Judgment Soumen Sen, J. Random House Publishers India Pvt. Ltd., the petitioner, has filed this application praying for winding up of the Mehras Books Pvt. Ltd. (hereinafter referred to as the “said company”). The petitioner is engaged in publishing, printing, and marketing of books. On September 4, 2009 the petitioner has entered into a ‘Distributorship Agreement’ with the said company whereby the said company was appointed as the non-exclusive distributor and reseller of books. The agreement was to remain valid till December 31, 2010 with the provision that, in the absence of any situation to the contrary, there would be automatic renewal for the period of one year each and could be modified through Addendum. Under the agreement the Company was obliged to make payment within 150 days of receipt of invoices (135 days+15 buffer days). Beyond this period, the Company would have to pay an interest of 1.5% per month. In case of delay in timely payments, beyond this specified period, the contract allowed the petitioner the unrestricted right to stop any/ all pending supplies or order. In or about May 6, 2011, the Petitioner and said company entered into another agreement. The said company was appointed as the non-exclusive distributor and reseller of books under the ‘Princeton Review’ in addition to the other books mentioned in the previous agreement. This agreement was termed as “Distributor Agreement-Princeton” with no change in scheme of payment. The respective contracts were renewed every year till December, 2013 with modifications by Addendum were brought in the years 2010, 2011, 2012 and 2013. The original payment structure, however, was retained and reiterated in every addendum. The dispute between the parties arose during settlement of accounts. Matter of unsettled accounts had been first intimated by the petitioner to the said company on February 26, 2013 and then further demands were made. On March 6, 2013 the Company in its reply did not dispute its liability but only raises issues with regard to the credit notes. According to the petitioner, towards the end of May 2013, the said company owed an amount of 1.38 crores approximately to the petitioner. In view of failure to pay the outstanding dues, two demand notices were issued and served to the company on January 17, 2013 in respect of the aforesaid two agreements. According to the petitioner, towards the end of May 2013, the said company owed an amount of 1.38 crores approximately to the petitioner. In view of failure to pay the outstanding dues, two demand notices were issued and served to the company on January 17, 2013 in respect of the aforesaid two agreements. A combined reply to both the demand notices was given by the said company on July 3, 2013. On August 7, 2013 the petitioner forwarded the statement of accounts for the Delhi and Kolkata businesses of the company, respectively, with the instruction that in case there is no reply within a week the respective accounts would be treated according to the terms agreed upon. On August 12, 2013 petitioner issued notice to the said company to refer the matter for arbitration with respect to both the agreements and a reply to that has been made by the said company on August 13, 2013. The petitioner served statutory notices upon the said company on August 26, 2013 and followed it up. This was replied to by the Company on September 3, 2013. The petitioner is a creditor of the company. It is submitted by the petitioner that repeated demands were made to the said company for the payment of the debt but the said company raised frivolous pleas in order to avoid and delay payment. The petitioner contended that the company was not in a position to pay debt, even though on number of occasions, it had acknowledged the fact of unsettled accounts and its liability to make payment for the books sold and delivered. Since the debt was not discharged, this application under Sections 433 read with 434 and 439 of the Companies Act, 1956 is filed praying for the winding up of the Company. The company, on the other hand, contended that though the agreement contains a payment schedule, it was contingent upon the receipt of payment following the practice of the trade. The company has also stated that the property in the goods did not pass on to them unless they were able to sell the goods. The allegation put forth by the said company against the petitioner was that the quantities of books supplied were without the assent of the company. The company has also stated that the property in the goods did not pass on to them unless they were able to sell the goods. The allegation put forth by the said company against the petitioner was that the quantities of books supplied were without the assent of the company. It was also contended that the supply of books was not made according to the order placed inasmuch as the books, which had no market at all, used to be dumped in the warehouse of the company. The company was compelled to accept front list books and books which had no such market. The petitioners caused a breach of contract to the extent that it created a parallel supply of distributors in the north and the eastern zone (from where the said companies were mainly operating) and so their position was jeopardized. On top of this, since the release date was delayed by 5 days the company was not able to compete with the competitors expeditiously. These caused enormous loss or damage to the company. Moreover, they claimed the untimely and delayed payment from the customers coupled with failure to resume the supply of books have seriously affected the business of the company. The company submits that under such circumstances attempts were made by the company to return the books but there was either delay in confirming the return of books or failure to confirm at all that had resulted in failure to have the accounts reconciled. It is submitted that if the accounts are reconciled and stocks of unsold books are taken into consideration then no amount would be found due and payable by the company to the petitioner. The said company denied that it was liable