Alphagam Coating Solutions Pvt. Ltd. vs Oval Rolycoats Pvt. Ltd.

This appeal is filed by the Respondent in Company Petition No. 120/2009 being aggrieved by the order dated 05.01.2011, wherein the Company Judge has admitted the petition fifed by the Respondent herein u/s 433 (e) and (f) and Section 434 of the Companies Act, 1956 (hereinafter called the Act ) for winding up of the Respondent -Company, However, by the impugned order, the advertisement was deferred by six weeks from 05.01.2011.

The material facts of the case leading up to this appeal with reference to the rank of the parties before the Company Judge are as follows:

2.1 Company petition No. 120/2009 was filed under Sections 433(e) and (f) and 434 of the Act seeking for winding up of the Respondent - Company averring that the Petitioner - Company is a Private Limited Company incorporated under the provisions of the Act and is inter alia engaged in the business of manufacture, sale and supply of chemicals and paint products. The Petitioner has its registered office at 146/A/8, Jawahar Industrial Estate, Pirungut, Tal Mulashi District, Pune. The Respondent is a Company incorporated under the provisions of the Act having its registered office at G-F-7, Business Point No. 137, Brigade Road, Bangalore - 560 025. It has also branch offices/facility at D-2-17, Bicholin Industrial Estate, Bicholin North Goa, Bicholin, Goa and at Bandkar Building, Ground floor, Althino, Near Lar De Students, Panjim, Goa 403 001. The Respondent was initially a proprietary concern of Mr. Anil Nair (presently the Managing Director of the Company) under the name and style of M/s. Alphagam and was later incorporated as a Private Limited Company during the months of May-June 2007, which took over the business of the erstwhile proprietary concern. It is further averred that the Respondent and the Petitioner have had business relations and dealings for the past three years. The Petitioner had supplied and delivered to the Respondent chemical and paint products and has raised challan-cum-tax invoices for payment upon the Respondent. Goods were supplied and delivered to the Respondent both at Bangalore and Goa. It is averred that prior to incorporation of the Respondent, the Petitioner had supplied chemical and paint materials to the Respondent''s predecessor, the proprietary concern M/s. Alphacjam worth Rs. 6,44,948 = 08Ps. at its Goa office facility and Rs. 5,53,606.00 at Bangalore. The said materials were supplied during the months of August 2006 to May 2007. After the incorporation of the Respondent as a Private Limited Company, the Petitioner had supplied chemical and paint materials to the Respondent at Goa and Bangalore. After incorporation, the Managing Director of the Respondent has written to the Petitioner to raise all future invoices in the new name of ''Alphagam Coating Solutions Pvt. Ltd. It is further averred that an amount of Rs. 18,58,923/- is due to be paid by the Respondent towards the material supplied to it at both Goa and Bangalore by the Petitioner, A separate account was maintained by the Petitioner for transactions with the Respondent in its books of account. By the end of April 2008, the Respondent''s Goa branch had a debit balance of Rs. 17,29,448=31Ps. Since the Respondent has withheld payment to the Petitioner without any justification and as per the terms of the contract, an interest of 24�/o per annum from the date of invoice till the date of payment is payable on the said amounts, the interest due and payable as on 31.05.2009 is Rs. 7,08,786.11. The debit balance in relation to the Respondent''s Bangalore branch by the end of April 2008 amounts to Rs. 15,28,808.94 Ps. The interest due and payable up to 31.05.2009 on the said amount is Rs. 6,58,451,99 Ps. The total amount due from the Respondent to the Petitioner towards, supply and delivery of material calculated by applying the said contracted rate of interest at 24% is Rs. 46,25,495,.35 Ps. As per the terms and conditions contained in the Petitioners challan-cum-tax invoices, the Respondent is liable to pay interest. That apart, the transactions between the parties is commercial in nature and interest at the rate demanded is payable by the Respondent. It is further averred that the Petitioner called upon the Respondent to settle the long pending outstanding amounts on several occasions. Despite several reminders, the Respondent has failed to make any payment to the Petitioner towards the aforesaid amount and wherefore, legal notice was issued to the Respondent on 02.07.2009 u/s 434(1)(a) of the Companies Act, 1956, through the counsel to the Respondent calling upon the Respondent to pay its dues. Notice has been served on the Respondent on 07.07.2009 as per Annexure ''F'' to the petition. The Respondent has been served with notice as per the postal acknowledgement produced by the Petitioner. The Respondent, despite notice has not repaid the amount and has failed and neglected to pay the said sum that is legitimately due to the Petitioner and has withheld payment to the Petitioner without any justification, Therefore, the Respondent is liable to pay interest to the Petitioner on the sum due and outstanding at the rate of 24% per annum from the due dates of the respective challan-cum-tax invoices till the date of payment, for which the Petitioner had made a demand. The Respondent is not capable of discharging its debts in the normal course of business and is liable to be wound up. The Respondent has failed to respond to the legal notices issued by the Petitioner and has also failed to comply with the demand made therein, inspire of expiry of the mandatory 21 days period. The very fact that the Respondent has allowed the debts to grow to a tune of Rs. 46,25,495.35 Ps., reflects upon their patent disregard and indifference leading to inability to pay and wherefore, the petition was filed for winding up of the Respondent - Company u/s 433(e) of the Act along with the documents referred to in the petition.

