N.V. Ramana, J.
1. The petitioner, namely, M/s. Bharat Overseas Bank Ltd., represented by its manager, has filed this company petition under Sections 433(e) and 439 of the Companies Act, 1956 (for short 'the Companies Act'), read with Rule 95 of the Companies (Court) Rules, 1959, for winding up of the respondent, namely, M/s. Saritha Synthetic and Industries Ltd., on the ground that it has become insolvent and is unable to pay its debts.
2. The factual matrix of the matter, lies in a very narrow compass, which runs thus :
The petitioner is engaged in the business of corporate financing. On March 9, 2001, the respondent, which is engaged in the business of manufacturing and process of grey cloth fabrics and linen, has requested the petitioner to sanction a short-term loan of Rs. 500 lakhs. The petitioner sanctioned the short-term loan of Rs. 500 lakhs to the respondent, repayable within 90 days, subject to the condition of the respondent furnishing personal guarantee of its managing director, corporate guarantee and pledge of shares. The respondent in token of availment of the said short-term loan, executed promissory note and furnished the personal guarantee of its managing director, corporate guarantee of M/s. Saritha Steel and Industries Ltd. and pledged 80 lakhs shares of Rs. 10 each of the respondent held by M/s. Sri Vasavi Holdings and Investments Ltd. in eight share certificates in physical form. The respondent did not repay the loan amount within the stipulated period of 90 days. However, at the request of the respondent, the petitioner, vide its letter dated June 12, 2001, extended the period of loan up to September 21, 2001, and requested the respondent to confirm the dues of the petitioner, which as on June 23, 2001, stood at Rs. 5,16,02,740. The respondent by its letter dated July 3, 2001, is said to have confirmed the dues of the petitioner. When the respondent failed and neglected to pay the dues even after the expiry of the extended period, the petitioner during April, 2002, and June, 2002, got the pledged shares transferred into its name in demat form. On May 11, 2002, the petitioner got issued legal notice through their counsel to the respondent, its managing director, and the guarantor. Upon receipt thereof, the respondent, vide its letter dated June 14, 2002, requested the petitioner to reschedule the loan, which was refused. Thereupon, the petitioner, vide letter dated June 27, 2002, through their counsel, got issued notice of sale of the pledged shares, to M/s. Sri Vasavi Holdings and Investments Ltd., with a copy thereof marked to the respondent. In reply to the said notice, the respondent addressed a letter on July 5, 2002, to counsel for the petitioner, assuring to submit a detailed proposal for settlement of the dues, and requested the petitioner not to sell the pledged shares. As the respondent failed to repay the dues, the petitioner filed an application under Section 19 of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short 'the Debts Recovery Act'), in O. A. No. 385 of 2002 before the Debts Recovery Tribunal, Bangalore, for recovery of the loan amount, against the respondent and its guarantors, to which the respondent filed its written statement.
3. On behalf of the respondent its manager (legal) has filed counter. The respondent admitted the availment of loan sanctioned by the petitioner and their furnishing of personal guarantee of their managing director, corporate guarantee of M/s. Saritha Steel and Industries Ltd. and pledge of 80 lakh shares of Rs. 10 each of the respondent held by M/s. Sri Vasavi Holdings and Investments Ltd. in eight share certificates in physical form as per the terms of sanction, towards security of the loan amount. It is stated that towards discharge of its liability, the petitioner got transferred the 80 lakhs pledged shares of Rs. 10 each into its name in demat form during April, 2002, and June, 2002. It is contended that at the time when transfer was effected, the face value of the shares of Rs. 10 was Rs. 8, and as such, the respondent had paid to the petitioner an amount of Rs. 640 lakhs, which is far in excess of the amount due and liable to be paid by the respondent to the petitioner, and the petitioner itself is due and liable to pay to the respondent an amount of Rs. 89,11,211. By reason of transfer of shares, the petitioner has become the major shareholder of the respondent, and the petitioner ceased to be the creditor of the respondent. Hence the company petition is not maintainable, and is liable to be dismissed.
