The court emphasized that winding up is not a means of debt recovery and requires the company's inability to pay debts in the nature of commercial insolvency.

Permod Kohli, J. - The petitioner and the respondent are both Limited Companies incorporated under the Indian Companies Act, 1956. The authorised share capital of the petitioner-company is Rs. 12,50,00,000/- divided into Rs. 125,00,000/-shares of Rs. 10/- each, as per the balance sheet of the petitioner-company upto the date of filing of this petition. Similarly, respondent-company has paid up capital of Rs. 3,75,65,640/- divided into 37,56,564 shares of Rs. 10/- each. Present petition has been instituted by the petitioner-company seeking winding up of the respondent-company on its failure to pay debts. The factual background leading to the filing of the present petition is as under :-

2. As per the averments made in the petition, the respondent-company is engaged in the business of manufacturing industrial control equipments. On the request of the respondent-company, the petitioner advanced short term loans to the respondent-Company for funding its capital requirement for the purpose of development of a chip called VCU (Versatile Component Unit). The total loan advanced by the petitioner-company from time to time is said to be Rs. 5,40,893,273/-. It is alleged that these short term loans were repayable after one year or at least with the close of the financial year. Respondent-company issued various post dated cheques for the repayment of the loan and also issued receipts acknowledging the advancement of the loan from time to time. The loan was repayable with interest. The respondent-company paid interest through cheques after deduction of T.D.S. It is stated that balance confirmation of the loan is acknowledged by the respondent vide certificate for the year 2005-2006, copies whereof have been placed on record as Annexure P-3. Parties also entered into a loan agreement dated 15.4.2005 (Annexure P-4). Clause (b) of the aforesaid agreement, inter alia, refers to earlier loans and also additional loan as detailed in Annexure A to the agreement and also the additional loan of Rs. 2.00 crores. Copy of T.D.S. Certificate dated 30.6.2004 in Form 16-A regarding payment of the interest has also been placed on record at page 98 of the petition. It is further alleged that simultaneously with the execution of the loan agreement and another share pledge agreement dated 15.4.2005 was also executed by M/s R.L. Verma and Sons (HUF), as pledgers, in favour of the petitioner-Company, as pledgee duly confirmed by the respondent-company. It was duly acknowledged in the deed of pledge that the petitioner-company had already advanced a sum of Rs. 19.20 crores to the respondent-company and it further agreed to advance an amount of Rs. 2.00 crores. It is also the case of the petitioner that even after the execution of the loan agreement, petitioner-company paid an additional loan at the request of the respondent company and the total amount at the time of filing of the petition was more than Rs. 4.00 crores as notified here-in-above which is duly reflected in the books of accounts maintained by the petitioner-company. The amount is repayable with interest at the rate of 12% per annum. It is alleged that the respondent-company committed various defaults and breaches of understanding between the parties, including the terms of the loan agreement and has failed to pay the loan amount with interest as per the stipulations contained therein. Reference is made to various clauses of the agreement in paragraph 14 of the petition. It is not necessary to deal with every kind of alleged breach. On failure of the respondent to pay the loan, the petitioner served a legal notice dated 5.1.2007 (Annexure P-7) under Section 433 and 434 of the Indian Companies Act through its Advocate Mr. Sudhir K. Kakkar, demanding the entire outstanding loan amount of Rs. 54,08,93,273/- and interest through registered post. The said notice was received by the respondent who also sent a reply dated 27.1.2007 (Annexure P-8) through its Advocate Sh. P.A.S. Rao. It is allege