2.2 The petition was resisted by the Respondent by filing statement of objections and additional statement of objections.

2.3 The Respondent in the Petition - Appellant herein filed the statement of objections averring that the petition is not maintainable in law and does not merit any consideration whatsoever. The various claims made by the Petitioner in the petition are inherently contradictory. The Petitioner has miserably failed to verify the correctness of the averments made in the petition and based upon the misconceived assumptions, the Petitioner has wrongfully filed the petition against the Respondent. It is contended by the Respondent that the petition deserves to be dismissed for the following reasons:

a. That the Respondent is a solvent and profitable company having profits much in excess of the amount alleged to be due to the Petitioner, Therefore, the Respondent does not deserve to be wound up.

b. That the very amount alleged to be due from the Respondent to the Petitioner is incorrect.

c. That there exists no admission of liability by the Respondent of the amounts alleged to be due to the Petitioner.

d. That various amounts claimed by the Petitioner have already been paid despite which the Petitioner is making wrongful claims. There exist disputes as regard amounts payable, if any, by the Respondent to the Petitioner.

e. That larger issues / disputes involved in the matter require detailed trial / evidence, which cannot be permitted in the captioned proceedings; and

f. The Petitioner is attempting to coerce the Respondent to make payment of amounts that the Respondent is not even due to the Petitioner.

2.4 It is further averred that the Respondent is suffering damage and loss in defending the petition owing to the willful and negligent action of the Petitioner in fifing the petition. It is averred that the various averments made in the petition are incorrect and the true and actual facts and circumstances relating to the business relationship between the Petitioner and the Respondent have been stated in the objections statement as under:

2.4.1 The Respondent is a Company incorporated under the provisions of the Act and it was incorporated on 08.01.2007. The Respondent is involved in the business of manufacturing and distribution of automotive paints, coating solutions, paint ancillaries, equipments and paint consumables and has achieved leadership in the paint business and is renowned for its excellent backup service on product, technology and usage. The Respondent is an authorized distributor of MIPA AG, Germany. The major customers of the Respondent includes Automobile Corporation of Goa Limited (ACGL), Shree Damodar Coach Craft Pvt. Ltd., Goa, Tech-Force Composite Pvt. Ltd., Paint lines (Kerala), SRS (Bangalore), Bangalore Body Builders, KMS Coach (Bangalore), SA Autocraft and etc. The Respondent has achieved a steady growth in its business right from its inception till date. The annual turnover of the Respondent during 2007-2008 was Rs. 10,41,01,378/-. The annual turnover of the Respondent during 2008-2C09 was Rs. 11,49,76,012/-. The net-worth of the Respondent is Rs. 3,76,34,944/-. The income tax returns of the Respondent for the assessment year 2008-2009 have been produced as per Annexure ''R1'' to the objections statement. It is further averred that the Petitioner has calculated the total amounts due to it based on the self serving assumption that Alphagam, the proprietorship concern, has merged into the Respondent and consequently, the alleged liabilities of Alphagam, the proprietorship concern, has merged into the alleged liabilities of the Respondent. On that basis, the Petitioner has included approximately a sum of Rs. 14,29,916/into its total claim against the Respondent. On the said ground alone, the petition is liable to be dismissed.

