R.J Kochar, J.:— The petitioners have prayed for an order of winding up of the respondent-company under sections 433, 434 and 439 of the Companies Act, 1956, alleging failure on the part of the company to repay its debt to the tune of Rs. 6,06,24,539.15. It is the case of the petitioners that it had invested the aforesaid amount in the respondent-company by way of share application money. In a nutshell, the loan advanced by the petitioners to the respondent-company was treated as share application money in the books of account till a proper and legal share subscription agreement was entered into for allotment of shares by the company to the petitioners. Till such time, the said money remained as an advance with the company. It is alleged by the petitioners that in spite of repeated requests the company failed and neglected to enter into a share subscription agreement for allotment of shares to the petitioners. It called upon the respondent-company to return the said amount with interest at the rate of 24 per cent, per annum from the date of receipt of the said amount by notice dated August 14, 2000. By its reply dated August 31, 2000, the respondents contended that the petitioners were co-promoters of the company and that they had brought in the said amount as goodwill. The petitioners have denied the said contentions of the respondent-company and have demanded the aforesaid amount to be refunded which was given by the petitioners to the respondents as application money. According to the petitioners, the respondents had never issued any shares nor was any agreement entered into. According to the petitioners the project has failed and that no business activities had ever started. According to the petitioners, the company is heavily indebted to the petitioners as well as other creditors and that their liabilities are far in excess of its assets as reflected in the balance-sheet of the company which is making continuous losses and that it is not in a position to repay its liabilities in the ordinary course of business. It is further alleged that the company is commercially insolvent. In the aforesaid circumstances, the petitioners have prayed for a winding up order of the respondent-company.
2. On receipt of notice, the respondent-company has appeared and filed its affidavit in reply denying the various allegations and contentions of the petitioners. It is pointed out that Shri G.M Singh who is the managing director of the petitioners was included as a co-promoter in the respon-dent-company and that he had voluntarily agreed to bring in separately a sum of Rs. 2 crores in one lumpsum as goodwill. According to the respondents, it was a gentleman's understanding that no formal agreement would be required and hence no agreement was drawn upon. It is further mentioned in the affidavit that at the request of Shri Singh, the petitioners were also included as promoters of the respondent-company. Shri Singh, was inducted as a director of the respondent-company with effect from April 1, 1994. According to the respondents, Shri Singh was not initially designated as managing director but he carried out all the work as a managing director with effect from April 1, 1994. He was, however, officially appointed as managing director with effect from December 1, 1994, and continued as such till June 15, 1996.
3. According to the respondents the said Shri Singh was in control of the respondent-company during the crucial stage of the implementation of the project. He himself was operating the bank accounts of the respondent-company and he was in complete control of the affairs of the company. The respondents have denied that any amount is payable to the petitioners. It has further stated that in fact it is entitled to recover money from the petitioners and Mr. Singh and that criminal complaints were also filed against Shri Singh by the respondent-company. According to the respondents all amounts brought into the respondent-company by the petitioners were as and by way of promoters' contribution and not as any loan. The respondents have further denied the allegations that there was any agreement between them for entering into a subscription agreement as the aforesaid amount was brought by the petitioners as promoter's contribution. It is denied that any amount is due and payable to the petitioners. Shri Singh has filed his rejoinder on behalf of the petitioners.
4. Shri Kadam, learned counsel for the petitioners has submitted that the petitioners had applied for shares but no shares were issued to them and, therefore, the petitioners have become entitled to get back their money which is shown as share application money in the balance-sheets of the respondent-company. Since the offer was withdrawn by notice sent by the petitioners under section 6(2) of the Indian Contract Act, the contract stood revoked and the offer which was withdrawn by his clients cannot now be revived and, therefore, the petitioners are entitled to get their share application money invested by them with the respondent-company back with interest at the rate of 24 per cent, per annum. Shri Kadam has pointed out that in the accounts book and the balance-sheets, the liabilities of the said debt is admitted. In the balance-sheets the said amount is reflected as share application money.