to pay 1.38 crores (approx.) or any amount, including the interest amount, to RHI. It denied the presence of any undisputed debt. On the basis of the pleadings it needs to be examined if the said company has been able to raise a triable issue and there is a bona fide defence to the claim of the petitioner. In the case of Mechelec Engineers and Manufacturers Vs. M/s Basic Equipments Corporation reported at AIR 1977 SC 577 the matter of grant to leave, under Order 37 of the Civil Procedure Court has been discussed. In the case of Mechelec Engineers and Manufacturers Vs. M/s Basic Equipments Corporation reported at AIR 1977 SC 577 the matter of grant to leave, under Order 37 of the Civil Procedure Court has been discussed. In Mechelec (supra) the suit was filed by the Plaintiff, a partnership firm against the respondent, due to the dishonour of cheque, issued by the respondent towards consideration for the goods supplied. The appellate court while discussing whether it would be appropriate for the High court to interfere with the order passed by the Additional District Judge of the Delhi granting unconditional leave to defend, examined the principles which are to be considered while granting leave to the defendant. The court relied on the principles laid down in Smt. Kiranmoyee Dassi & Anr. Vs. Dr. J. Chatterjee reported at 49 C.W.N. 246 which are:- a) If the Said company satisfies the Court that he has a good defence to the claim on its merits the plaintiff is not entitled to leave to sign judgment and the Said company is entitled to unconditional leave to defend. (b) If the Said company raises a triable issue indicating that he has a fair or bona fide or reasonable defence although not a positively good defence the plaintiff is not entitled to sign judgment and the Said company is entitled to unconditional leave to defend. (c) If the Said company discloses such facts as may be deemed sufficient to entitle him to defend, that is to say, although the affidavit does not positively and immediately make it clear that he has a defence, yet, shows such a state of facts as leads to the inference that at the trial of the action he may be able to establish a defence to the plaintiff's claim the Plaintiff is not entitled to judgment and the Said company is entitled to leave to defend but in such a case the Court may in its discretion impose conditions as to the time or mode of trial but not as to payment into Court or furnishing security. (d) If the Said company has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the Plaintiff is entitled to leave to sign judgment and the Said company is not entitled to leave to defend. (d) If the Said company has no defence or the defence set up is illusory or sham or practically moonshine then ordinarily the Plaintiff is entitled to leave to sign judgment and the Said company is not entitled to leave to defend. (e) If the Said company has no defence or the defence is illusory or sham or practically moonshine then although ordinarily the Plain- tiff is entitled to leave to sign judgment, the Court may protect the Plaintiff by only allowing the defence to proceed if the amount claimed is paid into Court or otherwise se- cured and give leave to the Said company on such condition, and thereby show mercy to the Said company by enabling him to try to. prove a defence". In Santosh Kumar v. Bhai Mool Singh reported at AIR 1958 SC 321 , it was observed by the court:- “Taken by and large, the object is to see that the said company does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining an early decree by raising untenable and frivolous defences in a class of cases where speedy decisions are desirable in the interests of trade and commerce. In general, therefore, the test is to see whether the defence raises a real Issue and not a sham one, in the sense that, if the facts alleged by the said company are established, there would be a good, or even a plausible, defence on those facts.” In the case of Madhusudan Gordhandas & Co. v. Madhu Wollen Industries Pvt. Ltd. reported at AIR 1971 SC 2600 it was held that three principles on which the court acts are as follows:- “a. The defence of the bona fide debt of the company is in good faith and one of substance. a. The defence is likely to succeed in point of law b. The company adduces prima facie proof of the facts on which the defence depends.” Thus, what is important is to establish whether there exists a debt and in order to substantiate the claim of winding up, the existence of debt should be irrefutable. a. The defence is likely to succeed in point of law b. The company adduces prima facie proof of the facts on which the defence depends.” Thus, what is important is to establish whether there exists a debt and in order to substantiate the claim of winding up, the existence of debt should be irrefutable. The object of the discretionary power given to the court, for granting leave to said company, have been discussed in Kesavan v. South Indian Bank Ltd. reported at (1949) 2 MLJ 70 , and is examined in greater detail in Sundaram Chettiar v. Valli Ammal reported at AIR 1935 Mad 43 in the following words:- “Taken by and large the object is to see that the defendant does not unnecessarily prolong the litigation and prevent the plaintiff from obtaining an early decree by raising untenable and frivolous defence in a class of cases where speedy decisions are desirable in the interest of trade and commerce. In general, therefore, the test is too show whether the defence raises a real issue and not of sham one, in the sense that, if the facts alleged by the defendant are established there would be a good, or even a plausible defence on those facts.” In New Finds (India) v. Vorion Chemicals and Distilleries Ltd. reported at (1976) 46 Comp Cases 87 (Mad) it was held that ‘bona fide dispute in regard to a debt means that the dispute is based on a substantial ground and if such a dispute is raised, the court will not make a winding up order even if only a part of the debt is disputed on substantial ground’. However, if a dispute is not genuine and bona fide and it is put forward to hide a company’s inability to pay, a petition of winding up should be entertained, and accordingly winding up should be allowed. It is well established that the machinery of winding up should not be misused by the petitioners as means of putting pressure to the company to realize debts, but where the court is satisfied that the company is insolvent and its substratum is gone, the court should order the winding up, irrespective of the motive that the petitioner might have, as was held in Baccharaj Factories Ltd. vs. Hirjee Mills Ltd. reported at AIR 1955 Bom. 355 ‘Unable to pay debts’ renders a company insolvent. 