IN THE HIGH COURT OF KERALA 

K. L. NARASIMHAN and ANIL XAVIER, Advocates, for the petitioner. 

M. PATHROS MATHAI and MARIAM MATHAI, Advocates, for the respondent. 

JUDGMENT 

P. K. BALASUBRAMANYAN, J. - This is an application under section 433 (e) read with section 439 (1)(b) of the Companies Act praying that the Asianet Satellite Communications Limited be wound up on the ground that the company is unable to pay its debts. The applicant is a financial consultant. According to him his services were utilised by the company. He was to be paid remuneration for his services rendered at the rates agreed upon. The services expected to be rendered by the applicant and the percentage of remuneration payable to him by the company are reflected by the minutes of the fifth meeting of the Board of directors held on 23.6.1993. The applicant rendered services and he submitted an invoice, dated 11.3.1995 claiming remuneration at Rs. 67,00,000. Subsequently, on 13.3.1995, he served the invoice along with a covering letter to the managing director of the company. The amount was not paid. Since the debt due to the applicant was not paid inspite of the notice of demand served on the company, it has to be presumed in terms of section 434 (1)(a) of the Companies Act that the company is unable to pay its debts and hence the company is liable to 'be wound up. The company to which notice was initially issued by this court filed a counter affidavit questioning the maintainability of the company petition and pleading that there was no debt due from the company to the applicant. The authenticity or finality of the minutes of the meeting of the Board of directors of the company relied on by the applicant was questioned. It was contended that even if there was any such decision, the applicant had not rendered any service for getting the finance available within the time stipulated in the resolution, and no amount was payable to the applicant. It was also contended that the applicant had been paid remuneration, in fact in excess of what was due to him for to services he had rendered. It was also contended that there was no proper notice demanding payment of the amount delivered to the company by the applicant and on that short ground the application was liable to be dismissed. It is also contended that the allegation that the company was not commercially sound and not solvent was made without bona fides. The applicant filed a reply reiterating his position that he was a creditor to whom amounts were due from the company and the debt due to whom has not been discharged by the company inspite of the required notice of demand. 

2. I may notice here that there are allegations and counter allegations in the pleading somewhat vituperative in nature; but I am not dealing with them in extenso here. But I must notice the contention raised on behalf of the applicant that the very defence sought to be put forward by the company lacks bona fides. The necessary pleading in that behalf will be considered if necessary at the relevant stage in that context. 

3. The two points that arise for consideration are whether there has been a proper demand made under his hand by the applicant requiring the company to pay the sum due to the applicant and the company has for three weeks thereafter neglected to pay the sum and whether on the materials available, it could be held that a debt was due to the applicant from the company and this was not a disputed claim which has to be adjudicated elsewhere. The parties have not adduced any oral evidence and they submitted earlier before this court that the matter be argued on the basis of the materials available. It is on that basis that when the matter came up, the matter was heard. 

4. In Ofu Lynx Ltd. v. Simon Carves India Ltd. (1971) 41 Comp Cas 174 (Cal), the Calcutta High Court held that the notice under section 434 of the Companies Act was a serious matter and was one that was fraught with grave consequences. The effect of the notice validly given under the provision was to raise a presumption under the Companies Act as to the inability of the company to pay the debt and its insolvency rendering the company liable to the extreme penalty of losing its very existence and being compulsorily wound up by the court. Such a notice has necessarily to be strictly construed, and the notice must comply with the requirements of the statute. All that the statute required was that the notice must be in respect of an existing and presently debt which exceeded the sum of Rs. 500. It was not necessary to demand the exact amount ultimately found payable in the notice so served and the failure to claim the exact amount would not make the notice invalid. The court further held that it was well settled that if there was a bona fide dispute with regard to the debt which formed the subject matter of the winding up proceeding, the court would not entertain any winding up petition on the basis of the disputed debt and will leave the parties to resolve the dispute in appropriate proceedings. Whether there was any bona fide dispute with regard to any debt claimed or not will necessarily depend upon the facts and circumstances of the particular case. The disputes raised or sought to be raised may not be bona fide and would not necessarily make the debt a disputed one. Merely seeking to raise certain disputes for putting off liability for payment of the debt or creating a kind of defence to the claim, will not make the debt a disputed one and the dispute sought to be raised, if it appears to be one created or manufactured for the purpose of merely defending the proceeding, such a defence could not be considered to be bona fide and would be of no avail in resisting the winding up petition. 

