The judgment underscores the discretionary nature of the Company Court's jurisdiction, the criteria for deeming a company unable to pay its debts, and the limitations of the conclusiveness of a foreign judgment under Section 13 of the Code of Civil Procedure.

The appellant’s petition for winding up under Section 433 (1) of the Companies Act was dismissed and therefore, this appeal has been filed.

2. The appellant is a Company incorporated in Israel and dealing inter alia in home textiles. The respondent is a Company registered under the Companies Act and deals interalia in cotton fabrics. In the year 2001, there was a transaction between the appellant and the respondent. The respondent instituted legal proceedings against the appellant for amounts due on supply of goods. The appellant filed a counter-claim for damages for supplying defective fabrics.

3. By a judgment dated 5. 2005, the Magistrate Court in Israel allowed the counter-claim of the appellant and rejected the claim of the respondent. This amount awarded by the Israel Court works out to approximately US$342,623.11 as on 17. 2006 (Rs.1,38,76,235/-). The appellant issued a notice dated 17. 2006 under Section 433(2) read with Section 434 of the Companies Act. The respondent denied its liability to pay, questioning the demand made based on the Israeli Court’s adjudication. Since there was no positive response to this notice, the appellant filed a petition for winding up alleging that the respondent is unable to discharge its debts because of mismanagement and defalcation and since it is unable to meet its admitted liabilities it must be insolvent. The respondent in its counter specifically denied the allegation regarding mismanagement and according to them, the company’s financial position is very healthy. They denied that they had supplied defective quality fabrics. If the appellant had been genuinely dissatisfied they resist the claim of the respondent and as a counter blast. According to the respondent, Israel is not a reciprocating country and the provisions of Section 13 and Section 44(A) of C.P.C. must be complied with where there is a foreign judgment. According to them, the appellant cannot straightaway file a petition for winding up based on the Israeli judgment. The learned single Judge accepted the ground raised by the respondent with reference to Section 13(1)(c) and Section 44-A and further was of the opinion that on a perusal of the balance sheet of the respondent it was clear that the respondent was a going company and there was no justification for ordering winding up.

4. The learned senior counsel, Mr. Yashod Vardhan appearing for the appellant submitted that the respondent cannot raise any of the grounds mentioned in Section 13, C.P.C. The respondent cannot raise the issue jurisdiction since it was the respondent who invoked the jurisdiction of the Israeli Court. Both parties were heard and therefore, the respondent cannot raise the issue of absence of natural justice. It was a decision on merits and there is no ground to show that it was against Indian Laws. The learned senior counsel referred to Section 73 of the contract and submitted that loss of profit if proved can be made the basis for the claim for damages and so the counter claim was rightly allowed. The learned counsel submitted that the appellant had the option of invoking either Section 434(a) or (b).

5. The learned senior counsel submitted that it is hardly relevant that the financial health, of the respondent-Company is good if there is a refusal to pay the debt and therefore, a deemed inability to pay the debt. The learned senior counsel submitted that while it is true that the jurisdiction of the Company Court is a discretionary one, the discretion should be exercised soundly. According to the learned senior counsel, an adjudication of a claim against the respondent results in a liability to pay the debt. A judgment debtor is equally a debtor. Similarly, a judgment creditor is also a creditor for the purpose of the Section. When all the legal requirements are met, winding up should be ordered.

6. The learned senior counsel appearing for the respondent produced the balance sheets of the Company to show that it has a robust finan