Ruma Pal, J.
1. This is an application for winding up Associated Forest Product (P.) Ltd. (referred to as "the company") on the ground that the company is commercially insolvent.
2. The undisputed facts are : the petitioning creditor (which is a company carrying on business in Singapore) entered into an agreement with the company on August 12, 1986, by which the petitioning creditor agreed to supply and the company agreed to purchase sawn timber balau referred to as ("the goods") from Malaysia at the agreed price of U.S. dollars 94,875.47. On October 2, 1986, the goods arrived at Calcutta from Malaysia by ship and were taken delivery of by the company. Three bills were raised in respect of the goods by the petitioning creditor on the company. At the request of the company, the petitioning creditor agreed to give a discount on the price for the goods so that the total amount payable by the company to the petitioning creditor was U.S. dollars 87,503.37. The company, however, did not make any payment of any amount in respect of the goods to the petitioning creditor. Upon a demand being made on the company, the company sent a telex on January 7, 1988, stating that there had been discussions with the petitioning creditor that the bills would be paid by instalments upon receipt of permission from the Reserve Bank of India. It was also stated that the company had applied to the Reserve Bank of India for the required approval, but till the date of the sending of the telex no such permission had been given. It was further stated that the local laws did not permit the bank to credit a foreigner's account and as such the money could not be deposited in the bank to the credit of the petitioning creditor without the permission of the Reserve Bank of India. It was also stated that the bills were due for over 15 months, but that it was beyond the company's control. It was also proposed by the company that the petitioning creditor should accept payments by instalments and should authorise the bank to accept and remit payment of the bills in part/instalments 'subject to the Reserve Bank of India's approval. It was also stated that there would not be any obligation on the part of the bank to remit the amount unless the necessary Reserve Bank of India's approval was received. It was noted that for the period the money was so held by the bank, no interest would be paid. Therefore, to safeguard the interest of the petitioning creditor, the company was also applying to the Reserve Bank of India to pay the interest on the amount payable. It was finally stated that a photocopy of the letter would be forwarded to the petitioning creditor by post.
3. On June 25, 1988, a memorandum of understanding was entered into between the company and the petitioning creditor. The company was represented by P. Saraf, director and the petitioning creditor by its general manager/director. The terms and conditions of the document dated June 23, 1988, read as follows (the petitioning creditor being referred to as "KTS" and the company being referred to as "AFP") :
"(1) that AFP will settle the total outstanding amount of US dollars 87,503.37 by progressive monthly instalments before December 31, 1988.
(2) AFP has already made the first instalment of Indian Rupees 1,00,000 on June 16,1988, and the Canara Bank will get the approval from the Reserve Bank of India to remit the same to KTS.
(3) AFP shall, without fail, effect the instalments to the Canara Bank regardless of whether approval from the Reserve Bank of India has been granted or not, for the account of KTS.
(4) KTS will instruct Standard Chartered Bank, Singapore, to instruct Canara Bank to accept the instalments from AFP."
4. No payment was, however, made pursuant to the memorandum of understanding by the company to the petitioning creditor.
5. On May 24, 1989, a guarantee was executed by Pradip Saraf, the director of the company by which the facts set out earlier were confirmed. There was a rescheduling of the payments of the reduced price of U.S. dollars 87,503.37 equivalent to Rs. 14,17,554.50 in ten instalments of Rs. 1 lakh being payable on May 25, 1989, and the last instalment being payable on March 22, 1990. The guarantee contained clauses relating to the mode of payment which are set out verbatim, as reliance has been placed on the language of these clauses by the company in its defence in these proceedings. The clauses are Clauses 6 and 7 and read as under :
" That the undersigned will issue account payee cheque and/or bank draft on Bombay branch in favour of United Lubricants and Industrial Products of India, offices held both at Calcutta and Bombay, the third party known to both that is the said seller and the undersigned so far the first instalment payment on May 25, 1989, is concerned. Thereafter, for all the rest of the instalment payment, the undersigned will issue a cheque (account payee) and/or bank draft in favour of the said United Lubricants and Industrial Products on the Calcutta branch until the last instalment is paid :
That the undersigned do hereby agree to be and shall at all times hereafter, until repayment of this debt of Rs. 14,17,554.50, remain responsible to the said seller for and guarantee payment of the said sum Rs. 14,17,554.50 as the price for the sawn timber balau sold and delivered to the undersigned in case of default together with interest at 18 per cent. per annum (Indian bank interest) such interest to be calculated with effect from the date as fixed as per laws of the land."
