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2015 DIGILAW 55 (AP)

D. Mallamma v. Amsri Constructions P. Ltd.

2015-02-04

A.RAJASEKHAR REDDY

body2015
JUDGMENT : A. Rajasekhar Reddy, J. 1. This company petition is filed under sections 433(e) and (f), 434 and 439 of the Companies Act, 1956, seeking winding up of the respondent-company and for appointment of the official liquidator as the provisional liquidator of the respondent-company. The case of the petitioners is that petitioners Nos. 2 to 6 are absolute owners, possessors and joint title holders of land admeasuring Ac. 5.09 guntas forming part of Survey Nos. 123, 124, 125, 126, 136 and 137 of Nanakramaguda village, Serilingampally Mandal, Ranga Reddy District along with their father D. Venkat Reddy on equal shares (each holding one-sixth share admeasuring 0.34.8 guntas). The father of petitioners Nos. 2 to 6 died intestate on April 26, 2009 and the land falling to the extent of his share devolved on the first petitioner his wife and other petitioners and petitioners Nos. 2 to 6 and his four daughters whereby each of them became entitled to 0.34.8 guntas. The respondent is a private limited company incorporated under the provisions of the Companies Act and carrying on business of real estate development. It is stated that the respondent-company was desirous of developing the land belonging to the petitioners for constructing thereon two commercial buildings with a total built up area of 5,50,000 square feet for the IT park, software commercial space, Shopping Malls, Studio apartments, etc. (the project). The petitioners along with their deceased father executed a Development Agreement-cum-General Power of Attorney (hereinafter referred to as "DAGPA") on July 7, 2006, in favour of the respondent-company registered vide Document No. 14345 of 2006 in the office of Sub-Registrar-II, Ranga Reddy District for developing the project on the land in a phased manner as block-A comprising of 3,00,000 square feet built up area and block-B comprising of 2,50,000 square feet built up area in accordance with the terms and conditions as agreed under the DAGPA and the respondent had not adhered to any of the terms and conditions agreed thereunder including getting the plan sanctioned in relation to construction of block-A within four months from the date of execution of DAGPA by November 7, 2006. The respondent submitted application on February 5, 2008, for approval of the building plans and the respondent was also asked to pay an amount of Rs. 90,02,675 towards construction fee and development charges. The respondent submitted application on February 5, 2008, for approval of the building plans and the respondent was also asked to pay an amount of Rs. 90,02,675 towards construction fee and development charges. The respondent started excavation work in the land pursuant to the letter dated November 17, 2008, issued by the Commissioner and Special Officer, Town Planning Section, GHMC. Despite the above letter, the respondent has neither proceeded to make the payments nor began the construction of the project or any part thereof and though the respondent agreed to complete the construction work and make available the constructed areas for occupation within a period of 30 months from the date of obtaining permissions for the respective blocks and on its failure to do so, the respondent agreed under clause 20 at page 17 of DAGPA to pay an amount of Rs. 20 per square feet per month, computed on the extent falling to the share of the petitioners, for the first six months of the default period and should continue to pay an enhanced amount of Rs. 40 per square feet per month computed on the extent falling to the share of the petitioners in the project. It is further stated that the obligation of the respondent to construct and complete block-A got triggered when plans were approved, in principle, by the Commissioner and Special Officer, Town Planning Section, GHMC and as the respondent failed to meet the timelines for construction and completion as agreed under DAGPA thereby delaying the handing over the constructed space falling to the share of the petitioners. Thus, the respondent became liable to pay penalty to the petitioners as agreed under DAGPA. 2. The petitioners further stated that the respondent-company quoting market conditions, requested the petitioner to allow it to change the nature of the project into multi-storied residential apartments and assured the petitioners that the construction will be completed if the petitioners agreed to change the nature of the project and simultaneously to execute supplementary development agreement for the agreed changes and that the petitioners have expressed to extend their full co-operation to the respondent for completion of the project and the petitioners attended all meetings called for in that regard. It is further stated that on getting the records submitted by the respondent to the Registrar of Companies, the petitioners learnt that the respondent-company has no financial ability to proceed with the construction and completion of the project and that the respondent has diverted certain funds to its other group entities and has not commenced any business operations under the present company's name and falsely suggesting to the petitioners that the respondent are in negotiations with the investors and will do the project once the negotiations are finalised with the new investors. The annual report pertaining to