A winding up petition should not be pursued for disputed debts, and the financial solvency of the company is a relevant factor in determining the refusal to pay the debt.

1. This winding up petition has been filed by Mr. J.R. Srinivasa, an ex-Director of the respondent company Sri Gururaja Enterprises Pvt. Ltd. seeking winding up of the respondent company on account of the alleged failure to pay interest at 24% p.a. on the admitted liability of Rs.75.50 lakhs due by the respondent company to the petitioner, against the loan advanced by the petitioner to the respondent company.

2. The case set up by the petitioner in the present petition is that the petitioner Director advanced a sum of Rs.1,41,00,000/- to the respondent company to square up the outstanding dues of Andhra Bank which had initiated action against the respondent company under the Securitization & Reconstruction of Financial Assets & Enforcement of Security Interest Act, 2002 claiming a sum of Rs.2,64,69,938/- and no written agreement for the loan advanced by the petitioner to the respondent company was executed. But against the said advance of Rs.1.41 crores, respondent company had paid only a sum of Rs.65.50 lakhs and thus, the balance sum of Rs.75.50 lakhs remained outstanding which was duly reflected in the books of account of the respondent company and despite service of legal notice under S.434 of the Act by the petitioner vide Annexure G dated 20.9.2013 calling upon the respondent company to pay the balance amount of Rs.75.50 lakhs along with interest at the rate of 24% p.a., the outstanding dues were not cleared by the company and the company therefore, deserves to be wound up under S.433 (e) read with S.439 of the Act.

3. The respondent company replied to the said statutory notice vide Annexure H dated 15.10.2013 and while denying its liability to pay the said amount of Rs.75.50 lakhs, the respondent company through its advocate, gave the following reply and the relevant extract of which is quoted below for ready reference:

Our Client instructs us to state that, your client has not properly instructed to you and therefore you have issued this notice without ascertaining factual matrix of the matter. Our client is a company incorporated under the provision of Companies Act, 1956. Your client was one of the Directors of our client. Your client without any reason unnecessarily used to initiate proceedings before the various courts/forum. All the proceedings initiated by your clients were baseless, misconceived and abuse of process of law. Your client filed a Company Petition No.494/2008 before the Hon’ble Company Law Board at Chennai against our client and others, seeking relief under S.111 of the Companies Act, 1956 and obtained an interim of status quo in respect of constitution of board of director of the company. As there were only two directors i.e., your client and Mr. Narasimha Murthy Naik and due to non-cooperation from your client with the company, there was total deadlock in the Board of Directors of the Company. Because of indifferent approach of your client toward the company, the Company started facing various financial problems. The banker viz., Andhra Bank initiated the proceedings under SARFAESI Act, against our client. Non co-operation from your client with the Company, indifferent approach towards our client, putting spokes in day-to-day affairs of our client by your client were the reasons for financial problems of our client and ultimately this lead to initiation of recovery proceedings by M/s. Andhra Bank. Your client deliberately was not allowing to hold lawful meetings of our client to deprive our client from carrying out business. During such crucial time also your client did not co-operate with out client for opening of the North Block showing disrespect to the order passed by the Company Law Board and did not allow our client to generate the revenue to repay the loan to the financial institution viz., Andhra Bank. An application in CA 13/2009 was filed before the Company Law Board seeking an order to reopen the North Block premises belonging to our company which consists of 60 lodging rooms. After