Manmohan, J.

Present petition has been filed under Section 433(e) read with Sections 434 and 439 of the Companies Act, 1956 (for short `Act) stating that the respondent-company is unable to pay its debt allegedly amounting to Rs. 50,00,000/- as well as interest

2. The facts as stated in the petition are that in the year 1994, petitioner was approached by the respondent-companys management for lending money to it at an attractive rate of interest. According to the petitioner, as he was looking for an opportunity to invest in India, he agreed to give an interest bearing loan of Rs. 50,00,000/- to the respondent-company. The petitioner issued a cheque/draft of Rs. 50,00,000/- dated 05th December, 1994 from his account in Allied Irish Bank payable at Bombay in favour of the respondent-company. The said cheque was handed over to the respondent-companys management on 08th December, 1994 and a receipt for the said cheque was issued by the Accounts officer of the respondent-company. The receipt dated 08th December, 1994 issued by the respondent-company is reproduced hereinbelow:

" RECEIPT

Received Rs.5,000,000.00 (Rs. Fifty Lakhs Only) from Mr. Bhajan Singh Samra, S/o Mr. Bikar Singh vide draft no. 735085 dt. 05.12.94 drawn on Algemene Bank, Nederland14, Veer Nariman Road, Bombay-400023.

For Goodwill Foods Pvt. Ltd.

Sd/-

(Rajiv Singhal)

Date: 08.12.94

Accounts Officer."

3. It is stated in the petition that the aforesaid loan was given for a period of two years with interest @ 22% per annum. Upon petitioners request for redemption of his loan with interest in 1996, respondent company instead of redeeming the loan, offered to convert it into equity shares in petitioners favour and also agreed to appoint petitioner as an Executive Director.

4. It is stated that as despite repeated assurances, neither the shares were issued by the respondent-company nor the petitioner was made a Director, the petitioner initiated criminal proceedings in the year 2001 against the respondent-company as well as its Directors under Sections 420 and 120-B IPC, which proceedings are currently pending before the Metropolitan Magistrate, Saket Courts, New Delhi.

5. It is the petitioners case that it received a letter dated 21st November, 2002 and a certificate dated 23rd February, 2002 from the respondent-companys Chartered Accountant informing him that the alleged loan had been credited as Share Application Money from 1994 onwards.

6. On 09thMay, 2006, petitioner sent a statutory notice under Section 434(1)(a) of the Act to the respondent-company for return of loan amount along with interest. However, despite service of statutory notice, neither the loan amount nor interest was repaid to the petitioner. In fact, on 17th July, 2006, respondent-company replied to the legal notice admitting receipt of a sum of Rs. 50,00,000/- from the petitioner, but stating that money was part payment towards Share Application Money. Accordingly, on 07th September, 2006, present petition was filed.

7. Respondent-company in its reply affidavit stated that in the present case, the pre-requisite for filing a petition under Sections 433 and 439 of the Act was non-existent inasmuch as the petitioner is neither a creditor nor any amount is due and payable to the petitioner. Learned counsel for the respondent laid emphasis on the fact that the petitioner had not filed a single document along with the petition from 1994 till 2006 alleging that the aforesaid amount of Rs. 50,00,000/- had been forwarded as a loan.

8. Learned counsel for respondent-company further submitted that the alleged claim by the petitioner was hopelessly barred by limitation as it had been filed after a gap of more than twelve years. It was further contended by the learned counsel for respondent-company that even if it was accepted that the petitioner initially did not know as to how the amount of Rs. 50,00,000/- had been treated by the respondent-company in its books of accounts, it is an admitted fact that the petitioner was aware of the same in the year 2002, whereas the present petition had been filed after a gap of more than four years, in the year 2006.

9. On merits, learned counsel for respondent-company stated that it had been approached by the petitioner for purchase of its shares for a sum of Rs. 1 crore @ Rs. 100/- per share, but as the petitioner had deposited only a part payment of Rs. 50,00,000/- towards the Share Application Money, the shares could not be issued to the petitioner.