the year 2011-12 filed with Form 23AC before the Registrar of Companies shows that the respondent-company has not commenced any business operations under the present company's name. It is further stated that clause 20 of the DAGPA gets activated by November 17, 2008 and the respondent never disputed the amounts payable by it/or explicitly denied or refused to make the payment, has been delaying the payments without assigning any justifiable reason. Number of e-mails were also exchanged and the respondent assured that the project will be completed within time. The respondents are obligated to pay the penalty as per clause 20 of the DAGPA to a tune of Rs. 31,68,00,000 with interest thereon at Rs. 16,56,46,080. Hence, the respondent-company is liable to pay an amount of Rs. 43,34,46,080 in respect of Block-A and Rs. 32,58,18,240 in respect of Block-B to the petitioners. The petitioners issued statutory legal notice on March 26, 2014, to the respondent-company to its registered office address and its promoters-cum-directors under section 433(e) and (f) read with sections 434 and 439 of the Companies Act, 1956, to make payment of outstanding penalty amounts stated supra along with accrued interest per annum. It is further stated that the legal notice sent to Uppu Srinivas was received by him on March 29, 2014 and the notice sent to Patnam Amrtu Prasad was returned with endorsement "Left" and the legal notice sent to the respondent, i.e., the company was returned with the endorsement "not claimed, return to sender". Since the respondent has not complied with the statutory notice issued under section 434 of the Companies Act, the present company petition is filed. 3. Since the respondent has not complied with the statutory notice issued under section 434 of the Companies Act, the present company petition is filed. 3. The respondent-company filed its counter admitting the execution of DAGPA and stated that various terms, conditions and clauses incorporated and agreed to by the respondent under the DAGPA including the one in paragraph 13 will be effective, valid enforceable upon the petitioners establishing that their representations, assurances, declarations and statements concerning their exclusive rights and absolute title. It is stated that at the time of executing the DAGPA, there was no access to the land from the main road except a tank-bund admeasuring about 10 feet width on the North Eastern corner of the land and the petitioners were informed that they entered into the agreement with the neighbouring land owners and had almost finalised purchasing the adjoining land measuring 1,646 square yards in Sy. No. 135, but for completion of the formalities of payment of sale consideration and registration of sale deed. The petitioners are informed that they were planning to invest the security deposit secured from the respondent under the DAGPA as sale consideration for the proposed acquisition of adjoining land in Sy. No. 135 and the land owners thereby assured to provide a 60 feet wide access road to the project land through the land in Sy. No. 135 by executing a formal supplementary agreement to the DAGPA soon after completion of the purchase formalities of the adjoining access land and the respondent believed the representations of the petitioners to be true and had entered into DAGPA with the land owners and paid a sum of Rs. 25.00,000 towards security deposit under DAGPA to them. The purchase of access land was concluded by the petitioners on July 22, 2006, only after execution of DAGPA with the respondent vide registered sale deed bearing No. 15112 of 2006 and the petitioners entered into a supplementary agreement with the respondent on January 19, 2007, conferring access rights to the project land through the access land and also have made necessary arrangements to secure financial help and identified an investor, viz., M/s. Indiareit Fund Scheme-I and secured permission of the petitioners to include the said investor as co-promoter to the project and also to make necessary consequential amendments to the DAGPA. It is also stated that the respondents after clearing the boulders and levelling the land, commenced excavation work in the land investing huge amounts and also preferred applications before the authorities for securing no objection certificate, building permission and also applied for obtaining change of land use with regard to extent of about Ac. 2.29 guntas of land, which includes the access land in Sy. No. 135(P) and submitted the relevant documents before the authorities and also requested the petitioners to submit ownership documents relating to Sy. No. 135 for the purpose of clearance. The respondent also requested for execution of registered supplementary agreement through DAGPA and since there is no proper access to the land, the process of development is slowed down and the petitioners have suppressed about existence of a civil dispute filed by the maternal aunts of petitioners Nos. 2 to 6 in O.S. No. 537 of 2006 on the file of II Additional District Judge, Ranga Reddy District, challenging the title of the petitioners, but the same was settled and relinquishment deed dated September 12, 2007, was obtained by the petitioners from respondents Nos. 2 to 6 therein and the order of dismissal of suit on July 20, 2007. It is further stated that on the request and demands of the petitioners, the respondent has parted with additional amounts and paid a sum of Rs. 2,00,00,000 towards