The existence of a bona fide dispute regarding the alleged debt prevents the application of the deeming provisions of Section 434 of the Indian Companies Act, which presumes neglect to pay upon receipt of a statutory notice.

( 1 ) THIS petition has been brought under Sections 433 and 434 of the Indian Companies Act seeking winding up of the respondent-company on the ground that respondent-company has neglected to clear its debt despite statutory notice.

( 2 ) THE facts, in brief, are that one Mr. A. N. Prasad was an employee of the petitioner-company and was one of the Directors of the respondent-company and vide lease/licence agreement dated July 22,1987, Flat No. L-27 located on the first floor in Kailash Colony, New Delhi, was taken for the residence of Mr. Prasad from the respondent-company by the petitioner-company for a limited period. Under the terms of the said agreement Rs. 3,00,000. 00 were given by the petitioner to the respondent-company as security deposit which was not to bear any interest and was to be refunded on vacation of the flat_vide term No. 7 in the agreement, Mr. Prasad has also taken a personal liability for refund of the said amount and had agreed that the said amount could be adjusted in his salary and other dues which 261 may be recoverable from the petitioner-company. Admittedly on June 14,1988, on Mr. Prasad resigning from the service of the petitioner-company the possession of the flat was handed back to the respondent-company and the petitioner admittedly became entitled to refund of the said deposit of Rs. 3,00,000. 00 from the respondent. 3. The case set up by the petitioner is that despite sending of letters dated October 18, 1988 and December 1, 1988 and thereafter service of statutory notice dated May 9, 1990, the respondent-company failed to clear the balance amount of Rs. 93,336. 00 and thus, the respondent-company having neglected to pay its debt due to the petitioner is liable to be wound up. 4. The respondent-company has, however, taken the plea in opposing this petition that in fact, on August23,1988, Mr. Prasad had handed over a letter of even date alongwith cheques and the statement of account incorporated in the letter to the petitioner-company by virtue of which the account of the said deposit of Rs. 3,00,000. 00 was settled in the manner that cheques to the tune of Rs. 2,06,664. 00 were given to the petitioner-company and the balance amount of Rs. 93,336. 00 was settled in the salary and gratuity account of Mr. Prasad with the petitioner-company. It is also the case of the respondent that by virtue of the said licence/lease-deed certain documents pertaining to the flat in question were kept in deposit with the petitioner-company which were to be returned by the petitioner-company to the respondent on the refund of the said deposit of Rs. 3,00,000 / - and on that very date i. e. August 23,1988, the said documents were also returned to the respondent and the said account stood settled. 5. It is significant to mention that the petitioner-company had not made reference to this letter dated August23,1988,inits petitioner in its statutory notice served on the respondent. In rejoinder the factum of having received this letter alongwith cheques mentioned in this letter has not been denied. In respect of the documents pertaining to the flat which were given to the petitioner-company and which were to be returned on settlement of account of the said deposit of Rs. 3,00,000. 00 , the plea taken is that the company was not aware whether such documents have been returned as the records of the company were not available in that respect. 6. The short question which arises for consideration is whether the respondent has raised any bonafide dispute with regard to its alleged liability with regard to balance amount of deposit of Rs. 3,00,000. 00 or not? 7. The learned Counsel for the petitioner has drawn my attention to the provisions of Section 434 and has argued that as the respondent has failed to reply to the two letters written by the petitioner and also to the statutory notice it should be deemed that the respondent has neglected to pay its debt. I am afraid that there is a fallacy in this argument. T