company ended in dismissal and thereupon, the petitioner-Company filed an appeal being Appeal No.198 of 2009, wherein a consent order came to be passed appointing the sole arbitrator namely Sri Justice B.N.Srikrishna on 26.03.2009. Thereafter, the petitioner-Company filed a claim statement before the arbitrator on 18.09.2009 claiming an amount of Rs.7,28,33,965/- with future interest along with other reliefs. The said amount is inclusive of basic facility charges under the supply agreement and/or modification agreement from 01.10.2008 to 31.08.2009 with interest. The said liability is denied by the respondent-Company before the sole arbitrator. Para.6 of the counter-affidavit needs to be noted and it is thus: "In reply to paras.20 to 28 of the Petition, it is submitted that the very liability to pay the Base Facility Charges under the Modification Agreement being disputed by the Respondent Company and the same being subject matter of Arbitration before the Learned Arbitrator Justice B.N.Srikrishna, it cannot be said that the Respondent has admitted the said liability. Hence, on that ground alone the company petition deserves to be dismissed. The allegation that despite the assurances, acceptance and commitments, the Respondent Company has deliberately failed and neglected to pay the outstanding amount due and that it is a legally enforceable debt are denied as incorrect and false. Even otherwise, after filing of the Company Petition by the Petitioner, the Petitioner has consented for appointment of Arbitrator for resolution of the disputes arising out of supply agreement dated 4.9.2003 and Modification Agreement dated 1.9.2008 and as such on that ground alone, the Petitioner cannot pursue the Company Petition. As stated herein above, the Respondent Company has not admitted the liability under the Modification Agreement for payment of Base Facility Charges. As stated herein above, the Respondent Company has not admitted the liability under the Modification Agreement for payment of Base Facility Charges. Even in the reply filed by the Respondent company in Arbitration Petition No.170/09, the Respondent has denied their liability and stated that it is the Petitioner who has breached the terms of the Agreement and as such the Petitioner cannot claim any amount, much less the amount of Rs.3,91,69,885/-as mentioned in para.26 of the Company petition. The allegation that the Company is not in a position to pay up the admitted debts to its creditors and that it is facing financial problems and are accumulating losses and also having indebted to various other creditors is denied as incorrect and false. As submitted hereinabove, the Respondent Company has denied their very liability to pay the amount claimed by the Petitioner. The Respondent Company is also undertaking the other activities but has only shut down the steel melting shop for which purpose the agreement was entered into with the Petitioner." 5. The petitioner-Company filed a reply affidavit. It is stated in the reply affidavit that the matter referred for adjudication before the learned Arbitrator Mr.Justice B.N.Srikrishna (Retd.) is no way connected with the present Company Petition. The petitioner-Company is entitled to receive payments from the respondent-Company for the shutdown period also in accordance with the Clause 5.2 of the Supply Agreement, which was reconfirmed in the modification agreement. As the respondent-Company has not cleared the pending bills, the petitioner Company was constrained to suspend supply of gases to the respondent-Company as specifically provided under Clause 10.7 of the Supply Agreement read with Clause 11 of the Modification Agreement. It is further stated in the reply affidavit that e-mail correspondence between the parties speaks of the demand of the petitioner-Company to clear the outstanding payments from October, 2008 to enable it to restart the plant. 6. Heard learned counsel appearing for the petitioner-Company and learned counsel appearing for the respondent-Company. 7. It is further stated in the reply affidavit that e-mail correspondence between the parties speaks of the demand of the petitioner-Company to clear the outstanding payments from October, 2008 to enable it to restart the plant. 6. Heard learned counsel appearing for the petitioner-Company and learned counsel appearing for the respondent-Company. 