JUDGMENT :

K.S. RADHAKRISHNAN, J.

1. Leave granted.

2. A Company Petition No. 41 of 2009 was filed by the respondent herein under Sections 433(e) and (f), 434 and 439 of the Companies Act, 1956 before the High Court of Karnataka at Bangalore (hereinafter referred to as the Company Court) praying for winding up of the appellant company on the ground that it had failed to pay a sum of US$ 1,065,714.00 in terms of the Deed of Settlement entered into by the parties on 19.12.2003 towards the fees for the marketing services undertaken by the respondent for the appellant.

3. Prior to the filing of the company petition, a legal notice dated 16.8.2008 was served on the appellant under Section 434(1)(a) of the Companies Act, 1956, calling upon the company to pay the amount within twenty one days from the date of the receipt of that notice, failing which the appellant was informed that appropriate legal proceedings would be initiated. Specific reference was also made to the deed of settlement dated 19.12.2003 and the terms of the Compromise entered into by the parties on 18.3.2006 in O.S. No. 9655 of 2005 before the City Civil Court at Bangalore.

4. The appellant replied to the said notice vide its letter dated 28.8.2008 stating that it had not violated any of the terms and conditions of the said deed of settlement or the compromise entered into by the parties and that whatever amount received by the appellant prior to 31.12.2006 from M/s Solutions Protocol Sdn. Bhd. a company incorporated in Malaysia, was paid to the respondent. The appellant also denied the liability to pay the amount demanded. The respondent was advised not to indulge in any frivolous litigation against the appellant which would be at their risk and costs.

5. The Company Judge, however, admitted the company petition vide its order dated 17.9.2009 holding that the respondent company has established a prima facie case and ordered that the matter be re-listed for orders regarding advertisement to be published in the newspaper. The Company Judge also referred to certain clauses in the deed of settlement and the compromise petition and concluded prima facie that the appellant had undertaken to make future payments to the respondent. The Company Judge also directed the parties to appear before the Mediation Centre at Bangalore for amicably settling the dispute. Aggrieved by the above mentioned order, the appellant company filed OSA No. 36 of 2009 before the Division Bench of the High Court of Karnataka which was dismissed vide its judgment dated 21.10.2009 and hence, the present appeal before this Court.

6. Mr. R.F. Nariman, learned senior counsel appearing for the appellant company submitted that no grounds have been made out even prima facie warranting interference by the Company Court and to proceed further calling for an advertisement in the newspaper or directing the parties to appear before the Mediation Centre for amicably settling the dispute. Learned senior counsel submitted that the Company Judge as well as the Division Bench have completely misunderstood the terms and conditions of the deed of settlement dated 19.12.2003 and the compromise entered into by the parties on 18.3.2006. The learned senior counsel also submitted that if at all the respondent is aggrieved, the remedy open to the respondent is to approach in the Civil Court and not by way of a winding up petition, especially when there is substantial dispute between the parties. Learned counsel also submitted that the company is commercially solvent and capable of discharging its debts, if legally due.

7. Mr. R.S. Hegde, learned counsel appearing for the respondent company submitted that the Company Court as well as the Division Bench of the High Court have correctly came to the conclusion that prima facie grounds have been made out under Section 433(e) and (f) read with Section 434 of the Companies Act. The learned counsel submitted that the appellant company has failed to comply with the terms and conditions of