355 ‘Unable to pay debts’ renders a company insolvent. It suggests that the existing assets would be insufficient to meet the existing liabilities however it is not a conclusive test to allow winding up. However, it is also to be noted that commercial solvency is of no relevance if there is failure on the part of the said company to pay the debt amount within 3 weeks from serving the notice and an order of winding up will be asked for by the creditors or petitioner. In such a case, it is not necessary for the court to enquire whether the company is in fact solvent or not, nor can any such enquiry be undertaken by the court. A perusal of the facts of the case becomes essential at this stage to determine whether there exists a bona fide and reasonable dispute regarding the due amount as was held by Palaniswamy, J. in Rajasthan Spinning and Weaving Mills Ltd vs. Texkool Comapny Ltd. reported at [1971] 41 Comp. Cas. 66 (Mad.). The Contractual Agreement i.e. both Distributorship Agreement 2009 and Distributorship Agreement-Princeton 2011 categorically lay down the procedure in which the payment is to be made. There has been no change in the prescribed manner for payment even in the addendums which were introduced every successive year, after 2009, till 2013. Under the terms it was clearly mentioned that the company was obliged to make payment against each invoice within a period of 150 days, i.e. 135 days + 15 buffer days (where interest would not be charged) from the date of invoice. In case there is a failure to abide by this strict payment schedule, the contract specifies that a penalty charge at the rate of 1.5% per month would be leviable. The petitioner submits that towards the end of May, 2013 it was found that a sum of 1.38 crores (approx.) was due and outstanding. The petitioner has also disclosed documents showing that the said company was intimated about the amount outstanding and a plan of action was sought. In reply to the mails of the company Mr. SK Mehra on behalf of the company on May 18, 2013 reverts to their request saying that payment can be brought back on track if supply from the side of the petitioners is resumed and undertakes to make payment of a sum of Rs.1.38 crores latest by August 15, 2013. In reply to the mails of the company Mr. SK Mehra on behalf of the company on May 18, 2013 reverts to their request saying that payment can be brought back on track if supply from the side of the petitioners is resumed and undertakes to make payment of a sum of Rs.1.38 crores latest by August 15, 2013. The terms of all the above-mentioned contracts clearly state that in case the terms of the credit period if exceeded the petitioners reserve the unrestricted right to stop any and all pending orders or supply of books. Thus on this ground there cannot be any holding back of payment as that would lead to violation of the terms of the contract. In the same reply, it has been mentioned by S.K. Mehra that there exists a ‘general slump’ in the market and the same mail also mentions that there has been a delay of receipt of payment from the client of the distributors. These facts are sufficient to prove that the said company is acknowledging the fact that there exists a debt to be paid to the petitioners. Unpaid debt and not the amount of the debt is what matters. Where however, there is no doubt that the company owes the creditor a debt entitling him to a winding up order but the exact amount of the debt is disputed the court could make a winding up order without requiring the creditor to quantity the debt precisely. However, having regard to the consequences likely to follow from the order of winding up and the company would be deprived of having a say on the quantification of debt and secure the claim it is always desirable to have the debt assessed. Mr. Jishnu Chowdhury, the learned Counsel appearing on behalf of the company submitted that in receiving a winding up petition quantum of debt needs to be conclusively established. In this regard he has relied upon Juneja Chemical Industries P. Ltd. Vs. Alam Tannery P. Ltd. reported at [2007] 140 Comp Cas 833 (Cal) and in Juneja (supra) the requirement of determination of debt was emphasized in the following words:- “In receiving a winding up petition, not only should the factum of indebtedness be affirmatively established, but the quantum thereof needs also to be conclusively demonstrated. Alam Tannery P. Ltd. reported at [2007] 140 Comp Cas 833 (Cal) and in Juneja (supra) the requirement of determination of debt was emphasized in the following words:- “In receiving a winding up petition, not only should the factum of indebtedness be affirmatively established, but the quantum thereof needs also to be conclusively demonstrated. If indebtedness of the company is apparent as to a part of the claim, the company court may receive such part of the petitioner’s claim that is free from doubt and require the other, undetermined part to be established elsewhere. Despite the company conveying the overwhelming sense of being a debtor in its letter of June 3, 2004, and a substantial part of the company’s defence in response to the statutory notice being thereby discredited, the petitioner has failed to quantify such part of its claim that can be said to be free from doubt. Ordinarily, the cheques issued for Rs.57-odd lakhs would have gone some distance to pin the company down as to the quantum of its unimpeachable debt, but the company’s charge of the petitioner having sold