1970 PLP 184 (SCMR)

WAHIDUDDIN AHMAD, J.‑The petitioner‑firm filed an appli cation under section 162 of the Companies Act against the respondent‑company for its winding‑up. They alleged that they are dealing in advertisement business and undertook the publicity work on behalf of the respondent‑company for advertising their products in the newspapers and through other media as their agents. In this connection they rendered service from April to September 1965, to the respondent and a sum of Rs. 58,933/72 had fallen due to them which was acknowledged by the respon dent. But in spite of repeated demands and the notice served under the Companies Act, the respondent failed to pay the debt due from them. They, therefore, moved the West Pakistan High, Court that as the respondent‑company was unable to pay its debts it may be wound up. By judgment dated the 21st November 1968, a learned Single Judge of the High Court dismissed the petition on the ground that there was a bona fide dispute between the parties about the payment of the debt. This view was also upheld by the Letters Patent Bench in Letters Patent Appeal No. 356 of 1968, decided on the 4th July 1968. This order is being challenged in this petition for Special Leave to Appeal. In support of the petition Mr. S. M. Sirjees Nagi learned counsel for the petitioner, has contended that the respondent had already admitted their liability to pay the amount of Rs. 58,933.72 and by not paying the said amount it is proved that the respondent‑company is unable to pay its debt. The learned counsel further contended that for determining whether the company is unable to pay its debt or not, the viability of the company is not to be taken into consideration and this question is to be decided only on the consideration of the question whether the company concerned has wrongly refused to meet its liability. The contention of the learned counsel is not well founded. In all cases where an application under section 162 of the Companies Act is based on the allegation that the respondent‑company is unable to pay its debt, the question always arises whether the respondent company is not in a position to pay its debt and whether the Company concerned has a bona fide dispute with the petitioner who has come to the Court. This point was considered at length by the learned Judges of the High Court and on the facts of the present case they have come to the conclusion that there is a bona fide dispute between the parties about the amount due to the petitioner from the respondent. In Halsbury's Law of England (Vol. 6), the statement of law on this subject is as under:‑- "A winding‑up order will not be made on a debt which is bonded disputed by the company, but the Court must see that the dispute is based on a substantial ground. If there is a genuine dispute, the petition may be dismissed or stayed and an injunction may be granted restraining the advertisement of the petition." We have gone through the judgment of the High Court and there is a little doubt in our mind that in deciding the question before them they have followed the above principle. In the present case, though it is proved that a sum of Rs. 58,933/72 is due to the petitioner but the respondent is disputing to pay the entire amount on the ground that they have paid a large amount out of it to the principals of the petitioner. Their case is that the petitioner‑firm is only entitled to 15 % commission and the amount claimed from them was payable to their principals. It is not disputed before us that the respondent‑company had paid some amount to the principals of the petitioner. The learned counsel has only contended that the respondent had no business to pay any amount directly to the principals of the petitioner and they are liable to pay the entire amount to them. The dispute between the parties, therefore, is whether the respondent company could pay any amount out of the money due to the petitioner‑firm to its principals. It seems to us that on the facts of the present case, it cannot be said that there is no genuine dispute between the parties. This can only be resolved in a Civil Court. It is in evidence that the respondent company is financially sound. In our opinion, the provisions of the Companies Act are not vehicle of oppression. In these circumstances, the High Court was perfectly justified in refusing to exercise its discretion to wind up the respondent‑company. We, therefore, do not find any force in this petition. The petition is dismissed. Leave refused.