refundable/adjustable deposit to them as evidenced by the supplementary agreement executed by the petitioners on October 21, 2007 and that the stipulation of time under clause 13 of DAGPA has no application due to want of title and due to suppression of material facts and deliberate misrepresentation made by the petitioners under DAGPA. Though it is stated that the land is free from patent title defects, apart from pendency of O.S. No. 537 of 2006, another suit in O.S. No. 396 of 2007 is pending in respect of the land and the respondent and its directors were impleaded as defendants in the said suit and the said suit is still pending. Though it is stated that the land is free from patent title defects, apart from pendency of O.S. No. 537 of 2006, another suit in O.S. No. 396 of 2007 is pending in respect of the land and the respondent and its directors were impleaded as defendants in the said suit and the said suit is still pending. In view of existence of the above litigations instituted by third parties and the relatives of the petitioners challenging the very title and possession of the petitioners over the land has resulted in slowing down the process of implementation of the project by the respondent and that the petitioners have not conferred the legal and development rights upon the respondent over the access land in Sy. No. 135. It is further stated that instead of providing access road, the petitioners asking the respondent to expedite the implementation of the proposed 45 meters wide road as notified by the Government under G.O. Ms. No. 538, dated October 29, 2001, to be laid through the project land on its western side connecting the existing main road through the land developed by Mantri Developers. It is further stated that though the G.O. was passed in the year 2001 itself, as there was delay in the land acquisition proceedings, the same could not be implemented immediately. It is also stated that the site meant for development of block-B in the project was filled up with excess flow of water emanated from the Medikunta lake overflow and the petitioners have also permitted neighbouring construction projects to erect temporary sheds for labourers and storing building material in the block-A of the project land rendering the development of the project land difficult. In such circumstances, the respondent and its investor could not put in further investments into the project where there is no positive development or initiations forthcoming from the petitioners to better the situation, and therefore, having invested huge amounts to the tune of about Rs. 12 crores in the project, the respondent realised that it is not viable to keep their funds idle in the respondent-company and has divested the funds into other ongoing projects handled by the respondent group companies. 4. 12 crores in the project, the respondent realised that it is not viable to keep their funds idle in the respondent-company and has divested the funds into other ongoing projects handled by the respondent group companies. 4. The respondent further stated that it commenced the works of clearing the shrubs, bushes and trees, removing the existing rocks and boulders, levelling the project land, so as to make it fit to carryout survey for the purpose of preparing project plans, etc., even before issuance of letter dated November 17/19, 2008 and the respondent could not invest the said huge amount to the tune of about Rs. 90,02,675 into the project and as such, could not comply with the request of GHMC demand for approval of building permission. It is further stated that mere issuance of letter dated November 19, 2008, will not amount to approval of plans, per se, so as to trigger the liability oil the part of the respondent. It is further stated that the petitioners failed to resolve and settle the pending litigation in O.S. No. 99 of 2012 and in the counter and written statement filed by them in the above suit, they stated about the efforts of the respondent involved in execution of the project and the hardship they may be caused to the respondent. It is further stated that there is no jurisdiction on the part of the petitioners to bypass the jurisdiction of the arbitrator and to invoke the jurisdiction of this court under the Companies Act. It is further stated that by mistake, it was mentioned in the reply notice that the building permission was also obtained from the concerned authorities. It is also stated that there is serious dispute between the parties in respect of the liability projected in the petition and at no point of time, the respondent has admitted its liability and that if the petition is admitted and winding up order is passed, the respondent-company and its various stakeholders apart from the investors, will be put to irreparable loss and hardship, and as such, the petitioners approached the court with unclean hands and hence, the respondent sought for dismissal of the company petition. 5. 