IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH : HYDERABAD MONDAY, THE NINETH (9TH) DAY OF AUGUST, TWO THOUSAND AND TEN Present: HON’BLE SRI JUSTICE G.V.SEETHAPATHY C.P.No.76 of 2009 Between: Sri Kaveti Srikanth & another … Petitioners And: Kura Homes Private Limited, Secunderabad … Respondent HON’BLE SRI JUSTICE G.V.SEETHAPATHY C.P.No.76 of 2009 ORDER: This company petition is filed under Section 433(e) and (f) and 439 of the Companies Act 1956 (for short ‘the Act’) seeking a direction to wound up the respondent company. 2. Heard both sides. Perused the record. 3. The averments of the petition in brief are as follows: The respondent company was incorporated as a private limited company on 20.01.1999 with its registered office at Sikh village, Secunderabad. The authorized share capital of the respondent company is Rs.10,00,00,000/- divided into 10,00,000 equal shares of Rs.10/- each. The issued, subscribed and paid up capital of the respondent company is Rs.98,00,000/- divided into 9,80,000 equity shares of Rs.10/- each. The main objects of the respondent company as set out in the memorandum of association are extracted in the company petition and they are not reiterated here for the sake of brevity. The respondent company has been carrying on business in development, construction and sale of residential, commercial flats. In the course of its business, the respondent company has undertaken the construction of a residential project under the name and style of ‘Sri Sai Rajendra Prestige’ at Nehru Nagar, West Maredpalle, Secunderabad. The said property was purchased by the respondent company duly represented by its Managing Director, K. Satyanarayana Reddy from its vendors under an agreement of sale cum GPA dated 31.07.2006. The petitioners evinced interest in purchasing flat and after negotiations, 3 BHK flat admeasuring 1830 sq. ft.(inclusive of common areas and facilities), bearing Flat No.310 in Block-A was purchased by them for a total sale consideration of Rs.45,75,000/-. The petitioners jointly paid a sum of Rs.16,00,000/- on 12.11.2008 by way of cheques and obtained receipts. The petitioners have also paid another sum of Rs.5,00,000/- in cash on 17.12.2008 under acknowledgment. Thus the petitioners have paid total sum of Rs.21,00,000/-. The petitioners approached the respondent company in the first week of January 2009 offering to pay further sum of Rs.10,00,000/-. The respondent company arbitrarily started demanding Rs.18,30,000/- more than the agreed amount on the ground that there was better offer from third party. As the petitioners were not willing to pay more than the agreed amount, the oral agreement was cancelled and the same was acknowledged by the respondent on the reverse of the receipt dated 12.11.2008 and returned an amount of Rs.1,50,000/-. The respondent company agreed to return the balance amount of Rs.19,50,000/- within three weeks by the end of January 2009. The respondent company is liable to pay the balance amount of Rs.19,50,000/- with interest at 18% per annum from 17.12.2008. As the respondent company failed to pay the amount in spite of demands, the petitioners issued a registered notice dated 12.05.2009 under Section 434 of the Act. The respondent received the notice on 13.05.2009, but neither paid the amount nor gave any reply. Hence, the petition. 4. The respondent company filed a counter, admitting that they received altogether a sum of Rs.21,00,000/- as part of the sale consideration and contending that subsequently, the petitioners never approached the respondent company for payment of the balance amount and on the other hand, the first petitioner expressed his inability to mobilize the funds and requested for refund of the amount already made. As there were no latches on the part of the respondent company in cancellation of the agreement, the question of payment of interest does not arise. In the counter, it is stated that however, as a good will gesture, the company is willing to pay the amount as early as possible and the company is working out for the customer of the above flat for re-sale. On account of the recession in the market, the company is unable to secure a customer, but the company would honour the promise to pay back Rs.19,50,000/- and out of it, the company is also willing to pay Rs.5,00,000/- immediately by way of demand draft, if the petitioners are willing to accept the same. 5. It is not disputed that subsequent to filing of the petition, the respondent company has paid the principal amount of Rs.19,50,000/- and the petitioners have received the same. The dispute that remains is only regarding the claim for payment of interest. As per Section 433 of the Act, one of the grounds on which the company may be wound up is that the company is unable to pay its debts, and it is on the said ground the present application is filed. 