HON’BLE SRI JUSTICE G.V.SEETHAPATHY COMPANY PETITION No.124 OF 2006 THURSDAY, THE NINTH DAY OF SEMPTEMBER TWO THOUSAND AND TEN IN THE MATTER OF THE COMPANIES ACT, 1956 (1 OF 1956) AND IN THE MATTER OF M/S SOMMET TECHNOLOGIES PRIVATE LIMITED Between: M/s Bharti Airtel Ltd, (formerly known as Bharti Tele Venture Ltd.,) Rep. by its Head (legal) and Constituted Attorney K.B.S.Sarma …. Petitioner A n d M/s Sommet Technologies Private Ltd, Rep. by its Managing Director, Hyderabad. …Respondent HON’BLE SRI JUSTICE G.V.SEETHAPATHY COMPANY PETITION No.124 OF 2006 ORDER: This petition is filed under Sections 433(E) (F) & 439 (1)(B) read with Section 434 of the Companies Act, 1956 (for short ‘the Act’), seeking direction for winding up of the respondent company viz., M/s Sommet Technologies Private Limited. 2. Arguments of the learned counsel for the petitioner and the learned counsel for the respondent are heard. Perused the record. 3. The petitioner is limited company incorporated under the Companies Act, 1956 with its registered office at New Delhi and A.P. Circle Office at Hyderabad. The respondent company is incorporated under the Companies Act having its registered office at Hyderabad. The authorized share capital of the respondent company is Rs.5,00,000/- divided into 50,000 equity shares of Rs.10/- each. The paid up equity share capital is Rs.4,50,000/- divided into 45,000 equity shares of Rs.10/- each. 4. The main objects of the respondent company are to carry out business of software and hardware design, research and development, implementation, manufacturing and maintenance of products and components in the filed of commerce, irrigation, agriculture, health etc. The objects of the respondent company in detail are set out in the Memorandum of Association and extracted in the company petition and hence they are not reiterated here for the sake of brevity. 5. The respondent approached the petitioner in 2004 for availing corporate subscription of mobile cellular phone services for its employees. The petitioner sanctioned mobile connections from time to time to the respondent on the respondent’s signing subscription enrolment form. The mobile connections were activated by the petitioner from 01-09-2004 to 30-03-2006 with a monthly minimum rental payable by the company. The respondent company agreed to the terms and conditions of the petitioner and undertook the responsibility for payment of the bills raised on account of the services availed from the petitioner. The respondent requested the petitioner to provide further corporate connections by letters dated 01-05-2005 and 24-10-2005 and accordingly the petitioner increased the number of connections. After availing the services of the petitioner, the respondent committed default in payment of the bill for the period from 08-04-2006 to 07-08-2006 in a total sum of Rs.13,01,346- 60 Ps as on 07-08-2006. The respondent failed to pay the said amount in spite of the petitioner raising the bills and invoices and making several requests for payment. The petitioner, therefore, issued a statutory notice to the respondent under Section 434 of the Act on 19-08-2006. The respondent received the notice on 23-08-2006. The respondent did not give any reply nor paid the amount. The respondent has become commercially insolvent and is not in a position to viably and feasibly manage its finances and is not in a position to clear its liabilities. The petitioner, therefore, filed this petition for an order of winding up of the respondent company. 6. The respondent filed a counter contending, in brief, as follows:- The respondent availed the services from September, 2005 onwards and that too only for 54 phone connections, which gradually increased to 484 connections by May, 2006 when the petitioner abruptly disconnected the services. It is true that the respondent company agreed to pay for the connections and services availed from the petitioner, but one of the conditions was that the respondent would not be called upon to pay advance monthly rentals. The respondent addressed a letter to the petitioner only in January, 2006 seeking telephone connections, but the year was wrongly mentioned in the said letter as 2005 typographically. The petitioner has not filed any subscription form or individual bills for the period from January, 2005. In the month of March, 2006, the petitioner raised individual bills for a total number of 358 connections in a sum of Rs.2,16,625-11 ps. The respondent paid Rs.1,35,000/- towards the said bills. There were certain discrepancies in the bills raised by the petitioner for the month of March, 2006, as the petitioner charged advance monthly rentals contrary to the agreement. When the respondent sought clarification from the petitioner and deletion of the advance monthly rent from the bill, the petitioner resorted