Where a company is unable to pay its debts, a petition for winding up may be admitted under Section 433(e) of the Companies Act, 1956. However, if there is a bona fide dispute over the liability of the company to pay the debt, the petition should not be admitted and the parties should be relegated to the civil court.

In this petition under Sections 433(3) & (f) and 439[c] of the Companies Act, 1956 (for short, 'the Act') and Rule 95 of the Companies (Court) Rules, 1959, the Company incorporated under the Act namely Inox Air Products Limited (for short, 'the petitioner-Company') prays that Kalyani Gerdau Steels Limited (formerly known as SJK Steel Plant Limited) (for short, 'the respondent-Company'), a Company incorporated under the Act, be wound-up as it is unable to pay its debts.

2. The case of the petitioner-Company is that the petitioner-Company has entered into a supply agreement with the respondent-Company with regard to supply of gas continuously without any interruption and terms of supply agreement were reduced into writing on 04.09.2003. The recitals of the supply agreement are self-explanatory. Pursuant to the said terms of supply agreement, the petitioner-Company installed and erected Cryogenic Air Separation Plant/s at the plant of the respondent-Company. As the respondent/Company defaulted to clear the outstanding dues for the supplies made, the petitioner-Company filed O.S.No.132 of 2006 on the file of II Additional Chief Judge, City Civil Courts, Hyderabad, on 19.04.2006 for recovery of money. The petitioner-Company secured certain interim orders and thereupon, the respondent-Company filed CRP No.6582 of 2006 aggrieved by an order dated 15.09.2006 passed in I.A.No.2824 of 2006 being an application filed under Order 8, Rule (1) of the Arbitration and Conciliation Act, 1996, seeking reference to the arbitrator to resolve the disputes between the parties arising in the suit. Ultimately, the respondent-Company paid a sum of Rs.9,11,00,000/- as full and final settlement of the dues and accordingly, the suit filed by the petitioner-Company against the respondent-Company ended in dismissal as withdrawn. A memorandum of understanding, dated 15.01.2008, came to be entered into between the two companies. As per the terms of the memorandum of understanding, the original supply agreement, dated 04.09.2003, came to be amended/revised wherein the respondent-Company agreed to pay basic facility charge, a sum of Rs.2,01,915/- per day from 08.04.2008 to 31.07.2010. As per the terms of the agreement of modification, the respondent-Company during the currency of the agreement would not be entitled to purchase the required gas from any other company. Since the respondent-Company failed to pay the basic facility charges, the same came to be accumulated to an extent of Rs.3,91,69,885/-as on 31.03.2009. The petitioner Company issued a statutory notice under Section 434 of the Act demanding payment of the afore said amount. The respondent-Company, after receipt of the notice, neither paid the money nor gave any reply to the notice. When the respondent- Company has chosen to place orders for supply of gas from third parties, the petitioner-Company filed an application in the High Court of Judicature of Bombay under Section 9 of the Arbitration and Conciliation Act, 1996, to enforce the negative covenant in the agreement of modification. The respondent-Company filed counter in the said Arbitration Petition No.170 of 2009. The respondent-Company stated in the counter that due to economic slowdown and other factors, it was constrained to shut down manufacturing activities in the steel melting shop from September, 2008 to December, 2008 and once again from April, 2009. The petitioner-Company supplied the gas to the respondent-Company and against the said supplies, Debit Notes and/or its Invoices have been raised on the respondent-Company with effect from 08.04.2008. The aggregate amount thus payable by the respondent-Company to the petitioner-Company comes to Rs.3,91,69,885/- along with interest @ 15.25% upto 18.01.2009 and @ 14.75% from 19.01.2009 to 31.03.2009. As the respondent-Company failed and neglected to pay the outstanding amount of Rs.3,91,69,885/-along with interest, the respondent- Company deserves to be wound-up under the Compani