5. The petitioners filed reply affidavit contending that the respondent has entered into DAGPA knowing every detail on the title pursuant to conducting proper title verification and satisfying itself on the title to the property and the same is reflected in clause 20(a) of the DAGPA. It is also stated that, when once the respondent satisfied with the title of the petitioners, there is no need for the petitioners to further establish their title. It is further stated that the respondent had laid a black top road to be in compliance with the new building rules in relation to the access road to the properly for securing the building permissions and this road was later developed by Mantri Developers into a well laid 150 feet wide BT road and thus, the property has an excellent approach road well laid and existing on the ground. It is further stated that had the road access to the property been a concern, the respondent would not have entered into a DAGPA in the first instance, it is not the case as can be noted from clause 19 of the DAGPA and the respondent for the first time brought this access to the property as a concern before the court, which is absolutely frivolous and vague. It is further stated that the right to use 60 feet access road to the property was an additional requirement placed by the developer which was agreed by the petitioners on the condition that the developer pays an extra consideration and such an agreement shall automatically stand cancelled on the Government or local body providing an alternate approach road and as the Hyderabad Metropolitan Development Authority notified 150 feet road, the said arrangement between the parties stood cancelled. It is further stated that the respondent could not have filed any application in respect of land in Survey No. 135, which does not form part of DAGPA and the respondent did not secure any specific rights or powers over the same. It is further stated that the respondent could not have filed any application in respect of land in Survey No. 135, which does not form part of DAGPA and the respondent did not secure any specific rights or powers over the same. It is further stated that in case the partition suit filed by the petitioners is decreed, the petitioners could have offered the land to Parvathamma in other survey numbers without affecting the rights of the respondent or other third parties under the agreements and that the petitioners are not parties to the litigation in O.S. No. 396 of 2007 and that the respondent filed written statements admitting that the land belongs to the petitioners and their fathers and the counter filed in O.S. No. 396 of 2007 show that the respondent has admitted the title of the respondent. 6. Learned counsel for the petitioners contends that as per annual report for the year 2011-12 filed along with Form 23AC before the Registrar of Companies, the respondent-company has not commenced its business during the financial year ending March 31, 2012, as such the company is liable to be wound up under section 433(c) of the Companies Act. She contends that access to Block-B and its surrounding land shall be provided at all times from surrounding land of Block-A and till the Government provides an alternative access to Block-B and its surrounding land shown in the plan, which shows that the access to the land is available as on the date of execution of DAGPA. She also contends that the map annexed to DAGPA provided access land which is clearly mentioned in DAGPA. She also relied on clause 13 of the DAGPA contending that as per DAGPA the respondent is bound to obtain necessary approvals from the GHMC, Cyber Development Authority and statutory authorities within six months from the date of DAGPA and the same is extendable to another two months and in the event the respondent failing to respond the approvals within the said time, the petitioners have right to cancel the same, but in spite of several laches on the part of the respondent, the petitioners have not cancelled DAGPA. She further contends that since the respondent failed to comply with clause 20(8), the respondent is bound to pay penalty as envisaged in the said clause. She further contends that since the respondent failed to comply with clause 20(8), the respondent is bound to pay penalty as envisaged in the said clause. She also contends that though statutory notice is issued under section 434 of the Companies Act and served on the respondent-company, the same is not replied within 21 days and a presumption arises under section 434 of the Companies Act that the respondent-company is unable to pay its admitted debts. She also contends that the contents of the reply notice are inconsistent with the averments in the counter affidavit filed by the respondent. She further contends that as per the balance-sheet of the respondent-company, the profit of the company was shown as Rs. 2,97,389 and the company's financial position is not sound, as such, the respondent-company is commercially insolvent and the liability is more than the reserves. She also contends that once the respondent is liable to pay the admitted debt as per clause 20(1) of the DAGPA and having received the notice, neglected to pay the same and the defence put up is only for the purpose of company petition, and hence, the company petition is liable to be admitted. She further contends that the petitioners are not parties to O.S. No. 396 of 2007 and that when the respondent admitted the title of the petitioners, they cannot dispute the title and the defence taken by the respondent-company is invented for the purpose of the company petition. She further contends that even as per the supplementary agreement, the respondent was unable to proceed with the work due to other reasons, but not the reasons set up in the company petition. When once the defence set up by the respondent is not bona fide, the company petition has to be admitted. She further contends that even as per the supplementary agreement, the respondent was unable