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HHL, which borrowed money from the petitioner, defaulted in repayment of the loan. If Section 29 of the SFC Act were applicable, action for recovery of money could have been taken only against HHL, and not the respondent-company. Unlike Section 29 of the SFC Act, which enables the financial corporation to proceed only against the defaulting industrial concern, Section 433(e) read with Section 434(1)(a) of the Companies Act enables the petitioning creditor to file a petition for winding up of the guarantor/surety company if it is unable to pay the debt due. As the liability of the guarantor crystallizes into a debt, on default by the borrower to repay the loan in accordance with the agreement, the guarantor company owes a debt to the lender the moment the borrower defaults in repayment of the loan. Consequently, the lender is entitled to initiate proceedings under Section 433(e) of the Companies Act if the guarantor-company neglects to repay the said debt. Reliance placed by Sri A. Sudershan Reddy on N. Narasimahaiah1; and Subhransu Sekhar Padhi2, to contend that the surety cannot be sought to be wound up under Section 433(e) read with Section 434(1)(a) of the Companies Act, is misplaced.

The liability of the respondent-company, which was earlier contingent on HHL defaulting in repayment of the loan facility, crystallized into a debt on the happening of the contingency ie default by HHL. As the contingent liability of the guarantor (respondent-company) had crystallized into a debt, the lender was entitled not only to file a civil suit for recovery of the debt due, but also to invoke the jurisdiction of the Company Court, under Section 433(e) and Section 434(1) of the Act, on the ground that, despite a demand being made, the respondent-company had neglected to pay the amount admittedly due; and neglect to pay the debt due enabled the Company Court to order winding up of the respondent-company, under Section 433(e) of the Act, on the ground of its inability to pay its debts. As it failed to repay the debt, guaranteed by it, the legal fiction under Section 434(1)(a) is attracted, and the respondent-company must be deemed to be unable to pay its debts under Section 433(e) of the Companies Act. The contention that a petition for winding up does not lie against the guarantor company, despite default in repayment of the loan by the borrower, does not merit acceptance.

A petition presented under Section 433(e) of the Companies Act for winding up of a company is not equivalent to an application seeking recovery of a debt due to the petitioning creditor. Section 433 of the Companies Act is not intended to supplant the jurisdiction of a civil court to adjudicate a money suit. Section 433(e) vests in the Company Court the jurisdiction to wind up a Company, inter alia under clause (e), if the Company is unable to pay its debts. Once the statutory fiction under Section 434 comes into play, it is open to the Company Court to entertain a petition under Section 433(e) of the Companies Act. (Viral Filaments Ltd. v. Indusind Bank Limited ). If there is no bonafide dispute with regards the sum payable, it is open to the creditor to resort to both the remedies of filing a civil suit as well as filing a petition for winding up of the company. (Mediquip Systems (P) Ltd. v. Proxima Medical Systems (GMBH) ; Tube Investments of India Ltd. v. Rim and Accessories (P) Ltd. ).

In Kitti Steels Limited27, this Court held that Section 443(2) of the Act empowered the Court to refuse to make an order of winding up, if it was of opinion that some other remedy was available to the petitioner, and the petitioner was acting unreasonably in seeking to have the company wound up instead of pursuing the other remedy; though the petitioner had obtained a decree from the civil court, which was the basis for filing a winding up petition, the decree was in appeal; and, in such a situation, a winding up petition under Section 433(e) of the Act would not lie. The judgment in Kitti Steels Ltd.27 cannot either be read, or be understood, as extending the requirement of compliance with Section 443(2), (which is applicable to a petition for winding up under Section 433(f)), also to a petition under Section 433(e) of the Act. It is only where winding up is sought under Section 433(f) on just and equitable grounds would Section 443(2) enable this Court to refuse to make an order of winding up if it is of the opinion that some other remedy is available to the petitioner, and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy. The legislature, in its wisdom, has chosen to prescribe the requirement of compliance with Section 443(2) only where a company is sought to be wound up on just and equitable grounds under Section 433(f) of the Act. It has consciously chosen not to extend this requirement to any of the other circumstances in clause (a) to (e) of Section 433. Extending the requirement of Section 443(2), which the legislature has prescribed only to a petition filed for winding up under Section 433(f) on just and equitable grounds, also to a petition under Section 433(e) of the Companies Act would either require deletion of the words just and equitable or addition of the words unable to pay its debts in Section 443(2) of the Act.