4. The petitioner filed reply to the counter of the respondent. It is stated that the deponent of the counter has to prove his authorization to file the counter, and inasmuch as no authorization is filed, the counter filed by the deponent is liable to be rejected. It is stated that to secure the loan amount, 80 lakh shares of Rs. 10 each of the respondent held by M/s. Sri Vasavi Holdings and Investments Ltd., were pledged. It is stated that the petitioner being a financial institution is governed by the RBI guidelines, and having regard to the guidelines issued by the RBI in Circular DBOD No. Dir.BC.90/13.07.05/98, dated August 28, 1998, the banks were required to transfer the pledged shares into their names whenever the loan granted to the borrower exceeded Rs. 10 lakhs, and inasmuch as the loan granted to the respondent exceeded Rs. 10 lakhs, the petitioner got transferred the pledged shares into their name. It is further stated that the RBI guidelines stipulated exclusive and unconditional voting rights under such transferred shares in the banks. The petitioner had merely followed the RBI guidelines in the matter of transfer of shares into their name. Inasmuch as the shares were pledged by the respondent as security with the petitioner, it is stated that they continue to remain as security until the loan is discharged, and more so particularly when no request was made by the respondent to sell the shares and appropriate the proceeds realised therefrom towards liquidation of the loan amount.
5. In view of the RBI guidelines, the shares pledged in physical form were sent to the respondent for transfer into the name of the petitioner, which was done by the respondent. It is stated that since there was a regulation for holding of shares in electronic form, the shares were demated and kept in the bank's depository account. The 80 lakh shares of Rs. 10 each pledged by the principal borrower were comprised in eight share certificates, each consisting of 10 lakh shares. As there was no market, the shares were not quoted, and, therefore, they could not be sold by the petitioner in one single lot. It was only after demat of shares, the petitioner could dispose of 15,455 shares in the market, and the amount of Rs. 1,15,302 so realised from such sale, was credited to the account of the principal borrower.
6. Sri Raghavan, the learned senior counsel appearing on behalf of the petitioner, would submit that the respondent having availed of the team loan of Rs. 500 lakhs sanctioned by the petitioner, failed to repay the same in spite of extending time at their request. As on August 26, 2002, the respondent became due and liable to pay to the petitioner an amount of Rs. 5,50,88,788.80. Inasmuch as the respondent failed and neglected to repay the loan amount, the petitioner on May 11, 2002, through their counsel, got issued statutory notices under Section 433(e) of the Companies Act, to the respondent and its guarantors, and in spite of receipt of the said notices, the respondent failed to discharge the debt. As the respondent failed to repay the loan amount, the petitioner invoking the provisions of Section 19 of the Debts Recovery Act, filed an application in O. A. No. 385 of 2002 on the file of the Debts Recovery Tribunal, Bangalore, against the respondent and its guarantors, for recovery of the loan amount, which is pending. Learned counsel submits that the proceedings under Section 433 of the Companies Act and the proceedings under Section 19 of the Debts Recovery Act or the proceedings in a civil suit, being independent of each other, there can be no impediment for maintaining this company petition for winding up of the respondent which has not only failed and neglected to pay the loan amount, but has also become insolvent. In support of this contention, he placed reliance on the judgments in State Bank of India v. Hegde and Golay Ltd. ; Smt. Vijayalakshmi v. Hari Hara Ginning and Pressing [1999] 96 Comp Cas 723 (AP) and Viral Filaments Ltd. v. Indusind Bank Ltd. [2001] 4 Comp LJ 44 (Bom); [2003] 113 Comp Cas 85.
7. The learned senior counsel denied the contention of the respondent that it had discharged the debt when the petitioner got transferred the pledged shares furnished by the respondent towards security. He submitted that the petitioner being a financial institution is governed by the RBI guidelines. The guidelines issued by the RBI in Circular DBOD No. Dir.BC.90/13.07.5/98, dated August 28, 1998, required every financial institution which had sanctioned and granted loan exceeding Rs. 10 lakhs to get the pledged shares transferred to their name, and having regard to the guidelines in the said Circular, and having regard to the fact that the loan sanctioned and granted to the respondent exceeded Rs. 10 lakhs, the petitioner got the pledged shares transferred to their name in demat form. Learned counsel in support of his submission that the plea of discharge of debt taken by the respondent is not bona fide, and an order of winding up cannot