goods to others found in its letter of June 3, 2004, would rob the sanctity of the amount covered by the cheques issued by it as being the sum admittedly due. No doubt, the petitioner has disputed such charge made by the company but upon the charge being made and it being refuted, there is a dispute that needs to be adjudicated upon. And it would be hazardous to accept the sum covered by the 27, now dud, cheques to be the quantum of the company’s indebtedness. There is good reason for the company court requiring the quantum of indebtedness being established before it permits a creditor’s petition for winding up to proceed. For one, even though the floor limit set by the provisions of the Companies Act is a meagre Rs.500, it would be unfair to subject a functioning company to the attendant miseries upon a winding up petition being admitted merely on the company judge’s subjective assessment of the quantum of debt being in excess of Rs.500. Secondly, it is open to a company to secure a claim and such option presupposes an amount being determined. Secondly, it is open to a company to secure a claim and such option presupposes an amount being determined. Thirdly, in the practice followed by this court where a winding up petition is considered at two stages, the usual order passed is one permitting the company to pay or secure the amount, prima facie found due, so that advertisements do not ensue and the matter does not progress to the second, and more prejudicial, stage. If the company judge is unable to ascertain the sum that is due to the petitioner, albeit prima facie, then no condition for avoiding publication of advertisements can be set.” In the instant case having regard to the emails exchanged it cannot be said that the company is not indebted to the petitioner. The company even has proposed to pay at least 1.38 crores. Evidently, the amount which is due has been accepted by the company in its mails. The matter which now has to be examined is whether the defence put up by the company that it is a bona fide disputed, which is reasonable and in good faith, stands the point of law and is tenable. On consideration of the emails exchanged between the parties it can be observed that there have been several occasions in which a plan with respect to the settlement of dues were attempted to be discussed by the petitioners, which were at times even evaded by the respondents. Moreover, allegations in the replies to the statute notices were vague and without any factual basis as the learned Counsel has placed reliance on Siddharth Automobiles Ltd., In re Vs. Ashok Leyland Ltd., In re reported at [2008] 145 Comp Cas 524 (Cal) for the proposition that once the company has raised the counter-claim the same is required to be decided in a regular suit and the present proceeding is not the proper proceeding for realisation of such amount. In the said decision, the learned Judge found that the adjustment sought by the company was extremely vague and even if any generous estimate is made in favour of the company there would still remain indebtedness in excess of Rs.1.5 crores. In the said decision, the learned Judge found that the adjustment sought by the company was extremely vague and even if any generous estimate is made in favour of the company there would still remain indebtedness in excess of Rs.1.5 crores. In the instant case, as I have noted earlier that apart from a murmur of adjustment of few lakhs on sales and return basis as sought to be put up as a defence to the claim by relying on emails dated 22nd February, 2013 and 8th January, 2014 there is no clear defence disclosed by the company in this proceeding. Even in reply to the winding up notice, the company did not quantify its debt and the allegations made are vague and devoid of any particulars. There is no contemporaneous evidence to show that the company had denied its indebtedness but was only insisting that a return allowance to 15 per cent flat on all random books may be allowed to the company. In replying to the statutory notice apart from the fact that the accounts were not disclosed the claim for adjustment was also not made. The distributorship agreement provides that the company as distributor would have the right to resell and distribute the books within the definite territory, the company shall procure the books for resell and distribution within the definite territory. The credit period is also mentioned in Clause 5 of the said agreement. The agreement also contends the return policy which says that from October 01, 2009 till December 31, 2010, the return allowance of the books shall be capped by 15 per cent of the net purchasers during the said period on a region wise basis from January, 2011 onwards. The return allowance shall be 15 per cent of net purchasers made by the distributor from the publisher in the immediately previous calendar year on a region wise basis. The distributor shall attempt to return books/titles that have been purchased by it from the publisher in the immediately preceding 18 months on the basis of last in first out. Since significant amounts were outstanding against the supply made, the petitioner by an email dated 27th May, 2013 expressed its concern and requested the company to provide a plan of payment otherwise the petitioner would be constrained to stop supply of books. Since significant amounts were outstanding against the supply made, the petitioner by an email dated 27th May, 2013 expressed its concern and requested the company to provide a plan of payment otherwise the petitioner would be constrained to stop supply of books. The petitioner was quite categorical in stating that the petitioner had to stop supply of books because the petitioner did not want a situation continuing where old debt would be financed by new supplies in responding to such emails. The said email was preceded, inter alia, by an email dated 15th May, 2013 the petitioner reiterated that the total dues as on May 14, 2013 is about 32.43 million and the company was requested to provide an update on the accounts receivable so that the petitioner could draw a plan