The main legal point established is that in a petition for winding up, the court will not order winding up if the debt is bona fide disputed and the defence is substantial, as per the test established in Madhusudan Gordhandas & Co. vs. Madhu Woollen Industries Pvt. Ltd.

1. This is a petition filed under Section 433 (e) and (f) read with Section 434 of the Companies Act, praying for the winding up of the respondent-Company and for the appointment of the Official Liquidator.

2. I have heard Mr. C.S. Vaidyanathan, learned Senior Counsel for the petitioner and Mr. P.S.Raman, learned Senior Counsel for the respondent.

3. The brief facts, as pleaded in the petition, leading to the institution of the above proceedings are as follows:-

(i) that the respondent, which was originally incorporated as a Private Limited Company under a different name and which later became a closely held Public Limited Company and a wholly owned subsidiary of a listed Company, entered into 4 separate contracts, all on the same date viz., 10.5.2006 with the petitioner herein;

(ii) that all the 4 contracts were towards the project of setting up a coal based power plant of 3,600 MW Capacity;

(iii) that the total contract price of all the 4 contracts dated 10.5.2006 was fixed at USD 943,978,215.00 and INR 15,602,886,878.00;

(iv) that as per the terms and conditions of the contracts, the petitioner not only started executing works, but also issued Performance Bank Guarantees to the total tune of USD 123,599,998.10, all of which are valid and subsisting till 31.10.2013;

(v) that the petitioner completed all its obligations under all the 4 contracts and all the 4 Units (4 x 600 MW), were set up except that the Reliability Run and Performance Guarantee Test for Unit No.4 was pending;

(vi) that all the 4 Units are complete in all respects and are already operating commercially and generating revenue, with the respondent selling power from all the 4 Units to various Government and Non-Governmental Agencies;

(vii) that despite the petitioner fulfilling and performing all their obligations, the respondent delayed payment of even the admitted milestone payments, especially after 2010;

(viii) that in several letters, the respondent duly admitted its default as well as the delay in the release of the outstanding payments;

(ix) that when a staggering amount of USD 115.03 million and INR 140.95 crores was omitted to be paid by the respondent, the petitioner issued a notice of suspension of work on 18.4.2012;

(x) that immediately the respondent sent a reply, giving a payment schedule, thereby admitting the liability;

(xi) that even by a subsequent mail dated 20.4.2012, the respondent's Director admitted and acknowledged the liability to the tune of USD 107 million and INR 140 crores;

(xii) that even while admitting and acknowledging liability under the letter dated 20.4.2012, the respondent simultaneously issued notices on the same date, viz., 20.4.2012 to the Bankers to invoke the Performance Bank Guarantees;

(xiii) that therefore, the petitioner was constrained to move applications in Arbitration Petition Nos.590-593 of 2012 on the file of the High Court of Judicature at Bombay under Section 9 of the Arbitration and Conciliation Act, 1996, challenging the invocation of the Performance Bank Guarantees;

(xiv) that the prayer of the petitioner in those applications for the grant of an ex parte order of interim injunction was rejected by a single Judge of the Bombay High Court on 23.4.2012;

(xv) that the petitioner then moved appeals before the Division Bench and obtained interim prohibitory orders restraining the Banks from making payment to the respondent in pursuance of the invocation of Guarantee;

(xvi) that immediately thereafter, the respondent issued a letter dated 24.4.2012, revoking the letter invoking Bank Guarantees;

(xvii) that consequently, the parties reached a settlement, leading to the disposal of the appeals by the Division Bench, in terms of the consent between the parties;

(xviii) that thereafter the petitioner as well as the respondent nominated the Arbitrators to resolve the disputes;

(xix) that after the parties nominated the Arbitrators, but before the Arbitrators could choose an umpire, the parties resolved t