Arrears of rent constitute a debt for the purpose of winding up a company, and a winding up petition can be used to enforce recovery of a disputed claim, provided that the debt is undisputed or not disputable.

JUDGMENT :

M.S. Shah, J.

This petition is filed by LKP Merchant Financing Limited (hereinafter referred to as "the petitioner) under Sections 433 and 434 of the Companies Act, 1956, praying for winding up of Arvin Liquid Gases Ltd. hereinafter to as "the company"), a company having its registered office at 3rd Floor, Gayatri Chambers, R. C. Dutt Road, Baroda-390 005.

2. The facts leading to the filing of the present petition, as averred by the petitioner, are that the company required 1,000 gas cylinders for its use and business but the company was unable to purchase the same out of its own finance and, therefore, it had approached the petitioner for arranging lease of the cylinders. Thereafter, there were negotiations between the parties and ultimately an agreement was executed on July 6, 1992. As per the said agreement the petitioner had arranged and granted a lease of 1,000 gas cylinders to the company. The period of lease was five years and the company had agreed to pay rent at the rate of Rs. 3,15,900 every quarter of the year beginning from July 6, 1992. The agreement also provided that in case there was delay in making the payment then the company was to pay interest at 50 per cent. It is the case of the petitioner that as per the said agreement the petitioner had delivered 1,000 cylinders but the company failed to make payment of the lease rental as per the terms of agreement. Though the company had given one cheque on October 14, 1993, for Rs. 14,22,760, the same was given on the condition that the same was to be deposited with the bank only after the confirmation by the company. When the petitioner informed the company on October 20, 1993, and October 25, 1993, as regards their intention to deposit the said cheque, the company informed the petitioner not to do so. Thereafter, the company had informed the petitioner by their letters sent from time to time that they were in financial difficulties but they will arrange to make the payment of their dues to the petitioner. But, in fact they did not pay any amount. According to the petitioner, the company was liable to pay Rs. 62,06,958.74. Though the company was duly served with a statutory notice under Section 434 of the Companies Act, the company did not make payment of any amount within the stipulated period. It is the case of the petitioner that the company is not in a financial position to pay off its debts and as the company is unable to pay its debts and as the respondent is heavily indebted the petitioner has no alternative but to file the present petition seeking an order of winding up of the company.

3. The notice was issued to the company to show cause as to why the petition should not be admitted.

4. On behalf of the company, an affidavit-in-reply is filed contesting the petition on three grounds. The first defence is that the claim of the petitioner is not an honest, true and correct one. There was no agreement to pay interest at the rate of 30 per cent, and the agreed rate was only 13 per cent. The second objection is that the lease amounts for July, 1993, October, 1992, and January, 1993, had become time-barred on the date of the petition and, therefore, the petition is not tenable as it involved a time-barred claim. The third objection is that there was an agreement between the parties to have jurisdiction at Bombay only and consequently this court has no jurisdiction to entertain the present petition. It is also contended that the total assets of the company are more than Rs, 10 crore and the case of the petitioner that the company is not in a position to satisfy its debts is not true and, therefore, in these circumstances the petition deserves to be dismissed. The petition was admitted on January 16, 1997. The said order was carried in appeal and the Appellate Bench dismissed the appeal and confirmed the order of admission of the petition. The procedural requirements of advertisement of the petition have been complied with. The matter has, therefore, been fin