for recouping the debt. Of these approximately 25 per cent or 7.6 million is well above 180 days and another 6.2 million would be over due by the end of May, 2013 for a total of Rs.13.8 million or over 40 per cent of total dues. On 18th May, 2013, the company while acknowledging its liability to make payment of Rs.1.38 crores assured that the payments would be back on track provided the company get supplies from 1st June in respect of both the territories. The company never contended that the liability admitted by the company was by mistake. The company has furnished the figure and quantified its liability as Rs.1.38 crores. Thus, at least on 18th May, 2013 the company has reconciled its account. It is, therefore, no more open to the company to put forward a plea of reconciliation or SOR to deny its liability in so far as the claim of Rs.1.38 crores is concerned. Since no payment was forthcoming two statutory notices both dated 17th June, 2013 were issued in respect of the distributorship agreement dated 4th September, 2009 and 6th May, 2011. In response to the said statutory notice, the company contended that the company was only an agent and there was no sale of books as such from the petitioner to the company. It was alleged that the petitioner interfered with the business of the company and prevented the company from carrying on its business. In response to the said statutory notice, the company contended that the company was only an agent and there was no sale of books as such from the petitioner to the company. It was alleged that the petitioner interfered with the business of the company and prevented the company from carrying on its business. The petitioner dumped on the company new or unpopular titles to distribute and the company cannot be held responsible or accountable for distribution and realisation of price of such titles. The company also alleged that the books supplied to the company were available through other channels operating in the same territory. The petitioner in refusing to supply the books caused immense damage to the company and the company assessed Rs.15 crores as damages for the alleged breach committed by the petitioner. There appears to be a subsequent notice on 14th August, 2013 in relation to both the distributorship agreement. In the said notice it was clearly stated that on 27th May, 2013, a solution was suggested on behalf of the petitioner to work out a plan for payment. The said email addressed to Mr. S.K. Mehra of the company reads:- “a) RHI is sent an existing stock detail of RHI books in possession by MB at its warehouse in Delhi and Kolkata. b) MB forward a detailed accounts receivable for RHI product sold in the market. RHI will be happy to accompany MB to the relevant chain and independent retailers to understand the debt levels and work a plan with retail to clear the same. c) Mr. Nandan Jha, Vice President Sales at RHI would visit Kolkata to meet with Mr. S.K. Mehra to discuss the above and work on a plan of action.” The petitioner alleged that the said email was not answered and no solution was provided. The petitioner in this proceeding has disclosed emails between 26th April, 2013 and 7th of August, 2013 to show that reconciliation statement was exchanged by an between the parties and as on 31st March, 2013 a sum of Rs.2,49,59,980/- had remained due and payable on account of sale of books. The isolated instances raised in the affidavit filed by the company seeking adjustment by way of discount or SOR would not exceed few lakhs. The company replied to the statutory notice which was as vague as the earlier one. The isolated instances raised in the affidavit filed by the company seeking adjustment by way of discount or SOR would not exceed few lakhs. The company replied to the statutory notice which was as vague as the earlier one. As I have indicated earlier there was no real challenge thrown to the claim save and except the company harped on reconciliation of accounts and insisted on return of books. Mr. Chowdhury has relied upon Madison Communications Pvt. Ltd. Vs. Som Distilleries and Breweries Ltd. reported at 126 Comp Cas 786 and submitted that an uncertain amount is not a debt and the winding up petition must be for a definite sum and debt must be established. It was submitted that from the documents and averments made in the supplementary affidavit affirmed by the company on 29th January, 2015 and 2nd May, 2014 it was evident that the service provided by the petitioner was in complete derogation to the distributorship agreement and the emails exchanged between the parties. The learned Counsel has relied upon New Era Furnishers (P.) Ltd. Vs. Indo-Continental Hotels and Resorts Ltd. reported at 68 Comp Cas 208 for the proposition that if the company is able to establish that there were still defects which were not rectified and that was why payment had not been made, could be a reasonable ground for avoiding payment and a winding up petition should not be admitted in such circumstances. It is submitted that if debt is bona fide disputed on substantial ground winding up shall not be entertained as in such a situation there would not be a neglect to pay within the meaning of Section 433(1)(a) of the Companies Act. This argument is made on the basis of ratio laid down by the Hon’ble Supreme Court in Mediquip Systems (P) Ltd. Vs. Proxima Medical System GMBH reported at (2005) 7 SCC 42 and IBA Health (India) Private Limited Vs. Info-Drive Systems SDN. BHD. reported at (2010) 10 SCC 553. It is argued that the sole object of the winding up petition is to recover a sum of Rs.3,24,28,751 and the basis of the petition is not that the company is unable to pay its debt. Moreover, the amount claimed is unclear and ambiguous. The learned Counsel was critical about the conduct of the petitioner. It is argued that the sole object of the winding up petition is to recover a sum of Rs.3,24,28,751 and the basis of the petition is not that the company is unable to pay its debt. Moreover, the amount claimed is unclear and ambiguous. The learned Counsel was critical about the conduct of the petitioner. It