be refused when the defence taken is not bona fide and not one of substance, placed reliance on the judgment of the apex court in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd. : [1972]2SCR201 . According to learned counsel, the petitioner by merely getting the pledged shares transferred to their name, has not become the beneficial owner thereof, but is vested with the exclusive and unconditional voting rights, as stipulated by the RBI guidelines. The RBI guidelines require authorization by the board of directors of the petitioner to exercise the voting rights in respect of shares held by the petitioner as security, and inasmuch as no authorization has been given by the board of directors, the petitioner cannot exercise voting rights in respect of the shares which were transferred into their name, and, therefore, it cannot be said that it has become the absolute owner of the transferred shares. Learned counsel in support of his argument that no right of enjoyment was given to the pledgee under the pledged shares, which were transferred to the name of the petitioner, placed reliance on the judgment of this court in Shatzadi Begum Saheba v. Girdharilal Sanghi : AIR1976AP273 . Inasmuch as the respondent has pledged the shares towards security in physical form, they continue to remain under security till the respondent discharges the loan amount completely, and in support of this plea, he placed reliance on the judgment in Garware Capital Markets Ltd. v. Jaiswal Granites Ltd. (No. 2) : 1997(5)ALT353 . Learned counsel for the petitioner submits that the petitioner by merely transferring the pledged shares into their name has not become the shareholder of the respondent nor has it ceased to be the creditor of the respondent nor can the respondent claim discharge of the loan amount nor can the petitioner be termed to be a beneficial owner as defined under Section 2(1)(a) of the Depositories Act, 1996. Inasmuch as the respondent had failed and neglected to pay the loan amount and has become insolvent, learned counsel for the petitioner submitted that the respondent has to be wound up, and in support of this submission, he placed reliance on the judgments in Bangasri Ice and Cold Storage Ltd. v. Kali Charan Banerjee, : AIR1962Cal613 and Electro Flame Ltd. v. Mittal Iron Foundary Pvt. Ltd. : 1998(2)ALD594 . Learned counsel in support of his submission that whether or not the defence taken by the respondent is bona fide and one of substance, has to be decided at the time of hearing of the winding up petition and not at the stage of admission, for it is a matter of summary enquiry, placed reliance on the judgments in Sree Aravindh Steel P. Ltd. v. Tricky Steel Rolling Mills Ltd. and Airwings P. Ltd. v. Viktoria Air Cargo GmbH : AIR1995Kant69 .
8. Per contra Sri Kodandaram, learned counsel appearing on behalf of the respondent, strongly refuted the submissions made by learned counsel for the petitioner. He submitted that the petitioner got transferred 80 lakh pledged shares of Rs. 10 into its name in demat form during April, 2002, and June, 2002. At the time when the transfer of shares was effected, the face value of the share of Rs. 10 was Rs. 8, and since the petitioner got transferred 80 lakh pledged shares into its name, the respondent had paid an amount of Rs. 640 lakhs to the petitioner, and the petitioner itself is liable to pay to the respondent an amount of Rs. 89,11,921. Thus, he tried to draw a parallel placing reliance on Section 176 of the Indian Contract Act, 1872. By reason of the transfer of pledged shares, learned counsel for the respondent submits that the petitioner is no more the creditor of the respondent and, in fact, the petitioner has become the major shareholder of the respondent. The petitioner has become the legal and lawful owner of the transferred shares. The transfer of shares was effected in demat form and not in physical form as required by the provisions of the Depositories Act, 1996, and the SEBI Regulations, and having regard to the provisions of Section 130 of the Transfer, of Property Act, 1882, the transfer of shares which is an actionable claim, the title or any right arising out of such transfer of shares, exclusively vested in the petitioner. In support of this submission, he placed reliance on the judgments in Howrah Trading Co. Ltd. v. CIT : [1959]36ITR215(SC) , B. O. L Finance Ltd. v. Custodian : [1997]3SCR51 A. M. P. Arunachalam v. A.R. Krishnamurthy Jagdishchandra Champaklal Parekh v. Deccan Paper Mills Co. Ltd. and Hindustan Dorr Oliver Ltd. v. A.K. Menon [1994] 80 Comp Cas 384 (SC).
9. Learned counsel for the respondent sought to draw support from the judgments in Fazal D. Allana v. Mangaldas M. Pakvasa, AIR 1922 Bom 303 and Official Assignee v. Madholal Sindhu, AIR 1947 Bom 217 to submit that sale of shares backed by share certificates and blank transfers are 'goods' within the meaning of the provisions of the Contract Act, 1872, the Sale of Goods Act, 1930, the Transfer of Property Act, 1882.