7. Learned counsel appearing for the petitioner submits that as per the supply agreement dated 4.9.2003 and modification agreement dated 01.9.2008, the respondent-company is bound to pay the basic facility charges and since the said charges are not paid, the same came to be accumulated to a tune of Rs.3,91,69,885/-and thereupon, a statutory notice came to be issued to the respondent company to pay the undisputed outstanding debt amount of Rs.3,91,69,885/-along with interest and also informing the respondent company that in default, initiation of proceedings for winding-up of the respondent company under Sections 433 and 434 of the Companies Act, 1956. He would also submit that the respondent company received the statutory notice, but it neither replied nor liquidated the liability and thus, it would amount to neglect on the part of the respondent company to pay the undisputed debt, in which case, the petition deserves to be admitted and further proceedings to be taken up. Learned counsel took me to the E-mail correspondence that went on between the petitioner company and respondent company right from 2nd September 2008 to 3rd January 2009. Much emphasis has been laid on E-mail message sent to the respondent company on 05.01.2009 which reads as hereunder:- "Dear Mr.Vishwanathan, This refers to you mail in reply, I do not find anything new in this proposal, we had discussed this over phone when you were in Pune. In any case this is not acceptable to us. You will appreciate that we had renegotiated the entire contract last January and had given substantial concessions. You will realize that these contracts can not be renegotiated every year. Please note that the plant is not for sale. We would not be able to restart the plant until the outstanding is cleared. Our Director and the CMD are based at our Mumbai office and should you desire, a meeting can be arranged with them at Mumbai". 8. You will realize that these contracts can not be renegotiated every year. Please note that the plant is not for sale. We would not be able to restart the plant until the outstanding is cleared. Our Director and the CMD are based at our Mumbai office and should you desire, a meeting can be arranged with them at Mumbai". 8. Learned counsel by referring the reply filed by the respondent company to the interim application moved by the petitioner company before the Arbitrator contends that the petitioner company had accumulated losses to a tune of Rs.357 crores as on 31.3.2009, which indicates high indebtedness of the petitioner company to various creditors. Much emphasis has been laid on para 4(j) of the reply filed by the respondent company before the sole Arbitrator, which reads as hereunder:- "The respondents who had accumulated losses to the tune of almost Rs.357 crores as on 31st March 2009 were compelled to shut their plant due to their poor financial condition. The claimants were informed of the same by the Respondents vide their email/letter dated September 2, 2008. The claimants were at al material times aware of the Force Majeure conditions that prevailed". 9. In support of his submissions, reliance has been placed on the decisions in M/s. Madhusudan Gordhandas & Co. vs. Madhu Woollen Industries Pvt. Ltd. 1971(3) Supreme Court Cases 632, Haryana Telecom Ltd. Vs. Sterlite Industries (India) Ltd. (1999) 5 Supreme Court Cases 688 Resham Singh & Co. P. Ltd. Vs. Daewoo Motors India Ltd. (2003)116 Company cases 529 and Ritika Private Limited Vs. Omaxe Construction Ltd. (2010) 153 Company cases 573 10. In Madhusudan Gordhandas & Co. vs.Madhu Woollen Industries Pvt. Ltd. ( 1 supra), the Supreme Court held that 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 that particular debt. The principles 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. 11. In Resham Singh & Co. The principles 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. 11. In Resham Singh & Co. P. Ltd. (3rd supra), it has been held by the Delhi High Court that the admission of the petition at its first hearing is possible because, by virtue of Section 434 of the Companies Act, a presumption of the indebt ness can be legitimately drawn by the Court where no reply to the Statutory notice is forthcoming. Paragraph 3 of the cited judgment needs to be noted and it is thus:- "3. I shall first deal with the consequences of the Respondent's failure to send a Reply to the Statutory Notice. The reliance of Mr. Valmiki Mehta, Learned Senior Advocate appearing for the Petitioner on the above-mentioned decisions of my Learned Sister Usha Mehra, J. is somewhat exaggerated. The decisions do not inexorably lead to the conclusion that Winding-up orders must invariably be passed where no response to a Statutory Notice has been made. From my understanding of the judgment my Learned Sister had taken the failure to reply to the notice as an important factor in determining whether a bona fide defense had been put forward. In the circumstances of both the cases, she preferred to view the defense as an afterthought and as being bereft bona fide. In CP 220/2001 entitled H.B. Stock Holdings Ltd. v. Associated Infotech Ltd. , I have favored the opinion that where no response had been made to the statutory notice the Respondent Company runs the risk of a winding-up petition being admitted for hearing at the threshold stage itself. Normally, the Company Judge consider it prudent in the first instance to issue notice to the Respondent so that its defense to the possible far-reaching and fatal winding-up orders can be considered. The admission of the Petition at its first hearing is possible because, by virtue of Section 434 of the Companies Act, a presumption of the indebtness can be legitimately drawn by the Court where no Reply to the statutory notice is forthcoming. The admission of the Petition at its first hearing is