THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition No.148 of 2006 (Dated : 16-08-2011) Between: M/s. Hathway Cable & Datacom Pvt. Ltd. …Petitioner A n d M/s. Vanasthali Communication Network Private Limited ….Respondent THE HON’BLE SRI JUSTICE B.SESHASAYANA REDDY Company Petition No.148 of 2006 ORDER: This Company Petition has been taken out by M/s. Hathway Cable & Datacom Private Limited under Sections 433, 434 and 439 of the Companies Act, 1956 (`the Act’, in short) seeking an order of winding up of M/s. Vanasthali Communication Network Private Limited on the ground that it had failed to pay a sum of Rs.54,66,882/- towards subscription charges. 2. M/s. Hathway Cable & Datacom Private Limited (`petitioner’, in short) is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the business as a Cable TV Service Provider, which in the cable TV industry parlance called as Multi Systems Operator (“MSO”). The petitioner receives and distributes/ redistributes the satellite television, broadcast signals and other audio visual signal of cable TV channels to various end- subscribers either directly or through its distributors, franchises, local cable operators etcetera. 3. M/s. Vanasthali Communication Network Private Limited (`respondent’, in short) is a company registered under the Act. It is also engaged in the business of Cable TV Networks and is operating as MSO in the twin cities of Hyderabad and Secunderabad for re- distribution of signals to franchises, distributors for their ultimate end subscribers. 4. The petitioner was appointed as a distributor for SET Discovery Private Limited Bouquet of Channels popularly known as Sony Bouquet of Channels with effect from 1st January 2003 for the twin cities of Hyderabad and Secunderabad. As a result, any one desiring to transmit/retransmit the signals of said Sony Bouquet of Channels in the twin cities of Hyderabad and Secunderabad were required to enter into an arrangement/understanding or agreement with the petitioner for such transmission and/or retransmission. Likewise, the petitioner was appointed with effect from 15th January 2003 as a distributor for Star Bouquet of Channels. 5. The respondent approached the petitioner and requested for transmission of Sony Bouquet of Channels with effect from 1.1.2003 and for Star Bouquet of Channels with effect from 15.1.2003 for the cable operators and their subscribers, which the petitioner agreed. The respondent agreed to pay to the petitioner a sum of Rs.3,17,075/- for Sony Bouquet of Channels and Rs.4,22,730/- for Star Bouquet of Channels, per month. The petitioner raised invoices on the respondent for the monthly bills commencing from 15th January 2003 and 1st January 2003 for Star Bouquet of Channels and Sony Bouquet of Channels respectively, the details whereof are as follows:- Month of Billing Sony (Amt. in Rupees) Star (Amt in Rupees) Total (Amt in Rupees) January 2003 3,17,075/- 2,18,183/- 5,35,258/- February 2003 3,17,075/- 4,22,730/- 7,39,805/- March 2003 3,17,075/- 4,22,730/- 7,39,805/- April 2003 3,17,075/- 4,22,730/- 7,39,805/- Mary 2003 3,17,075/- 4,22,730/- 7,39,805/- June 2003 3,17,075/- 4,22,730/- 7,39,805/- Total : 42, 34, 283/- 6. The respondent having received the invoices and availed the facility of receiving signals and transmitting the same to the end users, failed to pay the invoices amount in full. Only a part payment of Rs.7,00,000/- has been made leaving a balance of Rs.27,94,478/-. The petitioner under letter dated 15.3.2003 demanded the respondent to pay the balance amount of Rs.27,94,478/- within a period of 48 hours. The respondent, upon receipt of the said letter, requested some more time to clear the outstanding liabilities. Despite granting time, the respondent failed to liquidate the liability. Thereupon, the petitioner issued a notice under Sections 433, 434 and 439 of the Act demanding the respondent to clear the outstanding liability amounting to Rs.27,94,478/-. Notice sent to the respondent returned un-served with a postal endorsement as “Unclaimed”. The conduct of the respondent in neglecting to pay the amount of Rs.35,34,283/- with interest at 18% p.a indicates that it has become commercially insolvent. The petitioner also learnt that the respondent is unable to meet its current demands and to pay its debts. The respondent company is in a substantial financial difficulty and unable to pay its debts in the normal course. Hence, the instant petition seeking the relief stated supra. 