10. Learned counsel for the respondent contended that the dispute raised by the respondent with respect to discharge of the loan amount to the petitioner being a bona fide one and one of substantial defence, this company petition for winding up of the respondent for recovery of the alleged debt, is not maintainable. In support of this contention, he placed strong reliance on the judgment of the apex court in Amalgamated Commercial Traders (P.) Ltd. v. A. C.K. Krishnaswami and of the judgments of the High Courts of Karnataka, Madras and Calcutta in T. Srinivasa v. Flemming (India) Apotheke Pvt. Ltd. ; Kamadenu Enterprises v. Vivek Textile Mills Pvt. Ltd. ; G. Loganayaki v. Moolangudi Chit Funds Pvt. Ltd. ; Divya Export Enterprises v. Producin Pvt. Ltd. 0065/1991 : ILR1991KAR4494 ; B. Viswanathan v. Seshasayee Paper and Boards Ltd. : (1992)IMLJ232 and J. N. Roy Chowdhury (Traders') P. Ltd. v. Jainti Enterprises : 90CWN974 .
11. Be that as it is, learned counsel for the respondent submits that inasmuch as the petitioner had already initiated steps for recovery of the alleged debt by invoking the provisions of Section 19 of the Debts Recovery Act, the petitioner is precluded from maintaining this company petition for winding up of the respondent for realisation of the alleged debt, which according to the respondent stood discharged by reason of transfer of the pledged shares.
12. Heard learned counsel for the petitioner and learned counsel for the respondent.
13. The contention of the respondent that inasmuch as the petitioner had already filed an application in O. A. No. 385 of 2002 under Section 19 of the Debts Recovery Act for recovery of the alleged debt before the Debts Recovery Tribunal, the present company petition filed under Section 433(e) of the Companies Act, for winding up of the respondent for recovering the amount claimed in the application, is not maintainable, is devoid of merit. Though the respondent had raised this contention, in fact, it had filed an affidavit before the Debts Recovery Tribunal to keep the proceedings in the O. A. in abeyance till the winding up proceedings before this court are concluded. Be that as it may, the scope of enquiry and the reliefs to be claimed and allowed under the Debts Recovery Act and the Companies Act, are entirely different, distinct and independent of each other and have no connection whatsoever. While under Section 19 of the Debts Recovery Act, the Debts Recovery Tribunal is required to adjudicate only the liability of the defaulting company and ascertain the debt due to the financial institution or bank and issue certificate of recovery to the Recovery Officer, to enable him execute the same in accordance with the procedure prescribed therefor. There is no power vested in the Debts Recovery Tribunal to wind up a defaulting company for recovery of the dues of the financial institution or bank. The power to wind up a defaulting company is vested in the company court under Section 433(e) of the Companies Act, when it is proved by the creditor that the defaulting company is unable to pay its debts. This aspect of the matter was considered by the Bombay High Court in Viral Filaments Ltd. v. Indusind Bank Ltd. [2001] 4 Comp LJ 44 ; [2003] 113 Comp Cas 85 wherein it was held :
'There is no provision in the Recovery of Debts Due to Banks and Financial Institutions Act, 1993, empowering the Debt Recovery Tribunal (DRT), constituted under that Act, to wind up a company which owes the debt to the applicant financial institution. The jurisdiction of the Tribunal under the RDB Act is only to adjudicate the liability of the respondent before it, ascertain the 'debt' due to the bank/financial institution and issue a certificate for recovery thereof. Once such a certificate of recovery is issued to the Recovery Officer, the Recovery Officer is empowered to execute the same in the manner prescribed under the RDB Act. . . Hence, what could be done by the company court under Section 433(e) of the Companies Act, 1956, could obviously not be done by DRT ... The DRT not having been invested with the power to wind up a company, it would not be possible to urge before the company judge that the petition should not be heard.'
14. Holding so, the Bombay High Court held that merely because the petitioning creditor had filed application before the Debt Recovery Tribunal under the provisions of the Debts Recovery Act, it cannot be said that the petition for winding up would not be maintainable. The proceedings before the Debts Recovery Tribunal and the company court being entirely different, distinct and independent of each other, it cannot be held that merely because the petitioner had moved an application before the Debts Recovery Tribunal under Section 19 of the Debts Recovery Act, and the respondent had also filed written statement therein, the petitioner would be debarred from maintaining this company petition under Section 433(e) of the Companies Act, for winding up of the respondent, and more so when it has failed and neglected to pay its debts.
15. None can have any quarrel on the proposition of law and the authorities relied upon by learned counsel for the respondent in support of his contention that when a debt is bona fide disputed and the defence taken is one of substance, a company petition for winding up of the company would not be maintainable. But such bona fide defence has to be considered on the facts and circumstances of each case. In the instant case, in the light of the rival pleadings, it should be examined whether the plea of discharge taken by the respondent is bona fide and one taken as substantial defence.
