JUDGMENT

W. Broome, J. - This petition for the winding up of the; Federal Chemical Works Limited of Ghaziabad has been presented under section 439 (1) (b) read with section 433 (e) and (f) of the Companies Act, 1956, by three creditors of the Company, who also happen to be shareholders. The amounts claimed by three petitioners Devendra Kumar Jain, Mahendra Kumar Jain and Mst. Hira Devi are Rs. 7,462, Rs. 30,000 and Rs. 5,000 respectively together with interest. Statutory notices of demand were served on the Company on 26th November, 1963; but the Company made no payment and the petitioners accordingly assert that by virtue of the presumption arising under section 434 (1) of the Act the Company must be deemed to be unable to pay its debts, It is further alleged by the petitioners that Mittra Sain Jain has seized control of the Company and is running it in a manner prejudicial to the interests of the petitioners.

2. The petition is opposed by the Company and its directors, who have filed a counter-affidavit, pleading that there are bona fide disputes with regard to the claims of each of the three petitioners. The stand taken in this counter-affidavit is that although the amounts claimed by the petitioners are due to them, the Company has counter-claims against the petitioners, which cancel out the entire liability of the Company so far as petitioner No. 2 is concerned and the major portion of the liability as regards petitioners I and 3.

3. It is well settled that in order to raise the presumption under section 434 (1) as to a Company's inability to pay its debts, it is not sufficient to show merely that the Company has omitted to pay the debt due to the petitioner despite service of the statutory notice; it must be shown that the Company has omitted to pay without reasonable excuse. The existence of valid counter-claims would clearly constitute reasonable excuse for non-payment. What has to be seen in the present case therefore is whether the counter-claims set up by the Company are prima facie valid and bona fide.

4. As regards petitioner No. 1, the Company asserts that he has been occupying certain premises belonging to the Company without paying rent for the last three years or so. He was asked to vacate these premises in May, 1961 and again in May, 1962, and was informed on the latter occasion (vide Annexure XII to the rejoinder affidavit) that he would be charged Rs. 132-50 per mensem as rent and damages, to be debited to his loan account, until he chose to vacate. The Company is perfectly willing to pay the balance standing to his credit in his account, as soon as he quits the premises.

5. Petitioner No. I denies his liability to pay rent and claims that the house in question was allotted to his family in exchange for another house belonging to them which was taken over by the Company. But the Company has produced evidence to show that when Petitioner No. I was working as one of the Directors of the Company he used to pay 10% of his salary as house rent for the premises in question (vide Annexure C to the counter-affidavit). Petitioner No. 1 tries to make out in his rejoinder that this 10% deduction was not for house rent but merely by way of a 'voluntary cut' in his salary; but the documentary evidence is against him in this respect.

6. I am satisfied that the Company has a bona fide counter-claim against petitioner No. 4 for rent (or damages for use and occupation) of the premises which he continues to occupy in spite of a notice to quit. If the Company were to take legal proceedings for his eviction, some years would presumably elapse before possession could be obtained and by that time the accumulated rent would be equal to the entire amount standing to his credit in the books of the Company. In such circumstances it seems to me that the Company has a reasonable excuse for not paying anything to petitioner No. 1 unless he agrees to vacate the premises.

7. As regards Petitioner No. 2 who was Director and manager of the