to proceed with the work due to other reasons, but not the reasons set up in the company petition. When once the defence set up by the respondent is not bona fide, the company petition has to be admitted. In support of her contentions, she relied on Bharat Bijlee Ltd. v. National Industrial Development Corporation, ILR 2002 (2) Delhi 243, Biraj Kumar Barua v. Barua and Barua Drugs P. Ltd. [2003] 114 Comp Cas 191 (Gauhati); [2003] 2 GLR 482, Karnataka Rubbers Ltd. v. Karnataka State Financial Corporation, AIR 1999 Karn 254 : [2000] 101 Comp Cas 421 (Karn), SBI Global Factors Ltd. v. Suryachakra Power Corporation Ltd. [2012] 171 Comp Cas 264 (AP), Jindal Paper and Plastics Ltd. v. Kedia Distilleries Ltd. [2004] 2 Comp LJ 139 (MP), JMC Products (India) Ltd. v. Bhagyanagar Infrastructure Ltd. (Order in C.P. No. 37 of 2011, dated October 5, 2012 (AP)), Enernorth Industries Inc. v. VBC Ferro Alloys Ltd. [2006] 133 Comp Cas 130 (AP) and Vijay Industries v. NATL Technologies Ltd. [2009] 147 Comp Cas 490 (SC) : ATR 2009 SC 1695. 7. On the other hand, learned counsel for the respondent submits that the enquiry in the proceedings for winding up of the company is summary in nature and this court cannot conduct a roving enquiry for deciding the serious disputes arising out of contractual obligations. He contends that when once the dispute is substantial and bona fide, the company petition is liable to be dismissed and the petitioners have to approach appropriate forum for deciding the contractual obligations. He also contends that civil suits are filed in respect of the land covered by DAGPA and the petitioners have not provided with 60 feet access road as agreed through supplementary agreement dated October 20, 2007 and that when the petitioners' title itself is under cloud, the respondent is not obligated to invest funds and proceed with the development risking its investments. He further contends that no prudent builder can invest money in the property under litigation and that Cyberabad Development Authority issued a letter to the respondent to produce ownership of the land in Survey No. 135, but the petitioners have not provided the same, as such, there was delay in grant of approvals. He further contends that no prudent builder can invest money in the property under litigation and that Cyberabad Development Authority issued a letter to the respondent to produce ownership of the land in Survey No. 135, but the petitioners have not provided the same, as such, there was delay in grant of approvals. He further contends that the letter dated August 17, 2011, issued by GHMC is not an approval and is only a letter and that the petitioners having received substantial amounts from the respondent, they cannot allege that the respondent is not financially sound. He further contends that the respondent-company is incorporated for carrying out the project only and that since the project could not commence due to non-cooperation of the petitioners, there was no activity, as such, for the sole reason, the respondent-company cannot be wound up under section 433(c) of the Companies Act. In support of his contentions, he relied on Bikkina Gopalakrishna Rao v. Seavalley Resorts P. Ltd. [2001] 104 Comp Cas 267 (AP) and IBA Health (I) P. Ltd. v. Info-Drive Systems Sdn. Bhd. [2010] 159 Comp Cas 369 (SC). 8. The court, at the stage of admission of the company petition, is not expected to hold a full trial of the matter and decide whether the grounds raised by the respondent-company is substantial and is also expected to go into the causes of the refusal by the company to pay before coming to that conclusion. The court should ascertain whether the company has a defence which is substantial in nature and, if not adjudicated in a proper forum, would cause serious prejudice to the company. The court has to find out whether a strong prima facie case on facts is made out for admission of a winding up petition and for this purpose the court is expected to hold a summary enquiry to ascertain prima facie case and the court is also expected to satisfy itself that it is case for admission and advertisement. The court has to find out whether a strong prima facie case on facts is made out for admission of a winding up petition and for this purpose the court is expected to hold a summary enquiry to ascertain prima facie case and the court is also expected to satisfy itself that it is case for admission and advertisement. Before admitting and advertising a petition for winding up, the court, after satisfying that a prima facie case is made out, should record its prima facie findings on (1) Whether the petitioning-creditor is a creditor to whom the company owes an ascertained sum of money or substantially ascertained sum of money; (2) Whether the said debt is within limitation; (3) Whether the defence of the company is valid and bona fide or whether it is a mere moonshine; (4) Whether, from the material on record, a presumption arises that the company is unable to pay its debts as contemplated under section 434(1)(a) or (b) as the case may be; or (5) Whether, from the material on record, the court is prima facie satisfied that the company is commercially insolvent as contemplated under section 434(1)(c). Further, the court has to find out whether the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed and where the debt is disputed, the court has to see whether the dispute on the face of it is genuine or merely a cloak for the company's real inability to pay the just debts see SBI Global Factors Ltd. v. Suryachakra Power Corporation Ltd. [2012] 171 Comp Cas 264 (AP). 