7. Notice to the respondent came to be ordered on 18.11.2006. The respondent entered appearance and filed counter. It is stated in the counter that the petitioner and respondent are service providers and in view of Section 14 of Telecom Regulation Authority of India Act, 1997, the disputes are required to be settled by an Appellate Tribunal. The respondent never received invoices raised by the petitioner. Indeed the respondent along with other operators objected to the appointment of the petitioner as a distributor. The respondent paid the monthly subscription amounts and no amount is due to the petitioner. There is no privity of contract between the petitioner and the respondent. The petitioner was running several networks for whom the respondent feeds all the channels. For the said facility, the petitioner, on behalf of its several networks, had to pay feed charges to the respondent. The respondent never agreed to pay a sum of Rs.3,17,075/- for the Soney Bouquet of channel signals on monthly basis and Rs.4,22,730/- for the Star Bouquet of channel signals on monthly basis to the petitioner. The invoices which have been filed are false and fabricated and had never been received by the respondent. Whatever the amount paid by the respondent to the petitioner was towards subscription amount and it was an account payment. The respondent at no point of time received letter dated 15.5.2003 demanding payment of amount and the respondent never requested the petitioner to grant time to clear the outstanding liabilities. 8. The petitioner filed reply affidavit. It is stated in the reply affidavit that monthly amount has been fixed after negotiations and that on reaching a consensus, the petitioner started providing/distributing Star and Sony signals to the respondent. The petitioner is not liable to pay any amount to the respondent, as claimed by the respondent. It is the respondent, who receives feeds from the petitioner and not the petitioner who receives feeds from the respondent. 9. Heard learned counsel appearing for the petitioner and learned counsel appearing for the respondent. 10. Learned counsel appearing for the petitioner submits that Telecom Disputes Settlement and Appellate Tribunal is not competent to decide the issue as to whether the respondent company is liable to be wound up and therefore, the company petition is maintainable. In support of his submissions, reliance has been placed on the decision of Supreme Court in Haryana Telecom Ltd. v. Sterlite Industries (India) Ltd.[1]. 11. There is no dispute with regard to the proposition of law that it is the Company Court, which is competent to order winding up of the company under the provisions of the Act. 12. It is nextly contended by the learned counsel that the petitioner raised invoices against the respondent from the month of January 2003 to June 2003 in respect of Sony and Star Bouquet of channels and the respondent having availed the network facility is estopped from denying its liability to pay the amount covered under the invoices. It is also contended by the learned counsel that the respondent having made part payment for both the channels to the petitioner, cannot be permitted to contend that there is no privity of contract between the petitioner and the respondent. Learned counsel refers letter dated 4.3.2003, whereunder, an amount of Rs.5 lakhs each towards subscription of Star Bouquet of channels and Sony Bouquet of channels has been paid. Learned counsel also refers the notices sent to the respondent demanding payment of balance amounts. Notices referred by the learned counsel are dated 15.3.2003, 31.3.2003, 8.4.2003, 10.5.2003 and 15.5.2003. 13. Learned counsel appearing for the respondent submits that at no point of time, the respondent agreed to pay Rs.3,17,075/- for Sony Bouquet of channels on monthly basis and Rs.4,22,730/- for Star Bouquet of channels and that the respondent never received invoices from the petitioner for the said amounts. Learned counsel by referring receipts dated 22.3.2003 and 3.5.2003 contends that what was paid under those receipts was towards subscription and not towards the amount as claimed by the petitioner. It is also contended by the learned counsel that a party to the dispute should not be allowed to use the threat of winding up petition as a means of enforcing the company to pay a bona fide disputed debt. A Company Court cannot be reduced to a debt collecting agency or as a means of bringing improper pressure on the company to pay a bona fide disputed debt and should not permit a party to unreasonably set the law in motion, especially when the aggrieved party has a remedy elsewhere. In support of his submissions, reliance has been placed on the decision of Supreme Court in IBA HEALTH (INDIA) PRIVATE LTD. V. INFOR- DRIVE SYSTEMS SDN.BHD[2]. 