is argued that the petitioner by emails and/or correspondence while giving assurance to the company that the distribution of the front list titles shall be on sale or return basis, however, without considering its earlier stand, the petitioner in order to recover its money had taken a completely contrary stand and has filed this present winding up petition. The petitioner cannot approbate and reprobate at the same time and in this regard Mr. Chowdhury has placed reliance upon in Cauvery Coffee Traders, Mangalore Vs. Hornor Resources (International) Company Limited reported at (2011) 10 SCC 420 and Devasahayam (Dead) by Lrs. Vs. P. Savithramma & Ors. reported at (2005) 7 SCC 653 . In Mediquip Systems (supra) the Hon’ble Supreme Court found that there was a bona fide dispute concerning US $ 11,000. The Hon’ble Supreme Court also found that there were inconsistencies in the finding of the learned single Judge. It was held that debt under Section 433 of the Companies Act must be a determined or a definite sum of money payable immediately or at a future date. The financial position of the appellant was also brought to the notice of the petitioner. An order under Section 433(e) of the Act was held to be discretionary. The machinery for winding up will not be allowed to be utilised merely as a means for realising debts due from a company. The Hon’ble Supreme Court affirmed the views of the Bombay High Court, Madras High Court as also the law laid down in Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P) Ltd. reported at (1971) 3 SCC 632 which would be evident from Paragraph 23, 24 and 25 which reads:- “23. The Bombay High Court has laid down the following principles in Softsule(P) Ltd. Re, (1977) 47 Com.Cases 438 (Bom):- Firstly, it is well settled that a winding up petition is not legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. The Bombay High Court has laid down the following principles in Softsule(P) Ltd. Re, (1977) 47 Com.Cases 438 (Bom):- Firstly, it is well settled that a winding up petition is not legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. If the debt is not disputed on some substantial ground, the Court/Tribunal may decide it on the petition and make the order. Secondly, if the debt is bona fide disputed, there cannot be "neglect to pay" within the meaning of Section 433(1)(a) of the Companies Act, 1956. 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. Thirdly, a 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, 1956. Fourthly, one of the considerations in order to determine whether the company is able to pay its debts or not is whether the company is able to meet its liabilities as and when they accrue due. Whether it is commercially solvent means that the company should be in a position to meet its liabilities as and when they arise. 24. Fourthly, one of the considerations in order to determine whether the company is able to pay its debts or not is whether the company is able to meet its liabilities as and when they accrue due. Whether it is commercially solvent means that the company should be in a position to meet its liabilities as and when they arise. 24. The Madras High Court in Tube Investments of India Ltd. vs. Rim and Accessories (P) Ltd. (1990) 3 Comp LJ 322, 326 (Mad) has evolved the following principles relating to bona fide disputes: (i) If there is a dispute as regards the payment of the sum towards principal however small that sum may be, a petition for winding up is not maintainable and the necessary forum for determination of such a dispute existing between parties is a Civil Court; (ii) The existence of a dispute with regard to payment of interest cannot at all be construed as existence of a bona fide dispute relegating the parties to a Civil Court and in such an eventuality, the Company Court itself is competent to decide such a dispute in the winding up proceedings; and (iii) If there is no bona fide dispute with regard to the sum payable towards the principal, it is open to the creditor to resort to both the remedies of filing a civil suit as well as filing a petition for winding up of the company. 25. The Rules as regards the disposal of winding up petition based on disputed claims are thus stated by this Court in Madhusudan Gordhandas & Co. vs. Madhu Woollen Industries Pvt. Ltd. (1972) 42 Com Cases 125 : AIR 1971 SC 2600 . This Court has held that if the debt is bona fide disputed and the defence is a substantial one, the Court will not wind up the company. The principles on which the Court acts are: (i) that the defence of the company is in good faith and one of substance ; (ii) the defence is likely to succeed in point of law; and (iii) the company adduces, prima facie proof of the facts on which the defence depends.” The Hon’ble Supreme Court found that there was a prima facie dispute as to the debt and, accordingly, the order admitting the winding up petition was set aside. In IBA Health (supra) it was held that at the time of considering an application for winding up on the ground of inability to pay debts, the Court would not be required to hold a full trial. A dispute would be substantial and genuine if it is bona fide, substantial and not spurious, speculative, illusory or misconceived. Where dispute requires detailed investigation of facts and evidence and interpretation of terms and conditions of agreement between the parties, the court shall not proceed with winding-up proceedings. While cautioning that if the creditor’s debt is bona fide disputed on substantial grounds dismissal of the petition would be proper lest there is danger of abuse of winding up procedure, the Hon’ble Supreme Court also observed that the grounds of dispute must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be mere wrangle. In Oswal Machinery Ltd. v Pipavav Shipyard Ltd. reported at (2012) 173 CC 211 (Guj) it has been held that:- “When the question of examining the defence on the ground that the claim is disputed, arises and it becomes necessary to determine whether the dispute is bona fide and substantial, one of the tests is to find out whether the dispute was raised