The averment made in the petition that the Respondent is not capable of discharging debts due by it in the normal course of business and is liable to be wound up has been denied. It is further averred that the Respondent is not liable to pay any amount to the Petitioner as claimed in the petition. The Petitioner is liable to pay various amounts to the Respondent on various counts such as computation and collection of excess Excise duty, Central Sales Tax on freight charges, supply of substandard quality material etc., and the Respondent is in the process of initiating appropriate claims against the Petitioner. It is further averred that the Petitioner has filed the petition with malicious intent of harassing the Respondent despite being aware of the fact that no amount is outstanding or pending due for payment by the Respondent. The Petitioner, despite being aware of the existence of Alphagam, the proprietorship concern, has deliberately joined the amounts allegedly due from Alphagam, the proprietorship concern, in its alleged claim against the Respondent. The claim of the Petitioner is disputed by the Respondent arid wherefore the petition is liable to be dismissed.

2.5 Additional statement of objections was filed by the Respondent averring that the same was filed in addition and without prejudice to the statement of objections filed earlier by the Respondent. It is averred that the Petitioner has created confusion with respect to the amount allegedly payable by Alphagam, the proprietorship concern and the amount allegedly payable by the Respondent and requisite clarification in that regard has been furnished. It is averred that the total amount allegedly payable by Alphagam to the Petitioner was Rs. 13,02,128/-. The said payment arose from the Goa operations and the Bangalore operations of Alphagam. The amount payable by the Goa operations of Alphagam was Rs. 7,35,496/- vide invoices bearing Nos. 45, 49, 51, 54, 55, 56, 67, 69, 71 and 72, drawn between May 05, 2007 and May 30, 2007, In relation to the aforementioned invoices and the amounts payable there under, Alphagam (Goa) has already made payment to the Petitioner. The payment working sheet in relation to the payments made by Alphagam to the Petitioner in respect of the. aforementioned invoices has been produced as per Annexure ''R5'' and the bank statements corresponding to payments denoted in Annexure ''R5'' have been produced as per Annexure ''R6'' to the additional statement of objections. It is further averred that the amount allegedly payable by the Bangalore operations of Alphagam was Rs. 5,66,632/- vide invoices bearing Nos. 286, 297, 311, 314, 316, 318, 325, 326, 334 and 335 drawn between March 02, 2007 and March 27, 2007. From the aforementioned amount, a sum of Rs. 23,692/-relating to the invoice bearing No. 335 has been incorrectly inserted by the Petitioner, given that such invoice was never handed over to the Petitioner. In relation to the aforementioned invoices and the amounts payable there under, Alphagam has already made payments to the Petitioner. The payment working sheet in relation to the payments made by Alphagam to the Petitioner in respect of the aforementioned invoices, has been produced as per Annexure ''R7'' to the additional statement of objections. The particulars regarding the purchase and payment mane by the Respondent is enumerated in the additional objections statement. It is also averred that the goods worth approximately Rs. 4,50,000/- dispatched by the Petitioner to the Respondent -Company were fraught with manufacturing defects and were consequently discarded by the Respondent as dud materials. Owing to supply of such defective materials to the Respondent and non-replacement of the defective materials, the Respondent suffered considerable hardship and loss. It is further averred that an amount in excess of Rs. 21,46,962/- was also paid to the Petitioner by Alphagam on behalf of the Respondent. In view of the same, the Petitioner and the Respondent arrived at a consensus that no further payment was required to be paid by the Respondent to the Petitioner against invoices detailed by the Petitioner and wherefore, the petition was liable to be dismissed.