5. In B. Viswanathan v. Seshasayee Paper and Boards Ltd. (1997) 3 Comp LJ 209 (Mad) (1992) 73 Comp Cas 136 (Mad), the Madras High Court held that unless the statutory notice served on a company under section 434 of the Companies Act is in conformity with the mandatory requirement of section 434 (1)(a) of the Act, the presumption under the section as to the company's inability to pay its debts cannot be raised. 

Where the notice is not served on the company at its registered office, but on its managing director, the notice does not conform to the mandatory requirements of section 434 (1)(a) of the Act. But the court took care to point out that however the non-availability of the presumption does not preclude a petitioner in a petition for winding up from proving by other evidence that the company is unable to pay its debts. The court has also noticed that where the debt is disputed, the proper forum to approach is the civil court and in a proceeding for winding up a company, a detailed investigation and adjudication of the dispute should be avoided. 

6. The serving of a notice for consultancy charges on the managing director of the company with a request to settle the dues expeditiously cannot be considered to be service of a demand under the hand of a creditor requiring the company to pay the sum due within the meaning of section 434 (1)(a) of the Companies Act. What is needed to draw the presumption arising under
section 434 (1)(a) of the Companies Act is a formal demand couched as a demand calling upon the company to pay the debt due. No decision was brought to my notice which enables me to take the view that even the handing over of invoice of this nature with a request to pay can be construed as a notice within the meaning of section 434 (1)(a) of the Companies Act. On the facts of this case, I am of the view that the applicant is not entitled to have the presumption available under section 434 (1)(a) of the Act raised in support of his claim for winding up under section 433 (e) of the Companies Act. 

7. Notwithstanding the non-availability of the presumption, as observed by the Madras High Court in B. Viswanathan v. Seshasayee Paper and Boards Ltd. (1997) 3 Comp LJ 209 (Mad): (1992) 73 Comp Cas 136 (Mad) referred to earlier, it may be open to the applicant to prove by other evidence that the company was unable to pay its debts. No evidence is adduced in this case to enable the court to come to a finding in favour of the applicant in that regard. No doubt, the correspondence and other materials relied on by the applicant may indicate that there was some resource crunch faced by the company. But that is different from saying that the company was unable to pay its debts, and on that ground, it must be wound up. 

8. The other aspect is whether there is a bona fide dispute in this case regarding the liability itself,.and hence the appropriate forum to settle the dispute is not the winding up court, but the civil court. Learned counsel for the applicant attempted to argue that the defence sought to be raised or the attempt to dispute the liability itself was not bona fide and has to be ignored. The deviations in the case of the company with reference to some of the correspondence and the pleadings in the counter affidavit were relied on by learned counsel for the applicant. It may be true that in certain aspects, the company does not appear to have a very consistent case. Though the company has questioned annexure A, the copy of the minutes relied on by the applicant, the company itself has not produced the approved minutes of that particular meeting to show that there was no understanding arrived at with the applicant regarding the payment of remuneration to the applicant for his making his services available to the company. But with all that, there is dispute between the company and the applicant regarding the extent of services rendered by the applicant and the amount due to the applicant from the company in that behalf. A sum of Rs. 30 lakhs appears to have been paid by the company to the applicant and the stand adopted by the company is that nothing more is due to the applicant since there had been no further services rendered by the applicant calling for payment of remuneration to the applicant. Though the actual amount of liability may not be relevant and all that is needed is the showing that the liability exceeds Rs. 500, in the circumstances of the case, it cannot be said that there is no bona fide dispute between the parties whether any amount at all is due to the applicant. Under such circumstances, I think that it is in expedient for this court in this summary proceeding to investigate that aspect and the proper forum to decide such a dispute would be the civil court. In Pradeshiya Industrial and Investment Corporation of U.P. v. North India Petrochemicals Ltd. (1994) 2 Comp LJ 50 (SC) : (1994) 3 SCC 348, the Supreme Court has indicated that if the defence to the winding up petition by a creditor raised was substantial, and the debt was prima facie disputed it was not expedient to order the winding up of a company under section 433 (e) of the Companies Act. The ratio of the said decision also induces me to find that grounds are not made out for allowing this application. 

9. Thus, for the reasons stated above, I am not satisfied that any ground is made out for winding up the company under
section 433 (e) of the Companies Act, at the instance of the applicant. I, therefore, dismiss the company petition. Taking note of the circumstances as a whole, I direct the parties to suffer their respective costs.