The machinery for winding up cannot be utilized as a means for realizing debts due from the company.

G.R.Majithia, J.

1. This is an application under Section 435 read with Sections 433 and 434 of the Companies Act (for short " the Act") for winding up the respondent-company.

2. C.P. No. 85 of 1985 was originally filed by some of the creditors of the company. By order dated September 11, 1986, the company petition was ordered to be advertised and the order was duly complied with. On September 3, 1987, counsel for the petitioners admitted that the entire claim of the petitioners had been paid to them. On August 11, 1988, the counsel for the petitioners made a statement that he did not want to prosecute the petition on behalf of the petitioners since they had entered into a settlement and had received the entire amount due to them. C.A. No. 100 of 1987 in C.P. No. 85 of 1985 was moved by some of the creditors for substitution as petitioners. The application was allowed and counsel for the petitioners was directed to file an amended petition. It is the amended petition on behalf of the fresh creditors allowed to be substituted which is being disposed of.

3. In the petition, it is stated that the petitioners deposited various amounts with the respondent-company against receipts details of which are as under:

S. No.

Name

Receipt No.and date

Amount deposited Rs.

Rate of interest P.A.

1.

Daulat Ram

003848/80 dt. 31-3-80

3500

12%

2.

Smt. Amrit Kaur

004041/80 dt. 25-11-80

2,500

12%

3.

Smt. Promila Saini

004018/80 dt. 30-10-80

1,000

12%

4.

Ramandeep Singh

003862/80 dt. 30-4-80

3,400

12%

5.

Jagdish Singh Saini

003634/79 dt. 1-9-1979

3,000

12%

Total

Rs. 13,400

4. The amount was not paid when demanded. The respondent-company has defaulted in making payment of the sum due. The respondent-company admitted that the amounts were deposited by the petitioners. Payment of interest to some of the creditors on their deposits was also admitted, but this was before October 1, 1982. On December 31, 1982, the petitioners came to the companys office, abused the managing director of the respondent-company and demanded immediate payment. After December 31, 1982, the petitioners did not approach the respondent-company. It was pleaded that their claim had become barred by time. It was also pleaded that the petitioners did not serve the statutory notice under Section 434 of the Act before filing the petition.

5. It is well-settled that the machinery for winding up cannot be allowed to be utilized as a means for realizing debts due from the company. If the debt was bona fide disputed, there cannot be neglect to pay within the meaning of Section 434(1)(a) of the Act. The principles on which the company court acts are : (1) that the defence of the company is in good faith and one of substance ; (2) the defence is likely to succeed in point of law ; and (3) the company produced prima facie proof of the facts on which the defence depends. In the instant case, the respondent-company has succeeded in proving that their defence is in good faith and one of substance. It was held in Chemical Enterprises v. Kalpanalok Ltd. [1984] 55 Comp Cas 552 (P & H) that the creditors who had not served any statutory notice were not entitled to continue the petition. No contrary authority has been brought to my notice by learned counsel for the petitioners. On the question of limitation, learned counsel for the respondent submitted that the deposit was for a term of six months bearing interest at the rate of 12% per annum. The limitation to effect recovery will start after the expiry of six months and not from the date when the payment is made. In support of his submission, he relied on Kashinath Sankarappa Wani v. New Akot Cotton Ginning & Pressing Co. Ltd., AIR 1958 SC 437 and more particularly on the following observations made therein (p. 438) :

" The only question which arises for our consideration in this appeal is whether the appellants suit was barred by limitation. The appellant, in the first instance, relied upon the deposit receipt which was passed by the co