2.6 In response to the statement of objections and additional statement of objections filed by the Respondent, the Petitioner has filed rejoinder averring that the Respondent has stated unnecessary and irrelevant facts in order to confuse this Court with regard to the present dispute at hand. The averment made in the objections statement that some amounts that form the subject matter or the dispute were allegedly owed by a Proprietorship concern named M/s. Alphagam and not the Respondent is incorrect by virtue of the records submitted along with the main petition. The contention of the Respondent that it has paid the Petitioner ail sums due as per Annexure ''R5'' and to the additional statement of objections is denied as false as the said invoices and corresponding bank statements are not the subject matter of the claim made by the Petitioner. It is further averred that soma payments have been received by the Petitioner on multiple invoices vide one cheque and it is common business practice to do so. There is no dispute that cumulative payments have been made on invoices raised on the Respondent and also there is no dispute that the account maintained is a running account. All amounts paid are adjusted as invoices as instructed by the paying party, by the Respondent. The averment made to the effect that cumulative payments were adjusted to various other accounts is false and untenable. It is averred that admittedly there is another Company named OHM Polytech Private Limited, which deals with the same nature of business, however, it is totally independent and has its own distinct corporate existence and none of its claims have been agitated in the petition. At no point of time, has the Petitioner or its Directors instructed the Respondent to pay sums clue to the Petitioner to OHM Polytech Pvt. Ltd. There is no substance in any contention which alleges that OHM polytech and the Petitioner are one and the same or even sister concerns for that matter. The averment made in the objections statement that the Petitioner is indulged in the practice of excessive invoicing with respect to Central Sales Tax on freight charges, computation of excess Excise duty is denied and it is averred that the said allegation is an obvious afterthought without any basis, made merely to deny the lawful claims of the Petitioner. It is further averred chat at no point in time the goods supplied to the Respondent were rejected for being defective. The Respondent has neither informed the Petitioner that the goods supplied were discarded as dud materials nor made any claim regarding defective goods against the Petitioner. The Respondent over 2 to 3 years, has continued to buy goods from the Petitioner, without any complaint whatsoever. There is no bona fide or legitimate dispute of the sums due from the Respondent to the Petitioner. The Respondent is evidently trying to divert the attention of the Hon''ble Court from the merits of the present dispute by making false claims. The contention of the Respondent that there was a double payment of Rs. 39,695/- against invoice No. 161 dated 30.07.2007 is incorrect. Both payments of Rs. 4,33,104/- and Rs. 2,44,208/- have been reflected to the credit of the Respondent as per Annexure ''E'' to the rejoinder. However, the dispute is primarily concerned with the balance of the amount due to the Petitioner from the Respondent on a running account. The Respondent has never pointed out any error with regard to the raising of invoices and payments. The Respondent agreed for the prices, quantities and trading practices offered by the Petitioner apart from taking delivery of the goods sent under the Invoices. There is no merit in the allegation that the Petitioner owes money to the Respondent since the Occasion for that state of affairs has not arisen and the Petitioner was the supplier of paint and other chemicals to the Respondent and it was the Respondent who was always owed money to the Petitioner

