( 1 ). This petition has been filed for the winding up of Indian Airlines Limited on the complaint that a sum of Rs. 54,24,625. 96 remains outstanding towards transportation of passengers and luggage of persons holding tickets/airway bills of the Respondent. The claims are predicated on an Interline Airlines agreement dated 13th May, 1995. The Petitioner had drawn Bills on the Respondent- commencing from February 1996 till May 1997. On the Petitioner s request for the clearance of outstandings bearing no fruition, the petitioner caused a legal notice dated July 21, 1997 to issue to the Respondent. In reply thereto it was stated on behalf of the Respondent, inter alia, that in respect of the Respondent s claims against the petitioner a sum of Rs. 103. 53 lacs was due from the former to the latter. This sum was reduced by the respondent to Rs. 77. 65 lacs, and since the Petitioner was still raising disputes", the Respondent finally offered to settle their claims at Rs. 55 lacs. However, even this offer was not acccepted by the petitioner as per their letter dated February 16, 1997, in which they instead reiterated their proposal to settle the claims of Indian Airlines at Rs. 20 lakhs. These claims could not be settled amicably, and a consensus was not arrived at. Thereafter in reply to the said Legal notice, it has been stated in the letter dated August 26, 1997 on behalf of Indian airlines that - "even otherwise the claim of your client for an amount of Rs. 54,24,625. 95 towards sale of tickets is not factually correct. It is with a view to pre-empt any action by our clients to seek recovery of money legitimate due to our clients that your clients have chosen to send a legal notice for winding up of our clients. You are requested to advise your clients not only to desist from resorting fco any ill-advised and misconceived legal proceedings against our clients but also to make the payment of rs. 103-53 lacs with interest @ 24% on the said amount from the date of same became due till date of payment. "

( 2 ). The Respondent s reply to the petition has been filed on 10th September, 1999. It has been averred that the petition is a misuse of the provisions of the Act. The claims of Indian Airlines have been reiterated in detail - It has been pleaded that on 31-3. 1997 the Respondent sent an Invoice for rs. 77,64,720/~ to the Petitioner. The defence is found crystalised in paragraph (ix) of the Reply and is reproduced verbatim.

"it is thus clear from the aforegoing that there was a dispute between Indian Airlines and NEPC in respect of their respective dues and to pre-empt any action on the part of indian Airlines, NEPC caused a legal notice to be issued on 21. 7. 1997 which was suitably replied to by Indian airlines on 26. 08. 1997. There is thus a bonafide dispute between the parties and there is therefore no question of any winding up order being passed. Moreover withholding of payment cannot mean inability of pay debt as contemplated under Sections 433 and 434 of the companies Act. The respondent company is solvent and if necessary the balance sheet for the year ended 31. 03. 1998 can also be produced. Indian Airlines further reserves the right to initiate appropriate legal action against NEPC for the recovery of its dues towards ground Handling services which are still due after adjusting the amount of rs. 54. 18 lacs plus interest Q 24% p. a. Intact, besides this an amount of rs. 21,15,398. 50 is also recoverable on account of engineering repair services, rendered to NEPC upto February 1998. Indian Airlines reserves the right to take appropriate action for recovery of the dues as well. "

( 3 ). In winding-up proceedings it is necessary to keep the following conditions in perspective --

(I) If there is a bona fide dispute and the defence is a substantial one, the Court will not wind-up the company.

(II) where the debt is undisputed the Court will not act upon a defence that the company has the ability to pay the debt