6. Learned counsel for the petitioner relied upon the decision in ‘Vijay Industries vs. NATL Technologies Limited[1]’, wherein, it was held by the apex Court that failure to pay the agreed/statutory interest is covered by the expression ‘debt’ under Section 443 (e). It was further held that ‘if dues as regards principal amount has been admitted, the fact that there is a dispute as to existence of agreement for payment of interest or the rate of interest payable, would not result in dismissal of winding-up petition’. In the above case, a dispute was raised regarding existence of agreement for payment of interest on delayed payments and invoices attached with each supply contained a stipulation as to payment of interest at 2% per month in case of delay in payment and the said invoices were signed by an officer of debtor company as a token of acceptance. Further, there were minutes between Debtor Company and the creditor indicating that the debtor company in principle agreed to compensate the creditor for delay in payment. Thus in the above case, it was found on facts that there was an agreement to pay the interest by way of compensation for the delay in payment and the dispute raised by the debtor regarding the existence of the agreement and also rate of interest payable was held to be not a ground for dismissal or winding up petition’. 7. The above decision is not applicable to the facts of the present case for the simple reason that there is no stipulation for payment of interest by the respondent company. The petitioners are claiming interest on the ground that in spite of cancellation of the agreement, the respondent failed to refund the amount of Rs.19,50,000/-. It is not the case of the petitioners that at the time when the respondent paid Rs.1,50,000/-, there was any stipulation for payment of interest on the balance amount of Rs.19,50,000/- from any particular date. The claim for interest is made by the petitioners unilaterally on the ground that the amounts due and payable by them by way of refund of the sale price, consequent upon cancellation of the agreement, was unjustifiably withheld by the respondent company. The respondent has disputed their liability for payment of the interest on the grounds, firstly, there was no stipulation to pay the interest; and secondly, the petitioners have failed to comply with their promise to secure another customer to purchase the flat. Thus, the claim for interest made by the petitioners is totally refuted by the respondent company. It is therefore, not a case of inability to pay any debt or negligence on the part of the respondent to pay the same, but it is a case where the liability to pay the interest itself is disputed by them. The question as to whether or not the respondent is liable to pay interest and if so at what rate, does not arise for consideration in this proceeding and it is open to the petitioners to seek appropriate remedy in that regard before appropriate forum, if permissible under law. As there is no admitted liability on the part of the respondent to pay interest and the claim made in that regard by the petitioners is a disputed claim and the principal amount of Rs.19,50,000/- having already been paid by the respondent, it is held that there are no valid or justifiable grounds for ordering of winding up of the respondent company. 8. In ‘Kitti Steels Ltd., Hyderabad vs. Sanghi Industries Ltd.,[2]’, this Court held as follows. “Notwithstanding Section 433(e) read with Section 434(1) (a) of the Act, Court must be slow in ordering winding up, even if it is shown that the company failed to pay debts within three weeks after receipt of registered notice demanding payment, or even if the company having received notice, does not respond. It is also well settled that petition for winding up is not a substitute for accepted mode of recovering debt by way of suit. Proceedings under section 433(e) of the Act cannot be used for arm-twisting to compel company to pay debts even if there are serious disputes regarding liability. But whenever the company disputes debt, same does not preclude the court from ordering winding up if it is shown that dispute raised by company regarding debt is not bona fide. If the dispute or defense raised by company has no substance or the dispute or defense is raised as an after though before court, company can be ordered to be wound up. Further, in its discretion, court may refuse the order of winding up, if it is of opinion that such winding up would not be in the interest of members, employees, workmen and creditors of company. A perusal of section 443 of the Act would show that absolute discretion is vested in the Court to make an order for winding up. Court can refuse to make an order of winding up, if it is of opinion that the person is acting unreasonably in seeking to have the company wound up instead of pursuing with other remedy.” 9. In the present case, as the dispute regarding the claim for interest is found to be bona fide, it is considered that winding up of the respondent company would not be in the interest of members, employees, workmen and creditors of the company and therefore, such an order, directing winding up of the respondent company is not warranted. It is open to the petitioners to work out other remedies available under law regarding his claim for interest. 10. In the result, the company petition is dismissed. No order as to costs. ___________________ G.V.SEETHAPATHY, J Date: 09.08.2010 Bss [1] (2009) 3 SCC 527 [2] 2010(4) ALD 116