16. There is no dispute about the fact that on the request made by the respondent by their letter dated March 9, 2001, the petitioner had sanctioned a short-term loan of Rs. 500 lakhs to the respondent by their letter dated March 23, 2001, for a period of 90 days, and the respondent towards availment of the said short-term loan, had furnished personal guarantee of their managing director, corporate guarantee of M/s. Sarita Steel and Industries Ltd. and pledged 80 lakh shares of Rs. 10 each of the respondent held by M/s. Sri Vasavi Holdings and Investments Ltd. as security. It is the admitted case of the respondent that at their request, the petitioner had extended the time for repaying the loan amount up to September 21, 2001, and that in spite of such extension, the respondent could not repay the loan amount.
17. The petitioner states that it being a financial institution, is bound by the RBI guidelines, and when the respondent did not repay the loan amount even after the extended period of time, the petitioner having regard to the guidelines issued by the RBI in Circular No. Dir.BC.90/13.07.05/98, dated August 28, 1998, which required the financial institutions which had sanctioned loans exceeding Rs. 10 lakhs to have the pledged shares transferred to their name, had got the 80 lakh pledged shares of Rs. 10 each transferred to their name during April, 2002, and June, 2002, as the short-term loan granted to the respondent exceeded Rs. 10 lakhs. It is the case of the respondent that inasmuch as at the time when the transfer of shares into the name of the petitioner was effected, the value of each share was Rs. 8 and having regard to the fact that the petitioner had got transferred 80 lakh pledged shares into their name, the respondent had paid an amount of Rs. 640 lakh to the petitioner, and as such, the short-term loan of Rs. 500 lakhs stood discharged, and the petitioner itself is due and liable to pay to the respondent a sum of Rs. 89,11,211.
18. It is significant to note that the respondent by their letter dated June 14, 2002, while requesting the petitioner to reschedule the short-term loan, indicated its inability to repay the loan in the very opening paragraph, when they said :
'The short-term loan sanctioned to us, which in the normal course should have been repaid on September 21, 2001. However, due to uncertainty and recent development in our industry during the past nine months due to which the company has been facing strain in cash flow and unable to repay the loan.'
19. In the very same letter, the respondent after seeking to explain adverse conditions being faced by the textile industry, under the captain 'request', stated thus :
'Keeping in view the extraordinary conditions prevailing at present, we find difficult to repay the short-term loan of Rs. 500 lakhs. The interest overdue amount of Rs. 25,00,000 for the period ended May 31, 2002, will be paid by June 30, 2002.'
20. It is also pertinent to note that in response to the notice dated June 27, 2002, issued by the petitioner through their advocate to M/s. Vasavi Holdings and Investments Ltd., which had pledged the shares of the respondent held by it of as security to the loan amount, with copies thereof marked to the respondent and their guarantors, indicating their decision to dispose of the pledged shares in the open market, the respondent through their advocate issued reply notice dated July 5, 2002, stating thus :
'Whatever the shares my client pledged with you are not owned by my client M/s. Sarita Software and Industries Ltd. They belong to M/s. Vasavi Holdings and Investments Ltd. They have pledged the shares in good faith on behalf of my client. Hence, we request you not to dispose of the said shares.
If these shares are disposed of at the prevailing lower prices, it will have adverse impact and the relationship between the two companies will be further deteriorated. So we request you to stop all such proceedings.'