contemporaneously (immediately when the ground or cause of dispute allegedly arose); or the dispute came to be raised only when the demand for payment came to be made or the statutory notice came to be served and whether it is in nature of afterthought. If it emerges from the facts that the grounds on which the defence is raised and the claim being disputed were never raised at the relevant point in time or until the demand came to be raised or statutory notice came to be served and then suddenly the dispute is raised for the first time upon a claim being pressed and upon the service of notice, such belated dispute may, in the facts of the case and in t he light of the conduct of the parties, lead the court to the belief that the dispute and defence which are raised for resisting the petition and the order of admission are raised by way of afterthought.” It was further held that the arbitration clause in the letter of intent would not be a bar in filing a winding up petition. In Goetze India Ltd v. Pure Drinks (New Delhi ) Ltd. reported at (1994) 80 Comp Cas 340 P H it has been held observed that:- “The winding up proceedings cannot be treated as an alternative remedy of a suit for recovery nor as an execution proceedings. It may be a legitimate means for seeking enforcement of payment of a debt but it cannot be used as a lever to exercise pressure on the company to pay off the debts to a creditor. It cannot be allowed to become an illegitimate pressure in spite of the fact that the creditor cannot be compelled to avail of his ordinary remedy for the recovery of his debts. An order passed in a winding up petition is an order in rem. As a necessary and natural consequence of the same, the court attains the custody and control of the assets of the company which are released and distributed in the manner provided by the Act. The court is bound to keep in view the public interest. Primarily, the court is concerned not only with the interest of the petitioner or the creditors but it has to keep in view the interest of the company's shareholders, contributories, etc., also.” However, it was further observed by the court that in matters concerning winding up on the basis of 433(e), it is only after the company is unable to pay its debts and there is no bona fide defence to meet the demand of the creditors that the company can be ordered to be wound up. In Amalgamated Commercial Traders Private Ltd v. A.C.K. Krishnaswami reported at (1965) 35 Com Cases 456 (SC), observed that:- “It is well settled that 'a winding-up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatised as a scandalous abuse of the process of the court. At one time petitions founded on disputed debt were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petitions. At one time petitions founded on disputed debt were directed to stand over till the debt was established by action. If, however, there was no reason to believe that the debt, if established, would not be paid, the petition was dismissed. The modern practice has been to dismiss such petitions. But, of course, if the debt is not disputed on some substantial ground, the court may decide it on the petition and make the order.” (emphasis added) The allegations raised by the said company against the plaintiff are:- a) The petitioner has been pushing for the front list titles and non-selling stock. Without the assent of the company, the petitioner has been sending large quantities of books. b) Developing parallel channels of supply by appointing numerous distributors, in the north and south zone, despite exclusivity or semi-exclusivity with the said company has caused damage to the company. c) Breach of Contract by the petitioner which has caused enormous loss to the said company which would be in excess of 15 crore, resulting from the incongruence in date of new title billing and release date. Therefore, there is difficulty and imbalance of payment schedule. d) Whenever attempt is made to return books, approval is either delayed or not granted. The said company has stated that without his assent the petitioner has been sending them large quantities of books. The annexure attached by the said company on this point do not substantiate their claim on this point. The Annexure B merely states the order of the list of books which were placed by the Mehras and the quantity which were expected to be placed. The other annexure merely shows an exchange of emails stating the difference between the expected quantity and the order that had been placed, even the view of the said company had been sought in the mails regarding the same. The said company has clearly stated that “the supplies of the books were not made in terms of orders or advice of the company but in fact absurd quantities of books, some of which had no market at all used to be dumped at the warehouse of the company”. There has been no disclosure of any document, regarding this issue to substantiate its claim against the petitioner. There has been no disclosure of any document, regarding this issue to substantiate its claim against the petitioner. Mere disagreement on the matter of quantity and the disappointment showed through emails by the company stating meagre quantity ordered are not sufficient to prove the allegation of the said company when there is convincing materials to show that the company has accepted its liability. In the reply to the two notices dated August 12, 2013, the said company stated that it was a Distributor and thus was an agent of the principal. However, nothing of this manner has been specified in the contracts that were entered into. Thus, it is not legitimate for the company at this stage to deny their liability under the cloak of agency and claim its benefits. Both the agreements namely, the Distributorship Agreement 2009 and the Distributorship Agreement- Princeton 2011 clearly state that the company is a non-exclusive distributor of the petitioners. The company accepts that the said agreements are on a principal to principal basis and the company would be required to pay the price of the books sold and delivered at a discounted