14. It is nextly contended by the learned counsel that the petitioner and the respondent are two service providers and disputes between the two service providers are required to be adjudicated only by Telecom Disputes Settlement and Appellate Tribunal (‘TDSAT’) in which case, initiation of proceedings by the petitioner under the provisions of the Companies Act seeking an order of winding up of the respondent company is unjustified. 15. The question that arises for consideration is: Whether there is a substantial dispute as to liability of the respondent company ? 16. POINT: It is well settled that a winding up petition is not a legitimate means of seeking to enforce payment of the debt which is bona fide disputed by the company. A petition presented ostensibly for a winding-up order but really to exercise pressure will be dismissed, and under circumstances may be stigmatized as a scandalous abuse of the process of the Court, vide decision of the Supreme Court in Amalgamated Commercial Traders (P) Ltd. v. A.C.K.Krishnaswami[3]. The above mentioned decision was later followed by the Supreme Court in Madhusudan Gordhandas and Co. v. Madhu Woollen Industries (P) Ltd.[4] The principles laid down in the above-mentioned judgments have been reiterated by the Supreme Court in Mediquip Systems (P) Ltd. v. Proxima Medical System GmbH[5], wherein the Supreme Court held that the defence raised by the appellant company was a substantial one and not mere moonshine and had to be finally adjudicated upon on the merits before the appropriate forum. The abovementioned judgments were followed by the Supreme Court in Vijay Industries v. NATL Technologies Ltd.[6] The principles laid down in the above mentioned cases indicate that 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 and non-payment of the amount of such a bona fide disputed debt cannot be termed as “neglect to pay” so as to incur the liability under Section 433(e) read with Section 434 (1) (a) of the Companies Act, 1956. 17. It is well settled that the procedure under Section 433 of the Indian Companies Act is summary. When the company produces prima facie proof of facts on which the defence depends and which is probable and there is likelihood to succeed in point of law, it cannot be said that the company has neglected to pay within the meaning of Section 434(1)(a) of the Companies Act. Bona fide dispute implied substantial ground for the dispute raised. In the summary procedure, which the Company Court must follow, if the Court is satisfied prima facie that the defence raised is bona fide and likely to succeed in a civil Court that would constitute sufficient reason for the Court to reject the petition relegating the parties to the civil court. 18. The petitioner placed on record invoices raised on the respondent towards monthly amounts. The invoices do not contain the signature of the respondent. There is nothing on record to show that the respondent agreed to pay to the petitioner a sum of Rs.3,17,075/- for Sony Bouquet of channels and a sum of Rs.4,22,730/- for Star Bouquet of channels per month. It is the specific stand of the respondent that the amounts paid by it to the petitioner are towards subscription of Star bouquet of channels and Sony bouquet of channels. 19. There is no material on record to show that the respondent agreed to pay to the petitioner a sum of Rs.3,17,075/- for Sony Bouquet of channels and a sum of Rs.4,22,730/- for Star Bouquet of channels. In the absence of such material, I find it difficult to accept the contention of the petitioner that the respondent agreed to pay to the petitioner a sum of Rs.3,17,075/- for Sony Bouquet of channels and a sum of Rs.4,22,730/- for Star Bouquet of channels. First, the petitioner has to establish its arrangement with the respondent and thereafter, claim the amounts from the respondent, pursuant to the said arrangement. These are disputed facts, which are required to be gone into by a competent civil Court. The dispute raised by the respondent company is a substantial and bona fide. In view of the above discussion, I find that the petitioner failed to make out any valid grounds for admission of the company petition. 20. Accordingly, the Company Petition is dismissed at the stage of admission. No costs. _____________________ B.SESHASAYANA REDDY, J Dt.16-08-2011 *RAR [1] AIR 1999 SUPREME COURT 2354 [2] (2010) 10 Supreme Court Cases 553 [3] (1965) 35 Comp Cas 456(SC) [4] (1971) 3 SCC 632 [5] (2005) 7 SCC 42 [6] (2009) 3 SCC 527