21. Though the respondent contended that the transfer of pledged shares was effected on April 18, 2002, and May 27, 2002, the contents of the above communication dated June 14, 2002, and July 5, 2002, which are subsequent to the date of the transfer do not make any mention of the plea of discharge having been taken by the respondent by reason of transfer of such pledged shares, and on the other hand, they clearly indicate the request made by the respondent to the petitioner not to dispose of the pledged shares having regard to the fact that the pledged shares do not belong to them, but belong to M/s. Vasavi Holdings and Investments Ltd., who had pledged them in good faith towards security, and that in the event the pledged shares are disposed of at the prevailing lower prices, it would have an adverse impact on the relationship of the two companies. Be that as it may, it is the contention of the petitioner that though it got the pledged shares transferred to their name in demat form, it is not a beneficial owner, and that having regard to the guidelines of the RBI, it is only vested with the voting rights, and that such voting rights could be exercised only when the board of directors of the petitioner authorise, and inasmuch as the board of directors of the petitioner had not authorized, they cannot exercise the voting rights in respect of the transferred shares. This apart, the petitioner states that having sold 15,455 shares, they had credited the amounts realised therefrom to the account of the respondent. Be that as it may, whether or not by reason of transfer of the pledged shares in the name of the petitioner, the petitioner became the beneficial owner thereof, having regard to the provisions of Section 176 of the Indian Contract Act, 1872, Section 130 of the Transfer of Property Act, 1882, the Sale of Goods Act, 1930, upon which learned counsel for the respondent placed heavy reliance to contend that by reason of transfer of shares, the petitioner had become the shareholder of the respondent or the petitioner ceased to be the creditor of the respondent, for upon transfer of the pledged shares into the name of the petitioner, the petitioner became the rightful owner thereof and is vested with the voting rights, which is disputed by the petitioner, are all matters of enquiry and can be adjudicated only after a full-fledged trial, and therefore, reliance placed by learned counsel for the respondent on the various decisions in support of his submissions do not merit any consideration at this stage. Suffice it to say, that for a company petition to be admitted, the creditor has to make out a prima facie case. In Madhusudan Gordhandas and Co. v. Madhu Woollen Industries P. Ltd., : [1972]2SCR201 , it was held by the apex court that once a prima facie case is made out by the petitioner for admission of the company petition, the company court will have to examine, as to whether the respondent has, prima facie, put forth a substantial defence. The principles, on which the company court acts in this regard are first that the defence of the company is in good faith and one of substance, secondly, the defence is likely to succeed in point of law, and, thirdly, the company adduces prima facie proof of the facts on which the defence depends.
22. Admission of the company petition, which results in advertisement of winding up, would cause injury to the company if ultimately the application is dismissed. The apex court in Hind Overseas Pvt. Ltd. v. Raghunath Prasad Jhunjhunwalla : [1976]2SCR226 considering this aspect of the matter, observed that before the company court admits the company petition it should first verify whether the petitioner had made out prima facie case. It was held thus :
A prima facie case has to be made out, by the petitioner, before the company court can order admission of the company petition. While it is true that even admission of a company petition, which will lead to advertisement of winding up proceedings, is likely to cause injury to the company, if ultimately the application is dismissed, the scope of enquiry, by the company court, for admission of a company petition, is firstly to verify whether the petitioner had made out a prima facie case for admission of the company petition.
23. In New Kerala Chits and Trades (Pvt.) Ltd. v. Official Liquidator [1981] 51 Comp Cas 601 (Ker) it was held that the power of the company court, to direct winding up of a company, under Section 433 of the Companies Act, 1956, is discretionary, which should, however, be exercised in a judicial manner, taking into account the nature of the application and the circumstances of each case.
24. The question as to whether the debt disputed by the respondent-company is bona fide and is to be treated as a substantial defence, has to be culled out from the facts and circumstances of each case. In Divya Export Enterprises v. Producin (Pvt.) Ltd. 0065/1991 : ILR1991KAR4494 it was held :
The question as to whether the debt disputed by the respondent-company is bona fide and is to be treated as a substantial defence, are questions which will have to be decided from the facts and circumstances of each case. When the respondent-company comes forward and sets forth its defence, the company court has to examine the nature of the respective cases pleaded by the parties and if a prima facie case is made out by the petitioner, the respondent should shoulder the onus to disprove it by showing that its defence is in good faith, one of substance, and is likely to succeed in point of law. A plea which is frivolous, cannot be termed as raising a bona fide dispute. If for example the respondent-company has admitted its liability of earlier occasions, kept quiet without responding to the demands made and notices issued by the petitioner, and only after the petitioner has invoked the court's jurisdiction, the respondent-company has unearthed circumstances or material and opposed the claim, in such a situation, the company court may draw an adverse inference against the respondent-company, that the defence is prima facie an afterthought or is a mere cloak to cover up its inability or refusal to pay.
25. In the instant case, the letters placed by the petitioner in support of its case for admission of the company petition, reference to the contents of which had been made above, clearly go to show that the respondent has itself admitted its inability to pay its debts to the creditors, and, therefore, it is required to be held that the petitioner has made out a prima facie case for admission of the company petition.
26. In the above premises, the company petition is admitted. The petitioner is directed to take out newspaper publication of the admission of the company petition as required under Rule 99 of the Companies (Court) Rules, 1959, in two daily newspapers, namely, Deccan Chronicle (English) and Andhra Jyothi (Telugu) of Hyderabad edition, and file proof of service into court.
27. List the matter on March 31, 2004.