Judgment : This petition, seeking winding up of the respondent – Company, is filed under Section 433 (e) & (f) read with Section 439 of the Companies Act, 1956 (for short, ‘the Act’), and Rule 95 of the Companies (Court) Rules, 1959. 2. The petitioner is a subsidiary of State Bank of India (S.B.I.), and is a Company incorporated under the Act. On its amalgamation with S.B.I. Factors and Commercial Services Private Limited, a fresh certificate of incorporation was issued by the Registrar of Companies on 18.03.2010 certifying that the name of the petitioner-Company was changed to S.B.I. Global Factors Limited. The respondent is a Company incorporated under the Act on 8.2.1995, with its registered office at Hyderabad. The authorised share capital of the respondent – Company is Rs.90 crores divided into nine crore equity shares of Rs.10/-each. The main objects of the respondent – company is to generate, harness, develop, accumulate, distribute and supply electricity by setting up thermal power plants by use of liquid, gaseous or solid fuels for the purpose of light, heat, power, and for all other purposes for which electrical energy can be employed. 3. The petitioner accorded the respondent – Company a Trade Finance Facility by its sanction letter dated 21.12.2006 for a maximum amount of Rs.5 crores. The respondent – company accepted the terms and conditions thereof by a resolution of its Board of Directors dated 23.12.2006. Thereafter the respondent – company executed certain documents in favour of the petitioner for availing the said credit facility. At the respondent -Company’s request, a revised sanction letter dated 17.01.2007 was issued. It was made clear therein that, except to the extent of the amendment, the original terms and conditions remained in force. Thereafter another sanction letter dated 18.04.2007 was issued amending the terms and conditions of the earlier sanction letter for Import Factoring Facility. The credit facility sanctioned to the respondent – Company was realigned on 28.06.2007 as set out in the sanction letter dated 28.06.2007, which the respondent – company accepted by the resolution of its Board of Directors dated 02.07.2007. The credit facilities were modified and realigned thereafter also, and the modified terms and conditions were accepted by the respondent – company. At the request of the respondent – company, the facility was renewed by sanction letter dated 26.11.2010, and the limits were reduced to Rs.25 crores. The credit facilities were modified and realigned thereafter also, and the modified terms and conditions were accepted by the respondent – company. At the request of the respondent – company, the facility was renewed by sanction letter dated 26.11.2010, and the limits were reduced to Rs.25 crores. Despite reduction in the overall facility, the respondent – company did not make the payments due under the aforesaid facility. The cheques issued by the respondent – company, towards part payment of the dues, were also dishonoured on presentation, resulting in the petitioner filing a complaint under Section 142 read with 138 of the Negotiable Instruments Act, 1881 (N.I. Act). 4. The petitioner would assert that the respondent – company had acknowledged the debt from time to time, and the liability was subsisting as on date; a statutory notice was issued on 26.05.2011, which was received by the respondent – company’s Managing Director on 30.05.2011; and the respondent – company had replied denying their obligation. According to the petitioner, a sum of Rs.27,10,23,233.15 ps. was due and payable by the respondent – company as on 06.07.2011 with further interest at 18% per annum till the date of full and final payment. 5. In its counter affidavit, the respondent – company would admit that the petitioner had sanctioned a loan of Rs.5 crores under the factoring facility on 21.12.2006, and a further Rs.20 crores under the silent factoring facility on 11.09.2009. They would state that they were utilising the limits since the sanction of the facility, and had been regular in payment of the principal and interest till last year. They would state that they were utilising the limits since the sanction of the facility, and had been regular in payment of the principal and interest till last year. It is their case that, due to non-finalization of pending issues with the Andaman and Nicobar administration, there had been a huge gap in cash flow amounting to Rs.45 crores which had resulted in the facility turning irregular; they had several meetings with the officials of the petitioner on the possible closure of the facility; in the midst of such talks and negotiations, a notice under Section 138 of the N.I. Act as well as a statutory notice under Section 434 of the Act was issued though a compromise/settlement was being worked out; post dated cheques were issued, for the availed facility of Rs.5 crores, during 2010 – 2011 for repayment of the loan to the petitioner; in November, 2010 the petitioner had renewed the sanctioned facility for a further period of one year subject to reduction of a substantial part of the loan, in relation to the domestic factoring facility and reverse factoring facility, in different intervals, and to close the loan by the end of December, 2011; the