to abrupt and arbitrary disconnection of the services, as a result, the respondent company, which was engaged in the business of software development suffered a massive disruption to its activities. The respondent initially issued a cheque for Rs.2,14,000/- and later paid Rs.1,35,000/-. Thereafter, the petitioner restored the services for a while and then barred the outgoing calls in the month of April, 2006 and subsequently barred the incoming calls also. As a result, the respondent suffered loss of business and also reputation. The respondent has initiated steps for instituting civil proceedings for recovery of damages against the petitioner. The respondent received two notices from the petitioner, one under Section 138 of the Negotiable Instruments Act and the other under Section 434 of the Companies Act and under the mistaken impression that both the notices were same, got issued a reply to the former notice and could not give a separate reply to the notice under Section 434 of the Companies Act. The respondent company disputes the rights of the petitioner to claim the amount of Rs.13,01,346.60 Ps when it did not provide any services beyond April, 2006. If at all the petitioner can claim money only for the period during which it provided connectivity to the respondent company, that too subject to the counter-claim of the respondent for damages. As such, there is no admitted liability on the part of the respondent. 7. Subsequently, the petitioner filed a rejoinder stating that the respondent availed services from 2004 onwards and the original subscriber forms dated 20-11- 2004, 17-05-2005 and 20-12-2004 are filed. It is false that respondent availed services only from September, 2005. It is false that the respondent has not availed services beyond April, 2006. The petitioner is filing the invoices raised by it for the period from April, 2006 to August, 2006. 8. During enquiry, one K.B.S.Shara, Head (Legal) and constituted attorney of the petitioner was examined as P.W.1 and Exs.P-1 to P-17 were marked on behalf of the petitioner. G.Pavani, Manager (Administration) of the respondent company was examined as R.W.1 and Exs.B-1 to B-5 were marked on behalf of the respondent. 9. The point, which arises for consideration, is - whether the respondent is due in a sum of Rs.13,01,346.60 Ps towards charges for the mobile telephone services rendered by the petitioner for the period from 08-04-2006 to 07-08-2006 and whether the respondent is unable to pay the same and became commercially insolvent and, therefore, rendered itself liable to be wound up under Section 433 (E) and (F) read with Section 434 of the Companies Act? 10. The learned counsel for the petitioner would submit that the cheque issued by the respondent under Ex.P-13 for a sum of Rs.2,14,000/- was dishonoured for insufficient funds and the evidence of R.W.1 would also disclose that the respondent is not financially sound. 11. The learned counsel for the respondent, on the other hand, would submit that the respondent is disputing its liability for payment of any amount for the period from 08-04-2006 to 07-08-2006, as the telephones were under disconnection during that period and no service was rendered by the petitioner and the petitioner had not produced the bills for the relevant period and it is not shown as to how the amount of Rs.13,01,346.60 Ps claimed, is arrived at. He would further submit that when a bona fide dispute is raised regarding the claim made by the petitioner, the order of winding up cannot be passed. 12. It is not disputed that the respondent, which is a software development company, availed the mobile telephone service connections from the petitioner, agreeing to pay the necessary charges. According to the petitioner, the mobile services were provided by them to the respondent during the period from 01-09-2004 to 30-03-2006 and on the request of the respondent, the services were extended beyond 30-03-2006 also. The petitioner contends that the respondent was not regular in payment of the amounts due in spite of raising the bills periodically and for the period from 08-04-2006 to 07-08-2006, a total sum of Rs.13,01,346.60 Ps was due from the respondent. The petitioner also contends that in spite of issuing statutory notice under Section 434 of the Companies Act, calling upon the respondent to pay the said amount, it remained unpaid, though the notice was served on the respondent. The petitioner seeks an order of winding up of the respondent company on the ground that the respondent is unable to pay its debts and, therefore, became commercially insolvent. The respondent disputes the claim made by the petitioner, both regarding the period for which the amount is claimed and also the quantum. According to the respondent, it availed the services from the petitioner only from September, 