6. The guarantee was supported by a verification of Pradip Saraf signed on the same date to the effect that the contents stated in the document dated May 24, 1989, were correct and no part of it was false. The verification also states :
" I further affirm that the guarantee as stated before is fulfilled at my risk and responsibility."
7. The company thereafter made payment of an amount of Rs. 1 lakh to United Lubricants and Industrial Products of India. A receipt was granted by United Lubricants and Industrial Products to the company in which it has been stated that the amount of Rs. 1 lakh had been received on behalf of the petitioning creditor for remittance to them on receipt of payment for one lot out of three lots. The amount of Rs. 1 lakh has been deposited by United Lubricants with the United Commercial Bank.
8. After this, no further payment was received from the company either by United Lubricants or by the petitioning creditor. The company also did not take any steps to apply for the approval of the Reserve Bank of India for remittance of the amount payable by the company to the petitioning creditor from the Reserve Bank of India.
9. On May 21, 1990, the petitioning creditor served notice under Section 434 of the Companies Act, 1956 (referred to as "the Act"), on the company through its advocates. No reply was received to the notice.
10. The winding up petition was presented on October 24, 1990. The company appeared and took directions for filing of affidavits. The company filed its affidavit on November 27, 1990. The petitioning creditor filed its affidavit-in-reply in February, 1991, On September 30, 1991, the company prayed for leave to file a supplementary affidavit to bring certain subsequent facts on record. Such leave was granted and on November 13, 1991, a supplementary
affidavit-in-opposition was filed by the company which was countered by a supplementary affidavit-in-reply of the petitioning creditor affirmed on January 29, 1992.
11. The defence raised by the company is sixfold. The first defence is that the goods supplied by the petitioning creditor were not as per specification and were defective and that the company was entitled to a discount of 50 per cent. on the price for the defective material. It is stated that the petitioning creditor had admitted the defects and had agreed to grant a discount of 25 per cent. on the price. The company has relied upon the telexes dated June 11, 1986 ; September 19, 1986 ; October 1, 1986 ; October 2, 1986, and October 4, 1986, in support of this defence.
12. The second defence of the company is that the petitioning creditor had failed to execute several contracts as a result of which the company has suffered losses and damages amounting to U.S. dollars 87,703.00. It is, therefore, stated that by reason of the claim of the company against the petitioning creditor, and upon taking of accounts, money w,as in fact payable by the petitioning creditor to the company.
13. The third defence of the company is that the claim of the petitioning creditor is barred by limitation as the goods had admittedly been received in 1986.
14. The fourth defence of the company is that the entire transaction between the company and the petitioning creditor was in violation of the Foreign Exchange Regulation Act, 1973, and that the agreement to make payment to United Lubricants was violative of Section 9 of the Foreign Exchange Regulation Act.
15. The fifth defence is an alternative to the fourth. It is contended that if United Lubricants was to receive the money on account of the petitioning creditor, there was a novation of the agreement between the petitioning creditor and the company within the meaning of Section 62 of the Contract Act and the petitioning creditor could not sue the company for the payments.
16. The sixth and final defence of the company is that the petitioning creditor had filed a suit under Order. 37 of the Code of Civil Procedure against Pradip Saraf on the basis of the guarantee stated to have been executed by him for the payment of the petitioning creditor's dues. The interlocutory judge had directed the matter to be tried as an ordinary suit subject to Pradip Saraf's furnishing a security of Rs. 2,50,000. Such security had been furnished. It is stated that one learned judge of this court having held in effect that there was a triable issue in respect of the payability of the claim of the petitioning creditor against the company, this court should not take a different view in the matter.
17. The first two defences of the company are not acceptable. There is ' a serious doubt regarding the genuineness of the telexes relied upon by the company. Some of the telexes do not bear any serial number. In fact, the telex dated October 2,1986, alleged to have been sent by the petitioning creditor to the company admitting that the timber was defective and conceding a 25 per cent. discount on the price is one of such telexes. The petitioning creditor has produced a copy of a telex also dated October 2, 1986, bearing the serial number mentioned in the telecom bill of the petitioning creditor, the contents of which are very different from the contents of the telex produced by the company. The company has on the other hand not produced its telecom bill which would have corroborated the authenticity of the telexes relied upon by it.