2.7 The learned Company Judge, after hearing the learned Counsel for the parties, by order dated 05.01.2011, held that the commercial relationship between the parties is not in dispute. The transaction between the parties was between 2006 and 2008 and during the said period, the Respondent had not raised any objection with regard to the quantity supplied and the quality of goods. The Respondent had not raised any objection when the Petitioner paid the excise duty to the concerned authorities on the supplies made to the Respondent. The payments made by the Respondent is not disputed by the Petitioner and the Petitioner has given deduction to alt the payments made by the Respondent. According to the Petitioner, after giving deduction to all the payments made by the Respondent, they are still due in all a sum of Rs. 46,25,495.35 Ps. towards principal and interest In so far as the interest part of it is concerned, the Respondent - Company has disputed the same and the said issue is required to be examined at the final stage. The learned Company Judge held hat excluding the interest part, there is prima facie evidence to show that the Respondent is still due towards the principal, that is to say the value of the supplies made by the Petitioner and wherefore, the Petitioner has made out a prima facie case for admission and accordingly, admitted the petition. However, the advertisement was deferred by six weeks from the date of order (05.01.2011). Being aggrieved by the said order dated 05.01.2011, this Original Side Appeal has been filed by the Respondent in the Company petition.

We have heard the learned counsel appearing for the Appellant (Respondent in the Company Petition) and the learned Counsel appearing for the Respondent (Petitioner in the company petition).

The learned Counsel appearing for the Appellant has taken us through the averments made in the appeal as also the objections statement filed by the Appellant (Respondent in the company petition) and various documents produced along with the objections statement and submitted that there is serious dispute with regard to the materials supplied by the Respondent herein (Petitioner in the company petition) and the Appellant is not liable to pay debt to the Respondent so as to constitute cause of action for the Respondent to initiate proceedings u/s 433(e) and (f) of the Act. The learned Counsel submitted that the materials were supplied by the Respondent to M/s. Alphagam, proprietorship concern and not the Appellant and wherefore, the Appellant is not liable to pay the said amount. The learned Counsel has taken us through the various invoices as also the documents produced by the Appellant before the learned Company Judge and submitted that since there is serious dispute about the fact as to whether the Appellant is due to pay any debt to the Respondent herein, the question of raising any presumption u/s 434 of the Act would not arise. The learned Counsel further submitted that the Appellant is a solvent Company and has taken us through the documents evidencing the financial position of the Appellant and submitted that it is financially sound and since there is dispute about the amount claimed by the Respondent herein, the amount has not been paid and it is not admitted that the Appellant owes any debt to the Respondent. In support of his contention, he has relied upon the following judgments:

Mediquip Systems Pvt. Ltd. Vs. Proxima Medical System GMBH,

Pradeshiya Industrial and Investment Corporation of U.P. Vs. North India Petrochemical Ltd. and Another,

Indo Swiss Jewels Ltd. Vs. HMT Watches Ltd.,

Madison Communications Pvt. Ltd. Vs. Som Distilleries and Breweries Ltd.,

IBA Health (I) Pvt. Ltd. Vs. Info-Drive Systems Sdn. Bhd.,

The learned Counsel appearing for the Respondent Herein (Petitioner in the company petition) submitted that since two to three years prior to filing of the Company petition, the Respondent was supplying paints to the Appellant herein (Respondent in the company petition) by raising invoices. The goods have been received and payment has not been made by the Appellant. All the payments made by the Appellant have been taken into account and despite service of notice u/s 433 (e) of the Act, the Appellant did not choose to pay the outstanding amount nor replied to the said notice and wherefore, there is presumption that the Appellant is unable to pay the debt. The learned Counsel further submitted that the material on record would clearly show that it was at the instance of the Appellant, invoices were raised in the name of the Appellant and M/s. Alphagam, the proprietorship concern, has merged into the Appellant and consequently, the alleged liabilities of M/s. Alphagam have also merged into the Appellant. Admittedly, the amount due has not been paid by the Appellant despite service of notice and wherefore, prima facie case is made out for admitting the company petition and the order of the learned Company Judge is justified.