2005, starting with 54 connections, which number increased to 484 till May, 2006. The respondent categorically denies that the services were availed from September, 2004 or that they lasted till 2006. According to the respondent, they availed the services of the petitioner only for eight months from September, 2005 to April, 2006. The respondent further contends that when the petitioner raised bill for 358 connections in a sum of Rs.2,16,625-11 Ps in March, 2006, the respondent paid Rs.1,35,000/-, in addition to Rs.2,14,000/- paid previously. According to the respondent, the petitioner’s demand included advance monthly rentals in their bills contrary to the understanding and on receiving the bill for the month of March, 2006, the respondent sought a clarification, but instead of clarifying, the petitioner resorted to abrupt disconnection of the telephone services. According to the respondent, on being assured that the discrepancies would be removed and adjusted in the future bills, the respondent paid the amounts of Rs.2,14,000/- and Rs.1,35,000/-, whereupon the services were restored, but temporarily and subsequently, the petitioner again disconnected the services in April, 2006. The respondent contends that when the services were stopped in April, 2006 itself, the question of liability for the subsequent period up to August, 2006, does not simply arise. 13. The specific case of the petitioner is that the respondent fell due in a sum of Rs.13,01,346.60 Ps for the period from 08-04-2006 to 07-08-2006 and in view of the failure and inability of the respondent to pay the said amount, the respondent became liable to be wound up. The petition does not disclose as to how the said amount of Rs.13,01,346.60 Ps was arrived at. The petition does not also furnish the break up details of the bills monthwise for the period from 08-04-2006 to 07-08-2006 and in respect of how many service connections the bills were raised. Even in the statutory notice Ex.P-5 dated 19-08-2006 got issued by the petitioner, the said details are not furnished. 14. P.W.1 admitted in the cross-examination that the services were disconnected, but he could not say the exact number of connections the respondent had at that time. He denies the suggestion that the services were disconnected in April, 2006 and asserts that they were disconnected in September, 2006. P.W.1 filed Exs.P-14 to P-17, which according to him would show that the respondent availed services of the petitioner till September, 2006. Exs.P-14 to P-17 relate to the period from 08-08-2006 to 07-09-2006 in respect of four service connections. All the four bills Exs.P-14 to P-17 relate to the period subsequent to the demand period, which is from 08-04-2006 to 07-08-2006. The petitioner has not filed similar bills pertaining to the relevant period i.e., April, 2006 to August, 2006. Ex.P-4 the statement of account merely furnishes the account number and mobile number and the total amount due is Rs.13,01,346.60 Ps, but does not disclose the period for which the said amount is due and as to how the said amount is arrived at. 15. The petitioner would allege that the cheque issued by the respondent for a sum of Rs.2,14,000/- was dishonoured on the ground of ‘insufficiency of funds’ for which a complaint was also filed before the jurisdictional Magistrate after giving a statutory notice under Section 138 of the Negotiable Instruments Act in C.C.No.491 of 2006. 16. It is not disputed that subsequent thereto the respondent paid Rs.1,35,000/- and the same was received by the petitioner, though P.W.1 says that he was not aware whether the petitioner company received any payment subsequent to dishonour of the cheque. It is also not disputed that on such payment only, the services were temporarily restored. The contention of the respondent from the beginning had been that there were discrepancies in the claim made by the petitioner, as they included certain amounts by way of advance monthly rentals, contrary to the understanding and without clarifying the discrepancies, the petitioner had resorted to disconnection of services and on the assurance of the petitioner that the same would be clarified and adjusted in the future bills, the petitioner paid the amount of Rs.1,35,000/- to them for restoration of services. Even in the reply notice Ex.B-2 issued to the petitioner’s notice dated 22-08-2006, the respondent had raised the said plea. The fact that the cheque issued by the respondent for Rs.2,14,000/- got dishonoured, does not necessarily lead to any inference of any such inability on the part of the respondent to pay its dues so as to render the respondent liable to be wound up, especially when the respondent subsequently paid a sum of Rs.1,35,000/- and the petitioner received the same. R.W.1 has testified that the respondent company is going