18. In any event the allegation of defective material, the right to a discount and the entitlement to damages were, according to the company's own showing, known to the company in 1986. No steps whatsoever have been taken by the company to realise any part of such loss or assert its right to any discount from the petitioning creditor. The total inaction on the part of the company belies the probability of its claim. Again, considering that the company's alleged claims on account of defective material, discount and damages were known to the company in 1986, the unconfli-tional acknowledgment of the liability of the company to make payment of the entire amount to the petitioning creditor in the telex dated January 7, 1988, the memorandum of understanding dated June 23, 1988, and the document of guarantee dated May 24, 1989, would falsify both the first and the second defences raised by the company.
19. Additionally, it is to be remembered, that the company had not chosen to give any reply to the statutory notice served by the petitioning creditor's advocate on it. There is no explanation as to why such reply was not forthcoming. If the company indeed had a defence as claimed on account of defective materials, discount and damages it is to be expected that the company would have raised the same in answer to the statutory notice. In the absence of such answer the court is entitled to presume that the company accepted the claim of the petitioning creditor in toto.
20. There has been some argument on the question whether the company's claim against the petitioning creditor is barred by limitation. It is not necessary to go into this aspect of the matter as I am of the view that" the claim is not worthy of any credence.
21. The third defence of the company is equally without substance. Although the claim of the petitioning creditor arose in 1986 nevertheless by the telex dated January 7, 1988, the memorandum of understanding dated June 23, 1988, and the documents of guarantee dated May 24, 1989, the claim of the petitioning creditor has been kept alive by the company by repeatedly acknowledging its liability--to the petitioner. The last of such acknowledgments having been made in 1989 and the winding up petition having been filed in September, 1990, there is no question of any part of the petitioning creditor's claim being barred by limitation.
22. I am also unable to accept the company's contention that the transaction between the company and the petitioning creditor was illegal or in violation of the Foreign Exchange Regulation Act.
23. It is stated by the company that there was no default in payment of the petitioner's debts as payment to the petitioning creditor was prohibited under the Foreign Exchange Regulation Act. It is stated that it was only when the receipt of United Lubricants was received by the company to the effect that the money had been received on behalf of the petitioning creditor that the company was advised that the payment was illegal. It is only for that reason that no further payment was made.
24. It is also urged that it was not the petitioning creditor's case fhat the company had not applied to the Reserve Bank of India for permission. In any event it was the duty of the Canara Bank in terms of the memorandum of understanding to get the necessary approval from the Reserve Bank of India. It is stated that Section 47(3)(b) of the Foreign Exchange Regulation Act did not save winding up proceedings. It is said that an application for winding up of the company is really an enforcement of the claim of a petitioning creditor and has been described as an equitable mode of execution. Reliance has been placed on the decision of the Supreme Court in Harinagar Sugar Mills Co. Ltd. v. M. W. Pradhan , in this connection. It is further submitted that the legal proceedings for recovery of monies under Section 47(3) of the Foreign Exchange Regulation Act did not include a winding, up petition. It is stated that there was nothing to stop the petitioner from applying for permission to the Reserve Bank of India to receive the payment from the company. It is stated that the court cannot presume that if an application were made for permission to the Reserve Bank of India, permission would be granted as a matter of course. It is stated that under threat of a declaration of insolvency the company would be forced to pay and circumvent the provisions of the Foreign Exchange Regulation Act. It is finally submitted under this head of the company's defence, that even if the court came to the conclusion that the provisions of the Foreign Exchange Regulation Act did not bar the company from discharging its obligation to the petitioning creditor, the company itself was under such impression. This could not be held to be mala fide as such a stand on a legal issue cannot be considered to be perverse or unreasonable.