We have given careful consideration to the contentions of the learned Counsel appearing for the parties and scrutinized the material or. Record,

The principles to be borne in mind while considering the petition for winding up of a Company u/s 433(e) and (f) and Section 434 of the Act are well settled. It is unnecessary to refer to all the judgments cited by the learned Counsel appearing for the Appellant as in the latest judgment of the Hon''ble Supreme Court produced by him in the case of IBA Health (I) Pvt. Ltd. Vs. Info-Drive Systems Sdn. Bhd., , all the earlier decisions have been referred to and the principles to be borne in mind while considering the petition u/s 433(e) and (f) read with Section 434 of the Act have been considered and it has been laid down by the Apex Court as follows:

The question that arises for consideration is that when there is a substantial dispute as to liability, can a creditor prefer an application for winding up for discharge of that liability? In such a situation, is there not a duty on the Company Court to examine whether the company has a genuine dispute to the claimed debt? A dispute would be substantial and genuine if it is bona fide and not spurious, speculative, illusory or misconceived. The Company Court, at that stage, is not expected to hold a full trial of the matter. It must decide whether the grounds appear to be substantial. The grounds of dispute, of course, must not consist of some ingenious mask invented to deprive a creditor of a just and honest entitlement and must not be a mere viragoes. It is settled law that if the creditor''s debt is bona fide disputed on substantial grounds, the court should dismiss the petition and leave the creditor first to establish his claim in an action, lest there is danger of abuse of winding up procedure. The Company Court always retains the discretion, but a party to a dispute should not be allowed to use the threat of winding up petition as a means of forcing the company to pay a bona fide disputed debt.

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The above mentioned decision was later followed by this Court in Madhusudan Gordhandas and Co. Vs. Madhu Wollen Industries Pvt. Ltd., . The principles Said down in the above mentioned judgment have again been reiterated by this Court in Mediquip Systems Pvt. Ltd. Vs. Proxima Medical System GMBH, wherein this Court held that the defense raised by the Appellant-company was a substantial one and not mere moonshine and had to be finally adjudicated upon on the merits before the appropriate forum. The above mentioned judgments were later followed by this Court in Vijay Industries Vs. NATL Technologies Limited, .

The principles laid down in the above mentioned cases indicate that 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 and non-payment of the amount of such a bona fide disputed debt cannot be termed as "neglect to pay" so as to incur the liability u/s 433(e) read with Section 434(1)(a) of the Companies Act, 1956.

Appellant company raised a contention that it is commercially solvent and, in such a situation, the question may arise chat the factum of commercial solvency, as such, would be sufficient to reject the petition for winding up, unless substantial grounds for its rejection are made out. A determination of examination of the company''s insolvency may be a useful aid in deciding whether the refusal to pay is a result of the bona fide dispute as to liability or whether it reflects an inability to pay, in such a situation, solvency is relevant not as a separate ground. If there is no dispute as to the company''s liability, the solvency of the company might not constitute a stand alone ground for setting aside a notice u/s 434 (1)(a), meaning thereby, if a debt is undisputedly owing, then it has to be paid. If the company refuses to pay on no genuine and substantial grounds, it should not be able to avoid the statutory demand. The law should be allowed to proceed and if demand is not met and an application for liquidation is filed u/s 439 in reliance of the presumption u/s 434(1)(a) that the company is unable to pay it debts, the law should take its own course and the company of course will have an opportunity on the liquidation application to rebut that presumption.

An examination of the company''s solvency may be a useful aid in determining whether the refusal to pay debt is a result of a bona fide dispute as to the liability or whether it reflects an inability to pay. Of course, if there is no dispute as to the company''s liability, it is difficult to hold that the company should be able to pay the debt merely by proving that it is able to pay the debts. If the debt is an undisputedly owing, then it should be paid. If the company refuses to pay, without good reason, it should not be able to avoid the statutory demand by proving, at the statutory demand stage, that it is solvent. In other words, commercial solvency can be seen as relevant as to whether there was a dispute as to the debt, not as a ground in itself, that means it cannot be characterized as a stand alone ground.