10. Learned counsel for respondent-company repeatedly emphasised that the amount received by the respondent-company was towards Share Application Money and not loan as alleged by the petitioner. Learned counsel for respondent-company further stated that neither there is any provision for payment of any interest on the alleged loan nor any such document had been filed by the petitioner. He stated that respondent-company is a legal entity and its accounts are duly audited and maintained in accordance with law.

11. Learned counsel for respondent-company submitted that the winding up proceedings cannot be used as a pressure tactic to recover an alleged debt for which a normal remedy, i.e., a civil suit is always available to the creditor. In this connection, he relied upon a judgment of the Bombay High Court in QSS Investors Private Limited vs. Allied Fibres Limited, (2001) 107 Company Cases 587 [LQ/BomHC/2001/948] (Bom.), wherein it has been held as under:

" It is crystal clear from the petition as well as the affidavits that the claim of the petitioners is not an ascertained or liquidated one. What was the nature of the money given by the petitioner to the respondent-company requires scrutiny on the basis of evidence. According to the petitioners, it was a loan and that the respondent company had treated it as share application money in its balance sheets. There is no written agreement to pay interest at the rate of 24 per cent per annum. The petitioners have computed their alleged loan with interest at the rate of 24 per cent per annum. According to the respondents the petitioners were co-promoters of the respondent-company and they had brought the said amount as contribution and, therefore, they were not entitled to get back any money in the garb of a loan given by them to the respondent-company.

From the interconnection between the parties, it does appear that the petitioners might have agreed to invest the said amount in the respondent- company as copromoters and had given the said amount towards the share application money. It is possible that both the parties had some oral understanding or agreement to treat the said amount as share application money and hence it is shown in the balance sheet under the caption share application money. The fact and the allegation is that the petitioners had applied for allotment of the shares but they were not allotted the shares, has been stoutly denied by the respondents. It is not disputed that there was no compliance with section 41(2) of the Companies Act on behalf of the petitioners. All these questions which have arisen in the petition definitely indicate that the alleged debt is not an admitted or liquidated debt but has been bona fide disputed by the respondent-company.

The petitioners have already filed a civil suit in this court for recovery of the aforesaid alleged debt from the respondent-company. Though according to Shri Kadam, pendency of the civil suit is not a bar to maintain a company petition, according to me, since the petitioners have restored to a legitimate civil remedy to recover their alleged debt, the present company petition cannot be entertained at all. It is well settled legal position that the company petition is a last resort for the parties and it must satisfy the prescribed conditions of the Companies Act. Winding up provisions cannot be used as a pressure tactics to recover an alleged debt for which a normal civil suit is always available to the claimants/creditors. The Supreme Court has always propounded this legal position that it would be a coercive and oppressive action on the part of the petitioners to file a company petition under sections 433, 434 and 439 of the Companies Act for the purpose of recovery of the alleged debt. Even, section 443 of the Act is very clear that a winding up petition cannot be used as a lever to recover the debt from the company. The petitioners having filed a regular suit for recovery of the debt they cannot be permitted to resort to this extraordinary remedy of winding up of the respondent company. The supreme Court has always mandated that the parties must resort to the legitimate civil remedy for recovery of the alleged debt and no company petition should be entertained for recovery of such debt which has been bona fide disputed by the respondent-company.

I am more than satisfied in the present case that the respondents have bona fide disputed the debt claimed by the petitioners and the petitioners have already resorted to the civil remedy and, therefore, the petition cannot be entertained. The petition, therefore, stands dismissed."