25. As far as the first aspect of the company's argument is concerned, it is not that the prohibition of payment to a person not resident in India is an absolute bar under Section 9(1) of the Act. The payment may be made subject to the permission of the Reserve Bank. This is clear from the wording of Section 9(1) of the Foreign Exchange Regulation Act. Even if the agreement between the petitioning creditor and the company did not explicitly provide for the obtaining of the permission from the Reserve Bank, Section 47(2) of the Foreign Exchange Regulation Act provides that every contract governed by the laws of India would have an implied term to the effect that anything agreed to be done which was prohibited to be done, except with the permission of the Reserve Bank, shall not be done unless such permission is granted. With this statutory implied term in the contract, the agreement between the petitioning creditor and the company cannot be said to be violative of the Foreign Exchange Regulation Act.
26. The contention of the company that it was the obligation of the Canara Bank to get the approval from the Reserve Bank of India in respect of payments is not borne out by the language of the memorandum of understanding dated June 23, 1988. It appears that the Canara Bank was to have obtained the approval from the Reserve Bank of India to remit the first instalment stated to have been paid by the company to it after getting the approval from the Reserve Bank of India. The obligation of the Canara Bank ended there.
27. The subsequent letters of guarantee, etc., do not contain any explicit statement regarding the obligation of the parties to obtain the approval of the Reserve Bank of India. It could not be the obligation of the Canara Bank because the Canara Bank was no longer the intermediary for receipt of the payment. The obligation to obtain permission really arises out of the statutorily implied term under Section 47(2) of the Foreign Exchange Regulation Act. Section 47(2) read with the form for the application for remittance of foreign exchange in respect of imports made or to be made, (Form A-1) would show that the application for permission has to be made by the importer which in this case was the company. Admittedly, the company has made no such application at least after the letters of guarantee had been executed. Even with regard to the earlier application for permission, the onus was on the company to show that such application had in fact been made. It would not be logical to rely upon the statement of the petitioning creditor regarding the application said to have been made by the bank to the Reserve Bank of India as clearly the petitioning creditor could have no first hand knowledge of the fact. The matter was within the special knowledge of the company and it was for the company to have produced the relevant correspondence to show that it had bona fide made all attempts to obtain the permission of the Reserve Bank of India. It has not done so. There is no doubt, therefore, that the principle enunciated by S. K. Roychowdhury J. in the case of Eurometal Ltd. v. Aluminium Cables and Conductors (U. P.) Pvt. Ltd.  53 Comp Cas 744 (Cal) is applicable to this case and cannot be distinguished on this ground.
28. In the case of Eurometal Limited v. Aluminium Cables and Conductors (U. P.) Pvt. Ltd.  53 Comp Cas 744 (Cal) the company which was sought to be wound up had entered into an agreement with a foreign buyer through the agency of a foreign concern. Under that agreement, the company was to supply goods to the foreign buyer. The company was also to pay commission to the foreign concern for negotiating the contract with the foreign buyer. The company supplied the goods to the foreign buyers and was paid the price, but did not pay any commission to the foreign concern. The foreign concern filed an application for winding up the company. One of the contentions raised was that the payment of commission could not be made by reason of the prohibition under the Foreign Exchange Regulation Act. In dealing with this submission, S. K. Roychowdhury J. said (at pages 757-761) :
" This is a right which is conferred upon the creditors by statute and is not a right arising out of a particular contract of loan between the petitioning creditor and the debtor . . .
It was the petitioning creditor's duty to produce a document to show that such a permission has been refused and it can be safely presumed that the company has not done anything of that sort. . .
The company has failed to produce any document whatsoever and, therefore, it should be inferred that the company has deliberately made no application for permission to enable it to pay to the petitioning creditor and, as such, it must be held that the company is unable to pay its debt and liable to be wound up. . .
It was the duty and it was also incumbent under the law, that is the Foreign Exchange Regulation Act and the Rules made, thereunder, for the company to make the necessary application for permission for remitting the said amount to the petitioning creditor. . .
If the company has failed to apply for the necessary permission and obtain the same in due course, that does not mean that the debt is not presently payable. It is due to the default of the company that such a situation has arisen and it is an elementary principle that nobody can take advantage of his own default. Therefore, it cannot be contended now by the company that the debt is not presently payable having not produced any document before this court to show that it made an application before the Reserve Bank of India under the Foreign Exchange Regulation Act for the remittance of the commission payable to the petitioning creditor, under the said contract between the parties, which is admitted. It is evident that the said plea raised by the company is not only frivolous and fallacious but lacks in commercial morality and involves a question of international commercial transactions, having impact on the public interest which the court should always zealously safeguard for upholding the national prestige in the international commercial transaction. , .