9. By non-payment of the undisputed debt, within the period of statutory demand, the company is deemed unable to pay its debts and when a company fails to comply with a notice under section 434(1)(a) for payment of a debt, the court has no discretion but to make an order for winding up. The sub-clause does not merely lay down a presumption of inability to pay, but the word "shall" is of great significance in that the creditor is entitled to an order and the creditor is not required to establish that the company is commercially insolvent. 10. The sub-clause does not merely lay down a presumption of inability to pay, but the word "shall" is of great significance in that the creditor is entitled to an order and the creditor is not required to establish that the company is commercially insolvent. 10. Exercise of discretion would arise only after the court comes to prima facie conclusion that the defence raised by the company in respect of the debt, which is the subject matter of a petition, is not bona fide and not acceptable. The controversy must be bona fide in both the subjective and objective sense and the onus is on the company to bring forward a prima facie case which satisfies the court that there is something which ought to be tried either before the court itself or in an action or by some other proceedings. If the debt is not disputed on some substantial ground, the court may decide it on the petition and make the order. The court is entitled to investigate the question as to whether a dispute has been manufactured in order to delay and defeat realisation of the dues of the petitioning-creditor, and is merely a cloak for the inability of the company to part its just debts and that if a debt is undisputedly owing, then it has to be paid and if the company refused to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. 11. If the debt is bona fide disputed, there cannot be "neglect to pay" within the meaning of section 434(1)(a) of the Companies Act and if there is no neglect, the deeming provision does not come into play and the winding up on the ground that the company is unable to pay its debts is not substantiated. If the debt about the liability to pay which, at the time of the service of the insolvency notice, there is a bona fide dispute, is not "due" within the meaning of section 434(1)(a) and non-payment of the amount of such a bona fide disputed debt cannot be termed as "neglect to pay" the same so as to incur the liability under section 433(e) read with section 434(1)(a) of the Companies Act. The expression "neglected to pay the sum demanded" in section 434(1) is not equivalent to the word "omission". The expression "neglected to pay the sum demanded" in section 434(1) is not equivalent to the word "omission". Neglected to pay the debt on demand is omission to pay without reasonable cause and where there is refusal to pay without any reasonable excuse, it must be held that the company has neglected to pay the amount due within the meaning of section 434(1)(a)of the Act. One should also bear in mind that the proceedings for winding up are not proceedings for recovery of any amount. See JMC Products (India) Ltd. v. Bhagyanagar Infrastructure Ltd. (Order in C.P. No. 37 of 2011, dated October 5, 2012 (AF)). 12. The facts in the present case have to be examined as to whether the company petition is liable to be admitted or not. The undisputed fact is that the petitioners and the respondent entered into DAGPA dated July 7, 2006 and the claim of the petitioners arises under clause 20(i), which reads as follows: "The developer agrees and undertakes to complete the entire construction work and make the constructed areas available for occupation within a period of 30 months from the date of obtaining approval of plans, for each Block, from the concerned local authority. In the event of the developer failing to complete the entire construction within the said 30 months as per above schedule and handover possession of the land owner's share thereof within the above stipulated time, the developer shall pay to the land owners separately an amount of Rs. 20 per sq.ft., per month for the first six months from the date of such failure and Rs. 40 per sq.ft., per month there afterwards, on the land owners' share of constructed area, as compensation for the said delay. Provided however that if the completion of construction is delayed due to any dispute over the title of the land owners on the schedule property, fixation of boundaries of the schedule property or due to civil commotion, fire, riots, or such other acts of god or Government, beyond the control of the developer, the land owners shall pay suitably extend the above said period of 30 months, in writing, to the developer." 