respondent – company had brought to the notice of the petitioner that, with reference to renewal of the sanctioned facility, they had agreed to close the factoring facility limits of Rs.25 crores vide letter dated 08.12.2010; unfortunately due to liquidity pressures, they were unable to pay the installments of Rs.5 crores each due at the end of January -March, 2011; they had paid Rs.77,61,800/-vide cheque dated 03.05.2011 as part of the commitment given to the petitioner; in the meantime, the petitioner had presented the post dated cheque on 15.04.2011 to the bank for payment; the same was dishonoured due to insufficient funds; even though talks were still going on, and the transactions were being carried out, the petitioner has chosen to serve a notice under Section 138 of the N.I. Act which was an unnecessary and uncalled for strong arm tactic; the statutory notice for winding up dated 26.05.2011 was not applicable to the respondent which had a fully secure and substantial asset base; their solvency could not be doubted; they had submitted a proposal for securitisation of the term loan, and regularization of bank accounts on 04.06.2011, to S.B.I., Industrial Finance Branch, Kolkata; under the said proposal, at item No.4 (d), they had proposed to liquidate the loans of the petitioner which was to a tune of Rs.27 crores; they had also informed that Rs.50 crores was held up with the Andaman and Nicobar administration on account of withholding of dues and tariff revision linked to the project cost; S.B.I. did not provide any financial help to them; and, therefore, they had approached Global Trade Finance Limited, and had been provided with a loan for Rs.25 crores; they had never denied the liability due to the petitioner, and had made their best efforts to liquidate the liability; their net worth was Rs.242 crores as on 30.06.2011 which showed that the Company was solvent, and was in a position to clear the liability; they had brought to the notice of the petitioner that the project at Andaman and Nicobar would exceed Rs.80 crores; any amount received on these accounts would be released to the petitioner on priority basis for repayment of the outstanding amount of Rs.27 crores; the total amount of receivables greatly exceeded the amount to be paid to the petitioner; and winding up of the respondent -company, at this stage, was wholly unnecessary. 6. In their additional counter-affidavit, the respondent – company admits that the petitioner had sanctioned a loan of Rs.5 crores on 21.12.2006 under factoring facility, and Rs.20 crores on 11.09.2009 under silent factoring facility. It is their case that these loan facilities cannot be treated as a debt as the concept of reverse and silent factoring is such that all receivables are routed through the petitioner itself; the petitioner is well aware of the net worth of the respondent -company; the petitioner was also aware that, due to non-finalization of pending issues with the Andaman and Nicobar administration, there was a huge gap in cash flow amounting to Rs.45 crores which had resulted in the facility turning irregular; and they had several meetings with the officials of the petitioner on the possible closure of the facility. They would reiterate that they had brought to the notice of the petitioner that the project cost of the project at Andaman and Nicobar would exceed Rs.80 crores; if the said amount is released, it would be first utilised for repayment of the outstanding amount of Rs.27 crores due to the petitioner; and, despite these facts being brought to their notice, the petitioner has proceeded to file a petition for winding up. They would also contend that the amount liable to be paid is not a debt for the purpose of Section 433 of the Act, and it is a loan acquired under reverse and silent factoring facility; the respondent – company was running, and was fully operational; and hence could not be brought either under the Sick Industrial Companies (Special Provisions) Act, or under Sections 433, 434 and 439 of the Act. 7. It is evident from the statutory notice dated 26.05.2011 that a sum of Rs.26,56,21,205.23 ps. with further interest at 18% per annum was due and payable by the respondent – company to the petitioner in respect of the trade finance facility as on 26.05.2011, and the respondent – company was informed that, if the said sum with further interest was not paid within 21 days, the petitioner would exercise its discretion to file a winding up petition. The respondent – company was further informed that the notice be treated as a statutory notice under Sections 433 and 434 of the Act. The respondent – company was further informed that the notice be treated as a statutory notice under Sections 433 and 434 of the Act. In reply thereto the petitioner was informed by the respondent – Company, vide letter dated 10.06.2011, that they had been sanctioned a loan of Rs.5 crores under the factoring facility on 21.12.2006, and Rs.20 crores under the silent factoring facility on 11.09.2009; they had been utilising the limits ever since these facilities were sanctioned; due to non-finalization of pending issues with the Andaman and Nicobar administration there was a huge gap in cash flow of Rs.45 crores which had resulted in the facility