and growing concern earning profits and providing training and employment to hundreds of skilled people. She also filed the balance and profit and loss account for the respondent’s company for the year 2003-2004, 2004-2005 and 2005-2006, which are marked as Exs.B-3 to B-5. Exs.B-3 to B-5 would show that the respondent company has been earning profits year after year. 17. Be that as it may, the facts remains that the respondent company nowhere admitted liability for the payment of the amount demanded in a sum of Rs.13,01,246-60 Ps by the petitioner. The respondent has specifically disputed not only the period for which the demand was made on the ground that the services remained disconnected during the said period but also disputed the quantum on the ground that certain amounts were included by the petitioner, contrary to the agreement. The question as to what exactly the period for which the respondent was liable to pay and in what amount, does not arise for consideration in this proceeding. Suffice it to note in the context of the present proceedings that the respondent did raise a dispute regarding the period and the amount for which the demand is made by the petitioner, the said dispute in the facts and circumstances of the present case and in the light of the evidence available on record, is certainly a bona fide one, which requires adjudication in the appropriate proceedings, but not in the present petition filed for winding up. 18. Before seeking an order of winding up, the petitioner has to establish that the respondent is unable to discharge the debts. When the respondent has raised a dispute over the claim made by the petitioner, no inference can be drawn that the respondent is unable to pay its dues, especially in the light of Exs.B-3 to B-5, which show that the respondent was earning profits during the relevant period. Thus, there was no admitted liability on the part of the respondent. 19. In MEDIQUP SYSTEMS PRIVATE LIMITED V. PROXIMA MEDICAL SYSTEMS G.M.B.H[1], the Apex Court while referring to M/s MADHUSUDAN GORDHANDAS AND COMPANY Vs. MADHU WOOLEN INDUSTRIES PRIVATE LIMITED[2], laid down the following principles on which the Court acts: (i) that the defence of the company is in good faith and one of substance: (ii) the defence is likely to succeed in point of law; and (iii) the company adduces, prima facie proof of the facts on which the defence depends. 20. In the above decision reference was made to SOFTSULE(P) LTD. RE[3], wherein the High Court of Bombay held as follows: "Firstly, it is well settled that a winding up petition is not legitimate means of seeking to enforce payment of a debt which is bona fide disputed by the company. If the debt is not disputed on some substantial ground, the Court/Tribunal may decide it on the petition and make the order. Secondly, if the debt is bona fide disputed, there cannot be "neglect to pay" within the meaning of Section 433(1)(a) of the Companies Act, 1956. If there is no neglect, the deeming provision does not come into play and the winding up on the ground that the company is unable to pay its debts is not substantiated. Thirdly, a debt about the liability to pay which at the time of the service of the insolvency notice, there is a bona fide dispute, is not 'due' within the meaning of Section 434(1)(a) and non-payment of the amount of such a bona fide disputed debt cannot be termed as "neglect to pay" the same so as to incur the liability under Section 433(e) read with Section 434(1)(a) of the Companies Act, 1956. Fourthly, one of the considerations in order to determine whether the company is able to pay its debts or not is whether the company is able to meet its liabilities as and when they accrue due. Whether it is commercially solvent means that the company should be in a position to meet its liabilities as and when they arise." In the present case also, the respondent has consistently been disputing the claim made by the petitioner in respect of the period and also the amount for which the demand is made and in view of the evidence available on record, the said dispute is certainly made in good faith and is of substance requiring adjudication in an appropriate civil proceedings. Further, the evidence on record does not also establish that the respondent is unable to discharge its dues and is, therefore, liable to be wound up. On the other hand, the evidence on record would go to show that the respondent was growing concern and was making profits during the relevant period. The petitioner failed to make out any case for winding up of the respondent company. 21. In the result, the company petition is dismissed. There shall be no order as to costs. ____________________ G.V.SEETHAPATHY, J 09th September, 2010. Lrkm [1] AIR 2005 SC 4175 [2] AIR 1971 SC 2600 [3] (1977) 47 Company Cases 438 (Bombay)