The court clarified that proceedings for winding up of a company are not recovery proceedings and that a company is liable to be wound up under Section 433(e) of the Companies Act if it is unable to pay the debt. The court emphasized that the defense raised by the appellant must be found to be a sham defense for maintaining a petition for winding up the appellant company.

JUDGMENT

Vibhu Bakhru, J.

1. The appellant has filed the present appeal impugning an order dated 24.01.2018 (hereafter `the impugned order') passed by the learned Company Court in Company Petition No.637/2016.

2. The respondent (petitioner in the company petition) had filed the said petition under Section 433(e) and 433(f) of the Companies Act, 1956 (hereafter `the Companies Act') seeking winding up of the appellant company (respondent in the company petition).

3. It was the respondent's case, that it was interested in purchasing an aircraft and had accordingly entered into an arrangement with the appellant in this regard. In terms of the said arrangement, the respondent was required to pay 30% of the agreed consideration in advance. The balance 70% of the consideration was required to be paid four weeks before the date of delivery of the aircraft.

4. The aircraft was required to be purchased from an Austrian aircraft manufacturer named, Diamond Aircraft Industries GmbH. It was the respondent's case that it had remitted a sum of Rs.30,00,000/- (Rupees Thirty Lacs Only) to the appellant and, thereafter, at the insistence of the appellant, it had paid EURO 145,400 (Euro One Hundred Forty Five Thousand Four Hundred Only) to the appellant's affiliate entity in the United Arab Emirates (namely, PCI Middle East FZE). The respondent alleges that the said amount at the material time was equivalent to Rs.1,19,19,892/- (Rupees One Crore Nineteen Lacs Nineteen Thousand Eight Hundred Ninety-two only).

5. The respondent claims that the appellant failed to procure the aircraft in question and also failed and neglected to refund the amount already paid by the respondent. Since the appellant had failed and neglected to repay the said amount, which was refundable, the respondent issued a notice under Section 434 of the Companies Act demanding a refund of the said amount. The appellant failed to comply with the said notice. Thereafter, the respondent filed a petition for winding up of the appellant company under Section 433(e) and 433(f) of the Companies Act, on the ground that the appellant was unable to pay its debts and it was just and equitable to wind up the appellant company.

6. The learned counsel appearing for the appellant disputes that the appellant is unable to pay its debts. He states that according to the appellant, there is a bona fide dispute as to whether there is any amount refundable to the respondent. According to the appellant, the respondent had failed to pay the balance amount when called upon to do so, and the amount paid was not refundable.

7. The learned counsel appearing for the appellant states that notwithstanding the said dispute, the appellant has deposited a sum of Rs.1,38,92,389/- (Rupees One Crore Thirty Eight Lacs Ninety Two Thousand Three Hundred Eighty Nine Only) with the Registry of this Court in compliance with the orders passed by this Court. He contends that the same clearly indicates that the respondent's allegation that the appellant is unable to pay the debt is erroneous.

8. At this stage, it would be briefly necessary to refer to the documents referred to by the learned Single Judge in the impugned order. It is observed in the impugned order that the Agreement between the parties is embodied in a Communication dated 11.07.2013. The said Communication is set out below:

"KANAKIA

SPACES

11th July 2013

To,

PCI Middle East Fze.

E-LOB, Office No. E-59 G 22 P.O. Box 419336

Hamriyah Free Zone - Sjh Dubai, UAE

Dear Sir,

With reference to your quotation No. 005/13-14/OA dated 1st July 2013, we Centaur Mercantile Pvt. Ltd. accept your quotation as per the below mentioned terms and conditions. A detailed purchase order for the same will be sent by 15th July, 2013.

NAME OF THE PRODUCT: Diamond DA42-VI Twin Engine Aircraft

Quantity - 1 Nos.

Port of Delivery- Mumbai, India

PRICE