turning irregular; due to liquidity pressures they were unable to pay the installment of Rs.5 crores each at the end of January-March, 2011; however they had paid Rs.77,61,800/-by cheque dated 03.05.2011 as part of their commitment; the cost of the project at Andaman and Nicobar would exceed Rs.80 crores; any amount received on this account in the near future would be released to the petitioner for repayment of the outstanding dues of Rs.27 crores; the respondent was a running Company with large number of talented employees joining periodically; and they would not fall within the ambit of Sections 433 and 434 of the Act. 8. The respondent does not dispute that they owe nearly Rs.27 crores to the petitioner. They merely contend that more than Rs.45 crores are the receivables from the Andaman and Nicobar administration where they are implementing a project whose cost exceeds Rs.80 crores; and, on receipt of money from the Andaman and Nicobar administration, the amounts so received would be paid to the petitioner. They would also assert that they are a running Company with a positive net worth, and it cannot be deemed that they are unable to pay their debts. They would dispute that the amount payable to the petitioner is a “debt”, as all receivables due and payable to the respondent is to be routed through the petitioner itself. 9. Section 433 (e) of the Act empowers the Court to direct winding up of a Company if it is unable to pay its debt. They would dispute that the amount payable to the petitioner is a “debt”, as all receivables due and payable to the respondent is to be routed through the petitioner itself. 9. Section 433 (e) of the Act empowers the Court to direct winding up of a Company if it is unable to pay its debt. Section 434 of the Act creates a legal fiction and, if the conditions stipulated in clauses (a) to (c) of sub-section (1) thereunder are satisfied, the legal fiction under Section 434 of the Act would require the Company to be deemed to be unable to pay its debts. Under Section 434 (1) (a) of the Act if a creditor, to whom the company is indebted a sum exceeding Rs.500/-, has served on the Company, by causing it to be delivered at its registered office by registered post, a demand requiring the Company to pay the sum due and the Company has, for three weeks thereafter, neglected to pay the sum or to secure or compound for it to the reasonable satisfaction of the creditor, then the Company must be deemed to be unable to pay its debts. 10. The fact that a notice was issued to the respondent, and delivered at its registered office by registered post demanding that a sum exceeding Rs.26 crores be paid within three weeks, is not in dispute. It is also not in dispute that the amount due and payable to the petitioner exceeds Rs.26.00 Crores, and the respondent neither paid the said amount within three weeks of receipt of the statutory notice nor did it secure or compound the sum due to the satisfaction of the petitioner. The legal fiction under Section 434 (1) (a) of the Act operates, and the respondent – Company must be deemed to unable to be pay its debts. The contention urged on behalf of the respondent – company, that what was payable by them to the petitioner is a loan and not a debt, is only be noted to be rejected. The Chambers Dictionary defines “debt” to mean “an amount owed by one person to another; a state of obligation or indebtedness”. A debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation, debitum in praesenti solvendum in futuro. The Chambers Dictionary defines “debt” to mean “an amount owed by one person to another; a state of obligation or indebtedness”. A debt is a sum of money which is now payable or will become payable in the future by reason of a present obligation, debitum in praesenti solvendum in futuro. (Web v. stenton ([1988] 11 QB 518);Kudremukh Iron Ore Co v. Kooky Roadways P. Ltd. (1990 (69) Com. Cases 178 (Kar) and Banchharam Majumdar v. Adyanath Bhattacharjee ([1909] ILR 36 Cal 936 [FB)). A liability depending upon a contingency is not a debt in praesenti or in futuro till the contingency has happened. But if there is a debt, the fact that the amount is to be ascertained does not make it any the less a debt if the liability is certain and what remains is only the quantification of the amount. (Kesoram Industries and Cotton Mills Ltd. v. CWT ( AIR 1966 SC 1370 ); Kudremukh Iron Ore Co). The meaning of the expression `debt' may take colour from the provisions of the concerned Act. It may have different shades of meaning. But the following definition is unanimously accepted: “a debt is a sum of money which is now payable or will become payable in future by reason of a present obligation”. The statutory definition of “debt”, contained in Section 434(1)(a), is a definite sum, viz., exceeding Rs. 500. (Newfinds (India) v. Vorion Chemicals and Distilleries Ltd. ((1976) 46 Company Cases 87 (Madras High Court)). It is not in dispute that the amount claimed by the petitioner, in the statutory notice issued by them on 26.05.2011, is for a sum exceeding Rs.26 crores. The respondent – company admits that they owe the said amount to the petitioner. Whatever be the nomenclature, whether it be a loan or a facility, once it is accepted that the amount is owed by the respondent – Company to the petitioner, it would amount to a “debt”. 