Important Point—It is not an authority for proposition that no sooner some cross claim is raised by the company against the petitioning creditor, the petition for winding up of the company has to be necessarily dismissed without even prima facie examining whether the cross claim is genuine and one of substance.

M.S. SONAK, J.

1. Heard learned counsel for the parties at length. With their consent and at their request, we proceed to dispose of this Appeal finally.

2. The appellant (company) appeals the order dated 28 June 2016 made by the Company Judge admitting the petition for winding up of the company and ordering the advertisement thereof in accordance with the provisions of the Companies Act, 1956 (said Act) and the Companies (Court) Rules 1959 (said Rules).

3. There is no dispute that the company is indebted to the respondent (petitioning creditor) in an amount of at least Rs.90.90 crores. The company however contends that as against such undisputed dues, the company has a claim against the petitioning creditor in an amount of Rs.152.57 crores by way of damages on account of certain acts of omission and commission on the part of the petitioning creditor. The company contends that even before the receipt of statutory notice under section 434 of the said Act, the company had instituted Suit (L) No. 939 of 2013, claiming the said amount of Rs.152.57 crores. This according to the company constitutes a defence which is bona fide and one of substance, both in law as well as in facts. Therefore, the company urges that the petition seeking its winding up ought not to have been admitted and the impugned order, which does so, warrants interference.

4. Mr. Zal Andhyarujina, learned counsel for the company, in support of this appeal, submits the following:

(i) Whilst there may be no dispute that the company is indebted to the petitioning creditor in an amount of Rs.90.90 crores, the company, even before the receipt of statutory notice under section 434 of the said Act, had already instituted Suit (L) No. 939 of 2013 claiming an amount of Rs.152.57 crores from the petitioning creditor for acts of omission and commission on its part, particularly in not selling the entire bulk of 20 lacs shares of Gitanjali Gems Limited (Gitanjali) up to 27 April 2013, on which date, freeze order was issued by the Economic Offences Wing (EOW) under section 102 of the Code of Criminal Procedure (Cr.P.C). The petitioning creditor was bound to sell such shares since, they had been pledged by the company to the petitioning creditor by way of security for the margins which the company was required to maintain with the petitioning creditor.

(ii) In any case, in the meeting dated 14 March 2013, since the petitioning creditor agreed to sell all the pledged shares, including the Gitanjali shares and further, actually sold some such shares between 19 and 22 March 2013, there was no legal justification whatsoever for the petitioning creditor to suspend sales after 22 March 2013, by which date, hardly 2.97 lacs Gitanjali shares, from out of the total pledged 20 lacs Gitanjali shares came to be sold. There is accordingly, unlawful omission or in any case, gross illegality in the manner of sale of the pledged Gitanjali shares. For such acts of omission and commission, the petitioning creditor is liable to pay damages quantified at Rs.152.57 crores to the company. The claim in the suit is therefore bona fide and a substantial one. In support of this ground, reliance was placed upon the decisions of the Supreme Court in Vimal Chandra Grover vs. Bank of India, (2005) 5 SCC 122, M/s. Sicpa India Pvt. Ltd. vs. M/s. Brushman (India) Ltd. (2013) 180 Company Cases 187 and S.L. Ramaswamy Chetty & Another vs. M.S.A.P.L. Palaniappa Chettiar, AIR 1930 Madras 364.

(iii) The claim in the suit instituted by the company, is in the nature of an 'equitable set off' to the dues payable by the company to the petitioning creditor. In re Portman Provincial Cinemas Ltd. 1999 (1) WLR 157 (Portman), the Court of Appeal (UK) has held that where, a company has an unresolved cross claim exceeding the amount of debt, the petition seeking its winding up has to be dismissed. The Company Judge in this case, has misconstrued the said decision and in any case, committed a gross error in preferring the mi