13. The respondent has not denied the obligation under clause 20(i), but only sets up a defence that it is not liable to pay as per the said clause since the petitioners have not provided 60 feet of access road in Survey No. 135 as was agreed by them at the time of entering into DAGPA and also supplementary agreement dated October 21, 2007 and civil suits are pending in respect of the subject land. As per clause 20(i), the respondent owe a sum of money as per the said clause, which means that there is a debt as the execution of DAGPA is admitted. When once the liability arises it can be said that the petitioner is a creditor to the respondent-company and the statutory notice is also issued under section434 of the Companies Act and after waiting for a statutory period, as no reply is issued, the company petition is filed and that a presumption arises under section 434 of the Companies Act that the respondent-company is unable to pay its debts. But, the facts narrated above and from the contentions of learned counsel for the respondent, it appears that they are disputing the debt and now it has to be seen whether the dispute is bona fide, substantial and not a moonshine, spurious, speculative and illusory; whether the defence is in good faith; and whether the respondent-company is liable to be succeed. Clause 20(a) of the DAGPA, which reads as follows: "That the developer has verified the Patta Passbooks Patta title and other documents of title of land owners over the schedule property and assured themselves of the marketable title of the land owners and are fully satisfied about the same." 14. From the above, it is clear that the respondent-company was satisfied about the marketable title of the petitioners basing on the documents. Even in the counter affidavit filed by the respondent in I.A. No. 2860 of 2008 in O.S. No. 396 of 2007, the respondent admitted that the petitioners and their father D. Venkat Reddy have right, title and claimed ownership and possession over the land. Even in the counter affidavit filed by the respondent in I.A. No. 2860 of 2008 in O.S. No. 396 of 2007, the respondent admitted that the petitioners and their father D. Venkat Reddy have right, title and claimed ownership and possession over the land. Even as per clause 3 of the supplementary agreement dated October 21, 2007, the extension of time initiated under clause 13 of the DAGPA was sought only on the ground that owing to frequent changes in Government polices with respect to delegation of authority for issuance of sanctions and the ensuing lack of clarity under such circumstances as to whom the respondent has to approach for obtaining necessary approvals and sanctions for commencement of construction activity of the proposed building, the respondent-company has been encountering severe hardships in obtaining building permissions and sanctions resulting in delay in the project. In the letters addressed by the respondent through e-mails, the respondent has not set up the said ground. The map annexed to DAGPA shows that there is an access road and payment of penalty under clause 20 of the DAGPA is not dependent for providing of access road. The stand of the respondent is that they have started excavation work and that if there is no approach road as alleged by the respondent, the question of starting the excavation work does not arise and it is stated that the excavation work is to clear the shrubs, bushes and trees, removing the existing rocks and boulders, levelling the project land. Paragraphs 10 and 13 of the DAGPA clearly shows that there was a road approach to the land and the provision of 60 feet road is also in addition to the existing approach road, which shows that the respondent has undertaken to pay additional consideration for providing 60 feet access road and the supplemental agreement for providing 60 ft. road also gets annulled as the Government provided an access road and admittedly the Government issued G.O. Ms. No. 538, dated October 29, 2001, which is not disputed or denied. As such, the condition of providing 60 ft. road also stands nullified and void by issuance of G.O. Ms. No. 538, dated October 29, 2001. There is no injunction operating against the respondents from starting construction. No. 538, dated October 29, 2001, which is not disputed or denied. As such, the condition of providing 60 ft. road also stands nullified and void by issuance of G.O. Ms. No. 538, dated October 29, 2001. There is no injunction operating against the respondents from starting construction. Injunction granted in the suits filed by the third party is only in respect of disposal of the share of the petitioners and when the respondent is obligated to pay penalty for violation of clause 20(i), at no point of time they have issued a notice to the petitioners denying the liability. In fact, the respondent-company was paying additional amount to the petitioners, which goes to show that the respondent did have proper title over the land in dispute. Even the respondent failed to respond to the statutory notice though the same is replied after the statutory period is over. The pleadings of the respondent in the suits filed and the correspondence through e-mails also do not inspire confidence that the dispute raised by the respondent is bona fide and only after statutory notice is issued and the statutory period is over, the respondent replied. Since the respondent has not complied with notice required under section 434(1)(a) of the Act, legal fiction operates that the respondent-company is unable to pay its debts. See SBI Global Factors Ltd. v. Suryachakra Power Corporation Ltd. [2012] 171 Comp Cas 264 (AP). The respondent could not point out any clause in DAGPA or supplementary agreement which stipulated that the respondent's obligation to make payment of penalty under clause 20(i) was contingent on providing 60 ft. road as such, such a defence raised is not bona fide, genuine and an afterthought. Since the respondent never issued a notice and went on paying additional amounts, it shows that there is no doubt about the title