12. Learned counsel for petitioner, in rejoinder submitted that this Court had the jurisdiction to not only examine, but to award interest on the principal amount in the present proceedings itself. In this connection, he relied upon a judgment of the Supreme Court in Vijay Industries vs. NATL Technologies Limited (2009) 3 SCC 527 [LQ/SC/2008/2515] , wherein it has been held as under:

"34. Section 433 of the Companies Act does not state that the debt must be precisely a definite sum. It has not been disputed before us that failure to pay the agreed interest or the statutory interest would come within the purview of the word "debt". It is one thing to say that the amount of debt is not definite or ascertainable because of the bona fide dispute raised thereabout or there exists a dispute as regards quantity or quality of supply or such other defences which are available to the purchaser; but it is another thing to say that although the dues as regards the principal amount resulting from the quantity or quality of supply of the goods stands admitted but a question is raised as to whether any agreement had been entered into for payment of interest or whether the rate of interest would be applicable or not. In the latter case, in our opinion, the application for winding up cannot be dismissed."

13. Having heard the parties, this Court is of the opinion that the petitioning-creditor has to satisfy the Court that the debt on which the petition is based was due and payable on the date of the petition. Certainly a time barred debt cannot be the basis of a winding up petition. However, admission of a debt either in a balance sheet or in the form of a letter duly signed by the respondent, would amount to an acknowledgement, extending the period of limitation. Section 18(1) of the Limitation Act, 1963 incorporates the said principle. Section 18(1) of the Limitation Act, 1963 reads as under:

"18. Effect of acknowledgment in writing. (1) Where, before the expiration of the prescribed period for a suit or application in respect of any property or right, an acknowledgment of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, or by any person through whom he derives his title or liability, a fresh period of limitation shall be computed from the time when the acknowledgment was so signed."

14. The Allahabad High Court in the case of Fortis Financial Services Ltd. Vs. KHSL Industries Ltd., (1999) 95 Company Cases 622 (All) held that an acknowledgement by an Assistant Vice-President of the debtor company was sufficient for computing a fresh period of limitation from the date of such acknowledgement.

15. The Calcutta High Court in the case of Bengal Silk Mills Co. Vs. Ismail Golam Hossain Ariff, AIR 1962 Cal. 115 [LQ/CalHC/1961/85] held that in an appeal arising from a money decree against a company, even statement of a liability in the balance-sheet of the company amounted to admission/ acknowledgement of a debt giving rise to a fresh period of limitation, notwithstanding the fact that the balance-sheet was prepared under `compulsions of statute and of the articles of association of the company.

16. In Vijaya Kumar Machinery & Electrical Stores vs. Alaparthi Lakshmikanthamma, (1969) 74 ITR 224 (AP) [LQ/APHC/1968/2] , the Andhra Pradesh High Court after following Bengal Silk Mills Co. (supra), Rajah of Vizianagaram vs. Official Liquidator, Vizianagaram Mining Company Limited AIR 1952 MAD. 1361, LahoreEnamelling and Stamping Co. Ltd. vs. A.K. Bhalla, AIR 1958 Punj. 341 and Jones vs. Bellgrove Properties Ltd. (1949) 2 All.ER 198 held, "What emerges from a consideration of the above decision is that the date of signing the balance-sheet by the second defendant started a fresh period of limitation".

17. Consequently, in the present case, the acknowledgement of the petitioners loan of Rs. 50,000/- by Chartered Accountant of respondent company vide letters dated 23rd February, 2002 and 21st November, 2002, as well as in the respondent-companys balance sheets for the years ended 31st March, 2004, 31st March, 2005 and 31st March, 2006 not only extends the period of limitation but also constitutes fresh cause of action for filing a winding up petition. Accordingly, the present winding up petition is within limitation.

18. Moreover as in a winding up petition, a disputed question of fact cannot be adjudicated, this Court has to believe the defence set up by the respondent. Consequently, this Court has to examine as to whether share application money of Rs. 50,00,000/-, as contended by the respondent company, constitutes a debt.