11. A company can be wound up on a petition of a creditor only if its is unable to pay its just debts. The inability is indicated by its neglect to pay after a proper demand and the lapse of three weeks. Such neglect must be judged by the facts of each case. 11. A company can be wound up on a petition of a creditor only if its is unable to pay its just debts. The inability is indicated by its neglect to pay after a proper demand and the lapse of three weeks. Such neglect must be judged by the facts of each case. Where the defence is that the debt is disputed all that the court has to see is whether the dispute, on the face of it, is genuine or merely a cloak for the company's real inability to pay just debts (British India General Insurance Co. Ltd., In re ((1970) 40 Company Cases 554 (Bombay High Court))). It is not enough that the company has the ability to pay the debt. If the company chooses not to pay a particular debt, the court would have no choice but to pass an order of winding up. (Madhusudan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd., ( (1972) 2 SCR 201 ); Shantilal Khushaldas and Brothers (P) Ltd., In re Smt. ManulabenBapalalGosalia v. ShantilalKhushaldas and Brothers (P) Ltd. ((1991) 70 Company Cases 195 (Bombay High Court))). If the debt is not disputed on some substantial ground, the court may decide it on the petition and make the order. (Amalgamated Commercial Traders (P) Ltd. v. A.C.K. Krishnaswami ((1965) 35 Company Cases 456 (SC)); Buckley on the Companies Acts, 13th edition, page 451). 12. In order to determine whether there is a bonafide dispute or not, regarding the debt due, it is necessary to find out whether the dispute raised by the company is a real and substantial one or it is a mere cover or it is an empty dispute with a view to cover up its real inability. (B.Viswanathan v. Seshasayee Paper and Boards Ltd. ((1992) 73 Comp.Cases 136 (Mad))).Whether the disputes which are raised or sought to be raised are bonafide or not, and whether the same have been manufactured for the purpose of resisting a case for winding up of the company, will have to be considered and determined by the court on the basis of the facts of each particular case and on the basis of the material that may be available to the court at the time the court is called upon to decide the question. (Ofu Lynx Ltd. v. Simon Carves India Ltd. ([1971] 41 Comp Cas 174); B. Viswanathan). 13. (Ofu Lynx Ltd. v. Simon Carves India Ltd. ([1971] 41 Comp Cas 174); B. Viswanathan). 13. A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere wrangle. If the creditor's debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of the winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of a winding up petition as a means of forcing the company to pay a bona fide disputed debt. (Iba Health (India) Private Limited v. Info-Drive Systems Sdn. Bhd ((2010) 10 SCC 553)). As the respondent – company did not pay the debt due within three weeks of receipt of the statutory notice, their failure to pay the said “debt” amounts to “neglect” to pay resulting in the legal fiction under Section 434 (1) (a) of the Act being attracted. Once the legal fiction comes into operation, and there is no dispute much less a bona fide dispute regarding the debt due from the respondent – Company to the petitioner, it matters little that the net worth of the respondent – Company is positive. An examination of the company's solvency may be a useful aid in determining whether the refusal to pay the debt is a result of a bonafide dispute as to the liability or whether it reflects an inability to pay. If there is no dispute as to the company's liability, it is difficult to hold that the company should be able to pay its debt merely by proving that it is able to pay the debts. If the debt is an undisputedly owing, then it should be paid. If the company refuses to pay, without good reason, it should not be able to avoid the statutory demand by proving, at the statutory demand stage, that it is solvent. If the debt is an undisputedly owing, then it should be paid. If the company refuses to pay, without good reason, it should not be able to avoid the statutory demand by proving, at the statutory demand stage, that it is solvent. In other words, commercial solvency can be seen as relevant as to whether there was a dispute as to the debt, not as a ground in itself, that means it cannot be characterized as a stand alone ground. (Iba Health (India) Private Limited). Once the legal fiction under Section 434 (1) (a) of the Act operates, and there is no bona fide dispute regarding the debt due, the necessary consequence is that the respondent – Company must be deemed to be unable to pay its debt necessitating, ordinarily, the Company Petition, filed for winding up, being admitted. 14. The Company Petition is Admitted. 15. Let advertisement of admission of the Company Petition, as contemplated under Rule 99 read with Rule 24 of the Companies (Court) Rules, 1959, be made in Form – 48, in “Andhra Bhoomi” (Telugu Daily Newspaper) and “Deccan Chronicle” (English Daily Newspaper) Hyderabad editions within 21 days from today. 16. For filing proof of publication, list after four weeks.