of the petitioners and in fact, they asserted that the petitioners have title and the petitioners have also got relinquishment deeds after receipt of the amounts from the respondent and closed one suit in O.S. No. 537 of 2006 and in a suit for specific performance in O.S. No. 396 of 2007 the petitioners are not parties. Just because some suits are filed, it cannot be said that the petitioners have no title over the land. Just because some suits are filed, it cannot be said that the petitioners have no title over the land. As such, the dispute raised by the respondent is not a bona fide and the presumption can be drawn that the respondent is unable to pay the debt and neglected to pay the same. (See JMC Products (India) Ltd. v. Bhagyanagar Infrastructure Ltd. (Order in C.P. No. 37 of 2011, dated October 5, 2012 (AP)). No doubt the petitioners have alternative remedies under the DAGPA but that cannot be a ground to dismiss the winding up petition. If the alternate remedy is ground for dismissing of the company petition in each and every case the power and jurisdiction conferred on company court under sections 433 and 434 would be rendered wholly negatory and otiose (see Bharat Bijlee Ltd. v. National Industrial Development Corporation, ILR 2002 (2) Delhi 243). 15. As per the director's report, it was mentioned that the respondent has not commenced its business during the financial year ending March 31, 2012 and the balance-sheet also shows that the liabilities are more than the resources and the allegation of the divesting the funds to the other companies is also admitted by the respondent-company. Though the respondent-counsel relied on judgment in Bikkina Gopalakrishna Rao v. Seavalley Resorts P. Ltd. [2001] 104 Comp Cas 267 (AP), the facts in that case are that some suits were filed, when interim orders were operating, the hotel could not be constructed and in the present case, even according to the respondent, there is no injunction operating from proceeding with the construction. As such, the said decision has no application to the present case, more so, the balance-sheet also shows that the liabilities are more than the resources. No cogent explanation has been offered for the failure of the respondent-company to commence its business after incorporation; as such the company petition is liable to be wound up under section 433(c) of the Companies Act also. See Biraj Kumar Barua v. Barua and Barua Drugs P. Ltd. [2003] 114 Comp Cas 191 (Gauhah) : [2003] 2 GLR 482 and Karnataka Rubbers Ltd. v. Karnataka State Financial Corporation, AIR 1999 Karn 254 : [2000] 101 Comp Cas 421 (Karn). When substratum of the respondent-company has totally been lost and as liabilities crossed assets, the company is liable to be wound up. When substratum of the respondent-company has totally been lost and as liabilities crossed assets, the company is liable to be wound up. See SBI Global Factors Ltd. v. Suryachakra Power Corporation Ltd. [2012] 171 Comp Cas 264 (AP). Other decisions cited by learned counsel for the respondent in IBA Health (I) P. Ltd. v. Info-Drive Systems Sdn. Bhd. [2010] 159 Comp Cas 369 (SC), wherein the apex court after analysing the various terms and conditions incorporated in the deed of settlement as well as the compromise deed and the averments made by the parties, in that case held that there is a bona fide dispute with regard to the a mount of a claim made by the company in the company petition which is substantial in nature and dismissed the petition for winding up the company while cautioning the company courts that the company petition for winding up of company should not be entertained, when substantial dispute is raised and substantiated. After examination of the DAGPA, supplementary agreement and rival contentions, I have already held in preceding paragraphs that the dispute raised by respondent is not bona fide and not substantiated substantially and it is only moonshine. If the contention of the respondent that the company petition is to be dismissed because it involves the interpretation of the agreement and only civil court has to go into that aspect than all the company petitions arising and basing on agreements for payment of money have to be dismissed. In commercial transaction all money transaction are basing on certain documents and the moment the respondent-company disputes the payment then the company petition will have to be dismissed. The apex court also analysed the various terms and conditions incorporated in the deed of settlement as well as the compromise deed and the contention of the parties and came to that conclusion that the debt is substantially disputed. IBA Health (I) P. Ltd. v. Info-Drive Systems Sdn. Bhd. [2010] 159 Comp Cas 369 (SC). 16. In view of above facts and circumstances, I am of the view that the dispute raised by the respondent-company is not bona fide, substantive in nature and it is only moonshine, spurious, speculative and illusory, and hence, the company petition is liable to be admitted. In view of the same, the petitioners have made out a prima facie case for admission of the company petition. 17. In view of the same, the petitioners have made out a prima facie case for admission of the company petition. 17. Accordingly, the company petition is admitted. However, in order to provide further opportunity to the respondent, the publication of admission of the company petition is deferred for a period of three months from today. Post on June 4, 2015.