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On a detailed analysis of the various terms and conditions incorporated in the deed of settlement as well as the compromise deed and the averments made by the parties, we are of the considered view that there is a bona fide dispute with regard to the amount of claim made by the Respondent company in the company petition which is substantial in nature. The Company Court while exercising its powers under Sections 433 and 434 of the Companies Act, 1956 would not be in a position to decide who was at fault in not complying with the terms and conditions of the deed of settlement and the compromise deed which calls for detailed investigation of facts and examination of evidence and calls for interpretation of the various terms and conditions of the deed of settlement and the compromise entered into between the parties, A company petition cannot be pursued in respect of contingent debt unless the contingency has happened and it: has become actually due. In the absence of any evidence, it is not possible to conclude that M/s. Solutions Protocol Sdn. Bhd. had in fact paid any amount to the Appellant company towards commission charges due to the Respondent company before the cut off date. A legal notice prior to the institution of the company petition could be served on the company only in respect of a debt (then due) and a company could be wound up only if it was unable to pay its debts. In this case, there is a bona fide dispute as to whether the amount claimed is presently due and if, at ail, it is due, whether the Appellant company is liable to pay the sum unless they have received the same from M/s. Solutions Protocol Sdn. Bhd. Where the company has a bona fide dispute, the Petitioner cannot be regarded as a creditor of the company for the purposes of winding up. "Bona fide dispute" implies the existence of a substantial ground for the dispute raised. Where the Company Court is satisfied that a debt upon which a petition is founded is a hotly contested debt and also doubtful, the Company Court should not entertain such a petition. The Company Court is expected to go into the causes of refusal by the company to pay before coming to that conclusion. The Company Court is expected to ascertain that the company''s refusal is supported by a reasonable cause cr a bona fide dispute in which the dispute can only be adjudicated by a trial in a civil court. In the instant case, the Company Court was very casual in its approach and did not make any endeavour to ascertain as to whether the company sought to be wound up for non-payment of debt has a defense which is substantial in nature and if not adjudicated in a proper forum, would cause serious prejudice to the company.

We may notice, so far as this case is concerned, there has been an attempt by the Respondent company to force the payment of a debt which the Respondent company knows to be in substantial dispute. A party to the dispute should not be allowed to use the threat of winding up petition as a means of enforcing the company to pay a bona fide disputed debt. A Company Court cannot be reduced as a debt collecting agency or as a means of bringing improper pressure on the company to pay a bona fide disputed debt. Of late, we have seen several instances, where the jurisdiction of the Company Court Is being abused by filing winding up petitions to pressurize the companies to pay the debts which are substantially disputed and the Courts are very, casual in issuing notices and ordering publication in the newspapers appropriate Court in respect of the injury to reputation caused by maliciously and unreasonably commencing liquidation proceedings against a company and later dismissed when a proper defense is made out on substantial grounds. A creditor''s winding up petition implies insolvency and is likely to damage the company''s creditworthiness or its financial standing with its creditors or customers and eyen among the public,