price. Moreover, nowhere in the agreements is it mentioned that the number of distributors that Random House could have was required to be limited, nor has there been any definition given to the ‘semi-exclusive distributor’. The allegation made by the said company that contracting with more distributors in the north and eastern zone, where they were conducting their distributorship is untenable. Terming this to be a premeditated conduct on the part of the petitioners to injure the business of the company and thus causing breach of contract amounting to a loss of 15 crore has no reasonable foundation. The matter regarding return of book s i.e. the RHI books which are in possession of MB at its warehouse in Delhi and Kolkata, has been duly considered by the petitioner in the legal notice issued by the attorney of the petitioner to the said company dated August 4, 2013. In the said notice, a solution has been suggested to SK Mehra with respect to the same. It is however seen that there has not been any confirmation received by the said company when in 2014 email, again the matter of sending the books back to RHI is asked by the company. In the said notice, a solution has been suggested to SK Mehra with respect to the same. It is however seen that there has not been any confirmation received by the said company when in 2014 email, again the matter of sending the books back to RHI is asked by the company. However, despite the fact that both the distributorship agreements had already terminated owing to the failure or default in making timely payment, and that has also been acknowledged by the said company, the reason to wait for the confirmation of the petitioner seems groundless. Prior to the issuance of the winding up notice there has been no contemporaneous document and material to show that the company has denied its liability and claimed damages. It has also been seen that the demand notices have been issued by the petitioner with respect to both Distributorship Agreement and Distributorship-Agreement-Princeton on June 17, 2013. In its reply the aforementioned allegations have been made. The said company has not been able to place any material, or document to substantiate any of the allegations later made by it. The said allegations are clear afterthought and made in order to avoid its liability. It can, therefore, be logically inferred that the disputes raised by the respondent company have been raised as afterthought and that the disputes were not raised contemporaneously. Thus, these are neither reasonable nor bona fide disputes and do not form substantial defence. The said company in any event has no defence for the amount admitted. The defence set up is illusory. The disputes sought to be raised by the said company is in the nature of afterthought and lacks bona fide and so in the present case the objection and contention cannot be sustained. In the present case it is evident that the denial by the company is motivated by an intention to evade payment. It is relevant to note that in the case of Ficom Orgarnics Ltd v. Laffans Petrochemicals Ltd. reported at (2000) 99 Comp. Cases 471 (Guj), after reaching the conclusion that the dispute raised by the respondent company against the petitioner's claim was not bona fide, time was granted to the company to pay the petitioner the claim amount. It is relevant to note that in the case of Ficom Orgarnics Ltd v. Laffans Petrochemicals Ltd. reported at (2000) 99 Comp. Cases 471 (Guj), after reaching the conclusion that the dispute raised by the respondent company against the petitioner's claim was not bona fide, time was granted to the company to pay the petitioner the claim amount. Even in Oswal (supra) the Court after arriving at a finding that the petitioner has made a case for admission of the petition and the company could not disapprove by showing that its defence is genuine and bona fide and also substantive deferred the order of admission of the winding up petition of the company and directed the company to deposit the invoice amounts in the court. In the instance case, having regard to the nature of the defence disclosed there cannot be any doubt that at least a sum of Rs.1.38 crores was due and payable by the company to the petitioner. The company did not even raise any dispute contemporaneously and what emerges from the facts is that the defence raised and the claim made in defence to the action initiated by the petitioner were never raised at the relevant point of time or until the statutory notice was served upon the company. However, considering the plea that if in the arbitration proceeding the company is able to establish return of some books and adjustment thereof I admit the petition for a sum of Rs.60 lakhs. This amount is ascertained on a generous allowance being given to the company of all its grievances for rebate and SOR. The company has not been able to demonstrate before this Court that the Company is solvent enough to pay off the debts assessed in this winding up petition. However, applying the principle in Mechelec (supra) and the other decisions on this point I direct the company to furnish security for a sum of Rs.60 lakhs to the satisfaction of the Registrar, Original Side, High Court, Calcutta on or before 15th December, 2015 which shall remain valid till the disposal of the arbitration proceeding. In the event such security is furnished the petition will remain permanently stayed. In default, the petition will be advertised once in ‘The Statesman’ and once in ‘Bartaman’. In the event such security is furnished the petition will remain permanently stayed. In default, the petition will be advertised once in ‘The Statesman’ and once in ‘Bartaman’. The advertisement should indicate that the matter will appear before Court on the first available working day after the expiry of a period of four weeks from the date of the publications being made. Publication in the official gazette shall stand dispensed with. There shall be no order as to costs at this stage. Urgent xerox certified copy of this judgment, if applied for, be given to the parties on usual undertaking.