19. The Supreme Court in J. Jermons vs. Aliammal & Ors., (1999) 7 SCC 382 [LQ/SC/1999/741] , ascribed the following meaning to the word `debt:

"14. The word "debt" is used in the order/notice issued under the Income Tax Act in the same meaning in which it is used in Section 60 CPC. Ordinarily, "debt" means money that is owed; an existing obligation to pay a certain amount; a sum of money due from one person to another. Debts can be classified, having regard to the criteria for payment, into three categories -

(i) debt which has become due and is payable at present (debitum in praesenti)..

(ii) debt which has become due but is payable at a future date (debitum in praesenti solvendum in future)...

(iii) contingent debt which becomes payable on the happening of a certain event which may or may not occur"

20. A similar definition of `debt was enunciated by the Supreme Court in Kesoram Industries & Cotton Mills Ltd. vs. The Commissioner of Wealth Tax (Central), Calcutta, AIR 1966 SC 1370 [LQ/SC/1965/337] , with respect to Section 2(m) of the Wealth Tax Act, 1957 and followed in CIT, Madras v. Lucas TVS Ltd. (2001) 10 SCC 544 [LQ/SC/1998/1178] .

21. The concept that share application money is trust money gathers strength from Sections 69 and 73 of the Act in so far as the said Sections provide that all monies received by a public limited company towards allotment of shares have to be deposited in a separate bank account and if the allotment is not made within the prescribed period, the said monies have to be refunded forthwith to the applicants. The Scheme of the Act itself obligates the company crediting the money as Share Application Money to either forthwith issue shares or refund the monies at the earliest. In fact, the Bombay High Court in Reserve Bank of India v. Bank of Credit And Commerce International (Overseas) Limited and Others (No.2), (1993) 78 Company Cases 230 at 235 held "The capacity in which the company or the bank receives the said amount (share application money) is a fiduciary capacity.The provisions of the Act impose a statutory prohibition on user of the application money for any purpose other than for the purposes specified in section 73(3A) of the Act. The said provisions are mandatory and incapable of being waived."

22. In the opinion of this Court, the judgment of QSS Investors Private Ltd. (Supra), relied upon by the respondent, is inapplicable to the facts of the present case as in the said case, the company from day one was willing to issue shares to the petitioning creditors and it was the petitioning creditor who was not complying with Section 41(2) of the Act.

23. In the present case, even after the petitioner issued a winding up notice, the respondent company did not issue any shares. In the reply affidavit, it was also not stated that the respondent company is willing to issue shares to the petitioner. It is only for the first time in the written submissions recently filed by the respondent company that the respondent stated that it is now willing to issue shares. But, in the opinion of this Court, once a winding up notice is issued, it is not open to the respondent to state that it is now willing to issue shares. It may be noted that during the same period, the issued and subscribed shares of the respondent-company increased from 7,75,000 equity shares in 1996 to 55,00,000 equity shares in 2009 with a majority of these shares allotted to the Chairman-cum-Managing Director of the respondent and his wife.

24. In the opinion of this Court, as the sum of Rs. 50,00,000/- has not been refunded by the respondent, such sum constitutes a debt in praesenti. Consequently, the sum of Rs. 50,00,000/- constitutes an unsecured debt in the hand of the respondent company which is due and payable to the petitioner.

25. Since no agreed rate of interest has been specified in any written document, this Court is not inclined to direct the respondent-company to pay any sum as interest.

26. However, keeping in view the aforesaid conclusion, respondent company is directed to deposit the amount of Rs. 50,00,000/- with the Registry of this Court within a period of eight weeks.

27. It is clarified that in the event the aforesaid amount is not deposited within the stipulated period as mentioned hereinabove, the Official Liquidator attached to this Court would stand appointed as Provisional Liquidator with regard to respondent-company. On such appointment, the Provisional Liquidator would take over possession of all records and assets of respondent-company and the Directors, employees and officers of the respondent-company would stand injuncted from dealing with any asset of the respondent-company.

28. List for direction on 12th March, 2012.

With the aforesaid directions, CA 1206/2006 stands disposed of.

C.A. disposed of.