5. On the other hand Shri Ardeshar, learned counsel for the respondent-company has vehemently opposed admission of the petition. According to learned counsel for the respondents, the petitioners were not entitled to claim back the said amount by naming the said amount as share application money. According to him, the said amount was a contribution made by the petitioner-company. It was, submitted by learned counsel that assuming that it was share application money, the respondent-company is prepared to allot shares in accordance with the provisions of section 41(2) of the Companies Act, 1956. It was also pointed out by him that the petitioners had never complied with the mandatory provisions of section 41(2) of the Act and unless they had done so, the company could not have allotted any shares in contravention of the provisions of the said section. By an affidavit dated September 6, 2001, the respondents have stated on oath that they are willing to allot to the petitioners shares of a value of the application money received by the company provided a proper and valid application is filed with the company in that behalf. Shri Ardeshar further submitted that in the absence of any application as required under section 41(2) of the Act, the respondents could not allot shares to the petitioners. It is further submitted by him that the petitioners are taking advantage of their own wrong of not making any application for allotment of shares in accordance with law. According to him, it was not a loan or advance and, therefore, the said amount could not be called as a debt as contemplated by the provisions of the Companies Act. It was a contribution as co-promoter made by the petitioner-company. According to learned counsel, there was no agreement to pay interest at any rate and, therefore, the claim of the petitioners for interest at the rate of 24 per cent, is not at all tenable. It would require evidence on the point whether there was an oral agreement of loan given by the petitioners to the respondent-company repayable with interest at the rate of 24 per cent, per annum. Shri Kadam has however, replied to the said contention of the respondent-company declining to accept the offer of allotment of shares as his clients had revoked the contract by the notice sent by them demanding the money back.
6. It is crystal clear from the petition as well as the affidavits that the claim of the petitioners is not an ascertained or liquidated one. What was the nature of the money given by the petitioner to the respondent-company requires scrutiny on the basis of evidence. According to the petitioners, it was a loan and that the respondent-company had treated it as share application money in its balance-sheets. There is no written agreement to pay interest at the rate of 24 per cent, per annum. The petitioners have computed their alleged loan with interest at the rate of 24 per cent, per annum. According to the respondents, the petitioners were co-promoters of the respondent-company and they had brought the said amount as contribution and, therefore, they were not entitled to get back any money in the garb of a loan given by them to the respondent-company.
7. From the interconnection between, the parties, it does appear that the petitioners might have agreed to invest the said amount in the respondent-company as co-promoters and had given the said amount towards the share application money. It is possible that both the parties had some oral understanding or agreement to treat the said amount as share application money and hence it is shown in the balance-sheet under the caption share application money. The fact and the allegations that the petitioners had applied for allotment of the shares but they were not allotted the shares, has been stoutly denied by the respondents. It is not disputed that there was no compliance with section 41(2) of the Companies Act on behalf of the petitioners. All these questions which have arisen in the petition definitely indicate, that the alleged debt is not an admitted or liquidated debt but has been bona fide disputed by the respondent-company.
8. The petitioners have already filed a civil suit in this court for recovery of the aforesaid alleged debt from the respondent-company. Though according to Shri Kadam, pendency of the civil suit is not a bar to maintain a company petition, according to me, since the petitioners have resorted to a legitimate civil remedy to recover their alleged debt, the present company petition cannot be entertained at all. It is well settled legal position that the company petition is a last resort for the parties and it must satisfy the prescribed conditions of the Companies Act. Winding up provisions cannot be used as a pressure tactics to recover an alleged debt for which a normal civil suit is always available to the claimants/creditors. The Supreme Court has always propounded this legal position that it would be a coercive and oppressive action on the part of the petitioners to file a company petition under sections 433, 434 and 439 of the Companies Act for the purpose of recovery of the alleged debt. Even, section 443 of the Act is very clear that a winding up petition cannot be used as a lever to recover the debt from the company. The petitioners having filed a regular suit for recovery of the debt they cannot be permitted to resort to this extraordinary remedy of winding up of the respondent-company. The Supreme Court has always mandated that the parties must resort to the legitimate civil remedy for recovery of the alleged debt and no company petition should be entertained for recovery of such debt which has been bona fide disputed by the respondent-company.
9. I am more than satisfied in the present case that the respondents have bona fide disputed the debt claimed by the petitioners and the petitioners have already resorted to the civil remedy and, therefore, the petition cannot be entertained. The petition, therefore, stands dismissed. The petitioners ought not to have filed the present company petition for winding up of the respondent-company having filed a civil suit for recovery of the same debt. The petitioners have abused the process of the court by filing the present petition as pressure tactics. The petitioners are, therefore, liable to pay costs to the respondent company quantified at Rs. 15,000.
10. The petition stands dismissed with posts as above.