It is clear on scrutiny of the material on record including the averments made in the petition, objections statement, additional objections statement filed by the Respondent (Appellant herein), rejoinder filed by the Petitioner (Respondent herein) and the documents produced along with the said pleadings that the fact that there was commercial transaction between the Petitioner and the Respondent is not disputed. Though it is contended by the Respondent that the Proprietorship concern, to which the materials were being supplied by the Petitioner has not converted itself into a Company and the said private proprietorship concern is still in existence, the same is not substantiated. On the other hand, copy of e-mail dated 03.06.2007 produced along with the company petition would clearly show that it was at the instance of the Respondent, the Petitioner was requested to raise all the invoices in the name of Alphagam Coating Solutions Private Limited. After the receipt of the said e-mail on 03.06.2007, invoices have been drawn in favour of the Respondent - Company. In any view of the matter, though it is contended by the Respondent that part of the materials supplied by the Petitioner pertains to the proprietorship concern, It is not disputed that the consignments were also given to and supply of goods was made to the Respondent - Company as averred in the petition. Therefore, the said contention is not substantiated and the material on record would clearly show that the Petitioner has ''supplied'' the goods to the Respondent and the Respondent has failed to pay the price of the same. The Respondent, at any point of time, has not chosen either to reject or return the goods supplied by the Petitioner on the ground that there was defect in the goods supplied by the Petitioner or that the same were of substandard quality. On the other hand, what is contended by the Respondent is that certain payments have been made to the Petitioner for supply of material and the same has not been taken into account and there is dispute regarding the balance amount. However, the material on record would clearly show that after taking all the payments made by the Respondent into account, the total amount, which is due to be paid by the Respondent would come to 46,25,495=35Ps., including interest as claimed at 24% per annum in the petition. It is not disputed that notice before filing the petition under 434(1)(a) of the Act was issued to the Respondent on 02.07.2009 narrating the facts and averring that the Respondent is unjustifiably withholding the payments lawfully due to the Petitioner and the only reason for nonpayment of the said dues is that the Respondent is commercially insolvent to pay the lawful dues of the Petitioner. The same averments have also been made in the company petition seeking for dissolution of the Respondent - Company. Receipt of the notice has been proved by producing the acknowledgement, which shows that the said notice dated 02.07.2009 has been served upon the Respondent. However, admittedly no reply has been given by the Respondent to the said notice- It is the contention of the Respondent that the Respondent is commercially viable and is making progress year by year and its profit is increasing year by year, in support of which fact, balance sheets have been produced. In view of the fact that legal notice has not been replied by the Respondent and the material on record, which shows that the Respondent owed debt to the Petitioner, It is clear that it is not open to the Respondent to contend that though it is financially viable and is able to pay the debt, it will not pay the debt due to the Petitioner, as held by the Hon''ble Supreme Court in IBA Health (I) Pvt. Ltd.''s case culled out above. Though it is contended by the Respondent that it is not liable to pay the debt as alleged by the Petitioner and has furnished particulars of the goods supplied by the Petitioner, no material is produced by the Respondent to substantiate payment made by it or to show that there is genuine dispute about the amount to be paid by it in respect of the goods supplied and wherefore, prima facie case is made out that the Respondent''s unable to pay the debt as it has not replied to the notice issued prior to filing of the company petition and the defense taken by the Respondent cannot be said to be genuine or bona fide as the same is not substantiated. It is well settled that at the stage of admission of a company petition, detailed enquiry need not be made and it is to be found out as to whether the Petitioner has made out a prima facie case regarding claim for payment of debt by the Respondent so as to admit the petition so that a detailed enquiry may be held thereafter by recording evidence. At the stage of considering the petition for admission, the Company Court is required to find out as to whether there is a genuine dispute with regard to the debt claim. There is no merit in the contention of the learned Counsel appearing for the Appellant (Respondent in the company petition) that there is no averment made in the petition to the effect that the Respondent is not financially viable or unable to pay the debt as it is averred in paras 12 and 13 of the company petition that: the Respondent has no intention to pay its dues; the Respondent -Company''s failure to pay the debts is for the reason that it is unable to repay its lawful debts; the Respondent has become financially unviable and commercially insolvent and is unable to pay its debts; the Respondent is not economically viable and is a threat to commercial morality and wherefore, the Respondent is liable to be wound up under the provisions of the Companies Act. Therefore, it is clear that a prima facie case is made out for admission of the Company Petition and the impugned order passed by the learned single Judge admitting the above petition cannot at all be said to be suffering from any error or illegality as to call for interference in this appeal. Accordingly, we hold that this appeal is devoid of merit and pass the following Order:

The appeal is dismissed.