possible because, by virtue of Section 434 of the Companies Act, a presumption of the indebtness can be legitimately drawn by the Court where no Reply to the statutory notice is forthcoming. The risk of the admission of the Petition, as well as the appointment of a Provisional Liquidator is thus broodingly and ominously present in all those cases where the Respondent Company neglects to send any Reply to the winding-up notice. But this is as far as the danger extends. My attention has been justifiably drawn to the decision of the Single Judge of this Court in Vimco Ltd. v. Sidvink Properties (P) Ltd. 1996 86 Comp. Cas. 610, where it has been held by P.K. Bahri, J. that where a bona fide dispute had been shown to the Court, the question of applying the deeming provision should not automatically arise. I continue to be in respectful agreement with his view. Applying this ratio to the facts of the present case, without in any manner diluting or undermining the significance of the failure of the Respondent Company to respond to the statutory notice, this factor will be duly kept in perspective when the conspectus of facts is considered." 12. In Ritika Pvt. Ltd. Vs. Omaxe Construction Ltd. (4 supra), it has been held by the Delhi High Court that the remedy of arbitration is not an alternative to the initiation of winding up proceedings. 13. Learned counsel appearing for the respondent contends that payment of basic facility charges for shut down period is a dispute before the sole Arbitrator, and therefore, no adjudication can be taken up in summary procedure which the Company Court must follow. She would further submit that the petitioner company put a claim in respect of basic facility charge before the sole Arbitrator and thereupon, the respondent company disputed its liability to pay the basic facility charge for the shut down period and the said issue is yet to be adjudicated by the sole Arbitrator and in which case, no liability can be fastened in respect of the basic facility charge on the respondent company even before the issue being adjudicated by the sole Arbitrator. In a way, the contention of the learned counsel is that any amount due under basic facility charge for the shut down period cannot be treated as admitted debt since the dispute of liability is bonafide. She would also contend that the respondent company is operating blast furnace and what is stopped is a steel melting shop and therefore, it cannot be said that the respondent company closed its manufacturing activities. There is no rule that winding up orders must invariably be passed where no response to the statutory notice has been made. Since the closure of steel melting shop is because of breach of the terms of agreement by the petitioner company, the petitioner company cannot take advantage of its own default in making out a case for winding up the petitioner company by moving an application under Section 433(e) & (f) and 439 (c) of the Act. Learned counsel by referring the reply affidavit of the petitioner company filed before the sole Arbitrator contends that the respondent company specifically pleaded before the sole Arbitrator that the default has been committed by the petitioner company, and therefore, the petitioner cannot take advantage of its own wrong. Much emphasis has been laid on paragraphs 4(r) (s)(t) and 5 of the reply filed before the sole Arbitrator which read as hereunder:- "r) The respondents submit that it is pertinent to note that in the mean time the global recession continued so far as the steel industry was concerned. Finally due to the noncooperative attitude of the Claimants and as merely running a pig iron plant is not commercially viable for the long run, the respondents were compelled to shut down the pig iron plant in March, 2009. The losses of the Respondents had thereafter multiplied manifolds and the claimants are, inter alia, responsible for the same. All reasonable offers made by the Respondents to the claimants have been rejected by the Claimants. (s) In the meantime, inter alia, on account of the non cooperative attitude of the claimants and the persisting global recession, after convincing their bankers who have agreed to restructure the respondents debt and infuse further funds to make the plant commercially viable, the respondents have commenced Capex Programme as a part of the backward and forward integration process. This Capex Programme would take approximately 18 more months and the plant would remain shut for the said period. This Capex Programme would take approximately 18 more months and the plant would remain shut for the said period. (t) In the meantime, the Claimants have initiated the proceedings against the Respondents. However, the Respondents in good faith and in a proper business like manner, in order to avoid commercial hardship and losses to both the parties have been carrying out negotiations with the claimant. The respondents are doing so despite the Force Majeure condition which have arisen as stated herein above and despite the Respondents suffering losses on account of the claimants conduct. 