Desai, J.:— The appellants before us are the original petitioners in Company Petition No. 759 of 1983 and in the appeal they impugn the order of the learned Company Judge dismissing the petition. In order to appreciate the order and the appellants' contentions with respect thereto, a few facts may be noted.
2. The appellants have, in the winding up petition, claimed that an aggregate amount of Rs. 90,810.71 was due and payable by the respondents Company to them, being made up of the principal amount of Rs. 58,968/- and interest thereon as indicated in the particulars of claim, Exhibit ‘A’ to the Petition. To the Petition, the appellants had annexed correspondence between the parties consisting of the letter addressed to the respondents-Company on behalf of the appellants by their attorneys which is a letter dated 31st August 1982 and the reply of the respondents which is one dated 12th September 1982. The principal amount claimed by the appellants (original petitioners) is in respect of value of 300 kgs. of a chemical ‘Biodobydroxyquinoliner’ which was originally supplied by the respondents Company and which was rejected by the appellants. By the said letter dated 12th September 1982, the Respondent Company appears to have accepted the rejection and promised to supply an equivalent quantity by the end of December 1982, failing which they promised to make repayment of the amount paid by the petitioners as cost of the rejected lot of the said chemical. It may be mentioned that the appellants' Attorneys' letter dated 31st August 1982 specifically called upon the respondents-Company to repay the said amount of Rs. 58,968/- (the principal amount indicated in the particulars of claim, Exhibit ‘A’ to the Petition) and mentioned that the letter should be treated as notice under section 434 of the companies Act, 1956.
3. It appears to have been urged before the learned Company Judge that there was no warrant for the appellants' claim of interest at the rate as indicated in Exhibit ‘A’ to the Petition, which is also the rate as mentioned in the statutory notice above-referred to Based upon the plea, the following order as reflected in the Minutes has been passed by the learned Company Judge:
“The statutory notice claims interest at the rate of 18 c. There is no basis for such rate. The refusal of the Company to honour the statutory notice is justified. Petition dismissed. No order as to costs.”
4. Shri Tulzapurkar appearing on behalf of the appellants has impugned the said order submitting that even assuming the claim in the statutory notice as to interest as also in the winding-up petition (Ex. ‘A’) was or could be held to be totally unjustified, if the other portion of the claim which is far in excess of Rs. 500/- was held to be prima facie good dismissal of the petition as well as the expression of the opinion that the statutory notice was improper were not correct in law.
5. Under section 433 of the Companies Act, one of the grounds on which a Company could be sought to be would up by the Court is when it is unable to pay its debts. Section 434 raises a presumption and provides that company is deemed to be unable to pay its debts if a creditor to whom the company is indebted in a sum exceeding five hundred rupees has served a notice on the company requiring the company to pay the sum and the company has failed for a period of three weeks to comply with the said requisition.
6. The short question we are considering is the position of the notice or of the subsequent petition when a part of the claim made by the creditor is seriouly in dispute, but the remaining portion which prima facie would appear to be in order exceeds the limit of Rs. 500/- indicated in section 434. Shri Tulzapurkar submitted that the position is not res integra being concluded by the decisions both of the English Courts and of the Calcutta High Court, which decisions have taken view contrary to the view which found favour with the learned Company Judge. Our attention was invited to these decisions and it becomes necessary therefore to refer to them.
7. In point of time, the first of the decisions in the decision given by Plowman J. in In re Tweeds Garages Ltd.,1 The relevant observations are to be found at pages 413 and 414 of the report. An opinion has been expressed in the said judgment that it would be quite unjust to refuse a winding-up order to a petitioner who is admittedly owed moneys which have not been paid merely because there is a dispute as to the precise amount owing.
8. Almost to the same effect are the observations in Cardiff Preserved Coal and Coke Company v. Norton,2. A contention had been advanced before the appellate Court that the winding-up order which was being considered was bad because the creditor had demanded a sum of £628, and it appeared that he was entitled only to £411 7s. 9d. This argument has been decisively rejected by Lord Chelmsfore, L.C speaking for the Bench at page 410 of the report. It has been observed that even if the creditor has made a demand upon the company for payment of more than was due, that per se will not make the notice or the consequential winding up order bad or invalid, provided that there was a debt in exeess of £50 due to the creditor.
9. Both the above decisions have been cited and followed by a Single Judge of the Calcutta High Court in Ofu Lynx Ltd. v. Simon Carves India Ltd. . AIR 1970 Cal. 418. The learned Single Judge was considering the validity of a notice under section 434 of the companies Act, 1956, and the contention raised was that the notice must be deemed to be bad because a portion of the claim in respect of which notice had been given was disputed and prima facie the dispute was required to be upheld. It was observed:
“I, therefore, hold that notice under section 434 of the companies Act, 1956 will not be rendered invalid only because of the fact that the amount of debt mentioned in the notice may not be exactly the correct amount of the debt due, provided the amount mentioned in the notice includes the debt due and exceeds the sum of Rs. 500/-.”
10. In our opinion, the aforesaid decisions set out the correct principle and once we have reached the conclusion, it will have to be held that the dismissal of the winding-up petition on the basis indicated in the impugned order would be clearly bad and order required to be set aside. Merely because there could be a serious dispute as to the liability to pay interest at all or at the rate of 18% would not render the statutory notice invalid or result in a dismissal of the winding-up petition. The Company Judge was required to consider the claim of the petitioners in respect of the principal amount and to come to a conclusion whether or not there was any real substantial dispute with regard to the said claim. If there was a genuine and bonafide dispute, then certainly it was within his discretion and jurisdication to dismiss the petition and relegate the petitioners to claim the amount by a regular suit. However, he did not go into this aspect but chose to dispose of the winding-up petition by dismissing the same on an erroneous basis which we have earlier indicated. If that be so, the impugned order will be required to be set aside and the petition will now go back to the Company Judge for reconsideration of the position and to decide whether it is required to be admitted and whether further directions after admission are required to be given.
11. In the result, the appeal is allowed. The impugned order dismissing the winding-up petition is set aside. The winding-up petition will stand restored to the Company Judge who will proceed with the same at the stage it was on 11th July 1984 when the impugned order, which we have set aside, was passed. It will be open to the respondents, if so advised, to file affidavits opposing admision and to advance for the consideration of the Company Judge such contentions as may be available regarding the principal amount claimed in Exhibit ‘A’ to the Petition and mentioned in the statutory notice. In the circumstances of the case, the parties are directed to bear their own costs of the appeal. In view of this appellate order, there will be no order on the Notice of Motion No. 2131 of 1984. The parties will bear their own costs of the said Motion.
Order accordingly.