THE HON'BLE MR JUSTICE N.V. RAMANA Company Petition No.20 of 2008 ORDER: This company petition, under Sections 433(e)(f), 434 (1)(a) and 439 of the Companies Act, 1956 (for short ‘the Act’) r/w Rule 95 of the Company (Court) Rules, 1959, is filed by M/s.Good Earth Marketing Services, praying to pass an order of winding up against the respondent, namely, M/s.Sanghi Spinners (India) Limited, and to appoint the Official Liquidator attached to this Court, as provisional Liquidator to take custody of its assets. The petitioner, which is a proprietary firm, states that it is engaged in the business of specialized execution of works relating to blasting of morrum and rock, and has several projects to its credit. It states that pursuant to the quotations called for by the respondent- company, it submitted its quotation and that the respondent has accepted its quotation for work to be executed at the factory site of the respondent, vide work order, dated 31.10.1995. However, it states that some disputes have arisen between them in regard to the execution of the contract and payments thereof. As the disputes could not be resolved by mutual negotiations, the petitioner claims to have filed O.S.No.68 of 1999 on the file of the learned Principal District Judge, Ranga Reddy District, which was decreed on 10.11.2004 for a sum of Rs.7,22,160/- together with interest and costs. Questioning the same, the respondent filed A.S.No.263 of 2005 before this Court, wherein no interims orders were passed, and the same is pending. While so, it is the grievance of the petitioner that since the respondent-company failed to pay the amounts due under the decree and since the affairs of the respondent company was reported to be not good, it got issued a legal notice, dated 27.05.2007, calling upon the respondent to pay the amounts due, in vain. Hence, the present company petition. In response to the notice, Mr.C.Raghu, learned counsel, entered appearance on behalf of the respondent-company, and filed a counter in the matter. It is admitted in the counter that the respondent- company issued a work order, dated 31.10.1995 in favour of the petitioner, but it is stated that the petitioner committed breach of contract and never completed the work substantially. It is also stated that against the judgment and decree in O.S.No.68 of 1999 filed by the petitioner, the respondent filed A.S.No.263 of 2005 before this Court and the same is pending. It is also stated that in the suit itself, the respondent made a counter claim. It is further stated that without resorting to execution of the decree, the petitioner filed the present company petition basing on the decree, which does not per se give any cause of action to invoke the jurisdiction of this Court under Section 433(3) of the Companies Act, 1956. Heard the learned counsel for the petitioner and the learned counsel for the respondent. At the hearing, Sri V.Hari Haran, the learned counsel for the petitioner, mainly contended that the debt, which is claimed by the petitioner in the present company petition, is a proved debt, in view of the decree, dated 10.11.2004, passed by the learned Principal District Judge, Ranga Reddy District in O.S.No.68 of 2009 and mere pendency of appeal before this Court against the said decree does not prevent the petitioner from filing the present petition under Sections 433(e)(f) 434(1)(a) and 439 of the Companies Act, 1956 and in support of his contention, he relied upon the judgment of Calcutta High Court in the case of Sarkar Estates (Private) Ltd., v. Kusumika Iron Works (Private) Limited[1] and also the judgment of the Delhi High Court in the case of Madhuban Private Limited v. Narain Dass Gokal Chand[2]. Further, he contended that the respondent-company is not doing well commercially and has defaulted in payments to several of the creditors and even the balance sheets of the respondent-company were so dressed up to look profitable. Therefore, he sought to allow the petition. On the other hand, the learned counsel for the respondent, Sri C.Raghu, contended that the petitioner having obtained a decree in its favour, without filing execution petition, has filed the present petition seeking to wound up the respondent-company, which is not permissible and in support of his contention, he relied upon the judgment of this Court in National Research Development Corporation v. Electro Flux P.Limited[3], wherein this Court has dismissed the petition for winding up of the respondent-company therein on the ground that the petitioner therein has not availed the alternative remedy available under Order XXI of the Code of Civil Procedure Code, 1908 for recovering the money under the award. He also contended that as per the Auditor’s Report, the respondent- company is a profit making company and the proposal of the respondent-company for waiving an amount of Rs.115.07 crores by IDBI and SBI has also been accepted. From the pleadings of both the parties, it is clear that admittedly, the petitioner has filed O.S.No.68 of 1999 on the file of the learned Principal District Judge, Ranga Reddy District, against the respondent- company for recovery of amounts due and has obtained a decree in its favour on 10.11.2004 for a sum of Rs.7,22,160/- together with interest and costs, which has formed basis for the petitioner to file the present company petition. It is also the stand of the petitioner that the affairs of the respondent-company are not doing well commercially and it is unable to pay the debts and therefore, the present petition is filed. However, during the course of arguments, it is admitted by the learned counsel for the petitioner that the petitioner-company has not filed any execution petition seeking execution of the decree, dated 10.11.2004 in O.S.No.68 of 1999. The relief to be granted under Sections 433 and 434 of the Companies Act, 1956, there cannot be any doubt, is a discretionary one and is to be exercised by the company Court, only when it is proved that the company is unable to pay its debts to its creditors on account of the fact that it has become commercially insolvent. However, in the case on hand, it is the specific case of the respondent- company that it is a profit making company and it is categorically denied that it is unable to pay the amounts due to its creditors. Further, it is not the case of the petitioner that in spite of initiation of execution proceedings, the respondent failed to satisfy the decree, either in whole or part. Admittedly, the petitioner did not avail the execution proceedings, which is an effective alternative remedy available to it under Order XXI of the Code of Civil Procedure, 1908 for recovering the money due under the decree. Merely because the respondent has not paid the amount under the decree, in spite of receipt of legal notice, dated 27.05.2007, it cannot be said that the company has become commercially insolvent, warranting exercise of discretionary power by this Court. Inasmuch as the petitioner has an effective alternative remedy and has approached this Court under Sections 433 and 434 of the Companies Act, 1956 without availing the said alternative remedy, no order of winding up can be passed presuming that the company has commercially become insolvent. Coming to the judgments relied on by the petitioner, referred to supra, they are of no help to the petitioner, since it is well settled that exercising of jurisdiction by the Courts under Sections 433 and 434 of the Companies Act, 1956 is discretionary one, which is to be exercised only when it is proved that the company is unable to pay its debts to its creditors on account of the fact that it has become commercially insolvent, but, in the case on hand, it is not such a case. During the course of arguments, the Auditor’s Report and Balance Sheet of the respondent-company were produced. On a perusal of the same, it cannot be said that the respondent-company is commercially insolvent. Be that as it may, since the petitioner has an alternative remedy of executing the decree in a competent Court having jurisdiction, it cannot be allowed to invoke the jurisdiction of the company Court, for executing the decree passed by the civil Court. For the foregoing reasons, the company petition is misconceived and it is accordingly dismissed, at the admission stage. This order, however, does not come in the way of the petitioner to execute the decree against the respondent in a competent executing Court having jurisdiction. ___________________ N.V. RAMANA, J. Date:31.03.2010 VGB [1] AIR 1961 Calcutta 439 (V 48 C 93) [2] 1971 DLT (7) 371 [3] 2005 ALT (1) 683