5. In the aforesaid circumstances it is submitted that the application for interim reliefs to be rejected. The default has been committed by the Claimants and the claimants cannot take advantage of their own wrong. It is the claimants who have on one hand refused to supply gases (whilst the same was required) and on the other hand are claiming that the Respondents should not take gases from third parties (even though the gases which were taken were of very limited quantity only for the purposes of starting the blast furnace in January, 2009)." 13. To buttress her submissions, reliance has been placed on the following decisions:- 1) Shapoorji Pallonji Finance Ltd. Mumbai vs. Shree Rayalaseema Alkalies and Allied Chemicals Ltd., Hyderabad 2005(4) ALD 403 2) Aluminium Corporation of India Vs. L.R.C.Mills AIR 1970 ALLAHABAD 452 3) NATL Technologies Limited v. Vijay Industies 2005(5) ALD 70 (D.B) 4) IT C Ltd. Vs. Fomento Resorts and Hotels Ltd. [1991]70 Comp Cases 459 (Bom) 5) Gautam Electric Motors vs. Firm Shantilal and Brothers ILR 1969 DELHI 708 14. This petition has been filed under Section 433(e) and (f) and 439 (c) read with Rule 95 of the Companies (Court) Rles, 1959. Section 433 of the Companies Act reads as hereunder:- "433. Fomento Resorts and Hotels Ltd. [1991]70 Comp Cases 459 (Bom) 5) Gautam Electric Motors vs. Firm Shantilal and Brothers ILR 1969 DELHI 708 14. This petition has been filed under Section 433(e) and (f) and 439 (c) read with Rule 95 of the Companies (Court) Rles, 1959. Section 433 of the Companies Act reads as hereunder:- "433. A company may be wound up by the Court,- (a) if the company has, by special resolution, resolved that the company be wound up by the Tribunal; (b) if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting; (c) if the company does not commence its business within a year from its incorporation, or suspends its business for a whole year; (d) if the number of members is reduced, in the case of a public company, below seven, and in the case of a private company, below two; (e) if the company is unable to pay its debts; (f) if the Tribunal is of the opinion that it is just and equitable that the company should be wound up;" 15. It is well settled that the procedure under Section 433 of the Companies Act is summary. When the company produces prima facie proof of facts on which the defence depends and which is proabable and there is likelihood to succeed in point of law, it cannot be said that the company has neglected to pay within the meaning of Section 434(1)(a) of the Companies Act. Where the debt is in dispute, the Company Court should not proceed further unless it comes to the conclusion that the dispute in regard to the debt is not based on either tenable defence or not a bona fide denial of the debt. In the summary procedure, which the Company Court must follow, if the Court is satisfied, prima facie, that the defence raised in the circumstances of the case is bona fide and is likely to succeed in a civil Court, that would constitute sufficient reason for the Court to reject the petition, relegating parties to the Civil Court. Where a bona fide dispute has been shown to the Court, the question of applying deeming provision should not automatically arise. 16. Where a bona fide dispute has been shown to the Court, the question of applying deeming provision should not automatically arise. 16. Indisputably, an Arbitrator came to be appointed on a joint memo filed by the parties in Appeal No.198 of 2009 in Arbitration Petition No.170 of 2009 on the file of High Court of Judicature at Bombay. Copy of the order has been annexed to the counter filed by the respondent company. Para 8 of the relevant portion of the order passed in Appeal No.198 of 2009 needs to be noted and it is thus:- "......it would be appropriate to permit either of the parties to apply to the sole arbitrator for any interim relief as they deem fit and to order that while considering such a prayer the learned arbitrator would not bound by the impugned order. The parties may also be at liberty to raise all contentions before the sole arbitrator in addition to those raised before the learned single Judge". 17. The petitioner company submitted statement of claim before the sole Arbitrator. The petitioner company claimed basic facility charge for the shut down period of the respondent company. The respondent company disputed its liability with regard to payment of basic facility charges for the shut down period. This is an issue, which is required to be adjudicated by the sole Arbitrator. In the given facts and circumstances, I am of the view that the respondent company prima facie established that liability to pay basic facility charges for shut down period is a bona fide dispute raised by it. The liability of the respondent company to pay basic facility charge for the shut down period cannot be adjudicated by this Court in a proceeding, which is summary in nature. Hence, I find that the petitioner failed to make out prima facie case for admission of the petition. 18. Accordingly, the Company Petition is dismissed. No costs.