It is also admitted that notice under Section 434 of the Companies Act, 1956, has been duly served on the company and in spite of such service, the company has neither taken any step for making payment of the amount after obtaining the necessary permission of the Reserve Bank of India nor produced any material before this court that it has ever applied for the Reserve Bank of India's permission which has been refused. It also appears that the company has not given any reply to the statutory notice served on the company by the petitioning creditor's advocate-on-record.....
At this stage, the question of permission of the Reserve Bank of India for the payment of the debt due to the petitioning creditor cannot and does not arise. That will only arise if the company is wound up and the assets of the company are realised by the liquidator in the administration of the company in winding up."
29. Even without going into the controversy as to whether or not the application was to have been or had been made by the company for approval from the Reserve Bank of India, the relevant period, in my view, is the period subsequent to the notice under Section 434. Assuming that the company could not pay by reason of the embargo placed under Section 9(1)(a) of the Foreign Exchange Regulation Act and assuming that the company had duly applied for permission which had not been granted by the Reserve Bank of India, nevertheless, there was no prohibition on the company securing or compounding the claim of the petitioning creditor under Section 434 of the Act. The prohibition in Section 9(l)(a) is limited to payment. The company had consumed the goods sent by the petitioning creditor to it in 1986. There is, therefore, no scope for restitution. The court cannot allow a situation where a party can reap the benefit of a contract and not pay for it. Had the intention of the company been at all bona fide it would have, at least secured the claim of the petitioning creditor which is admittedly due to it. This the company did not even attempt to do within the period of 21 days subsequent to the notice under Section 434 of the Act or at all.
30. If, therefore, United Lubricants were the agent of the petitioning creditor as claimed by the petitioning creditor, the company could have secured the claim were it minded to act in a commercially honest manner. If, on the other hand, United Lubricants were not the agent of the petitioning creditor, but an independent concern as claimed by the company, the company could have paid United Lubricants without any question of the payment being made to or for the credit of the petitioning creditor in violation of Section 9(1)(a) of the Foreign Exchange Regulation Act.
31. The payment to the United Lubricants would not be for the credit of the petitioning creditor. "Credit" has been defined in the Oxford Dictionary as :
"A sum placed at a person's disposal in the books of a bank, etc., any note, bill, etc., on security of which a person may obtain funds."
32. If United Lubricants were a recipient independent of the petitioning creditor, the payments to the United Lubricants could not be said to be at the disposal of the petitioning creditor.
33. Although the debt is the debt of the petitioning creditor and continued to be so after the letters of guarantee, the payment to United Lubricants would have given the company a valid and complete discharge. This too the company did not do. The company 'may, therefore, be presumed to be insolvent under Section 434 of the Act.
34. The defence of the company that there had been a novation of the contract by virtue of the document dated May 24, 1989, as a result of which only United Lubricants could sue to recover the debt has not been raised by the company in its affidavit-in-opposition. In fact, the company has stated :
" Under the document dated May 24, 1989, payments to be made to the United Lubricants and the Industrial Products are to the credit of the petitioner company and on behalf of the petitioner company and the dues of the petitioner would be totally discharged by payments to the United Lubricants and Industrial Products. No permission or exemption general or special from the provision of Section 9 of the Foreign Exchange Regulation Act, 1973, from the Reserve Bank of India was obtained in connection with the said document dated May 24, 1989. The said document and/or the agreement purported to be recorded therein is forbidden by Section 9 of the Foreign Exchange Regulation Act, 1973, and is illegal." (emphasis* supplied).
35. There was no doubt in the company's mind, therefore, that the debt was due to the petitioning creditor and there was no novation of the agreement to pay the petitioning creditor its dues. Furthermore, the document itself makes it clear that it was the debt of the petitioning creditor which was to be paid by instalments. Clause 5 of the document reads as follows :
" At the request of the undersigned, the buyer of the goods, the said seller has agreed to accept to receive the reduced price US dollars 87,503.37 equivalent to Rs. 14,17,554.50 in ten instalments for the sake of promotion of further business between them." (emphasis* supplied).
36. The seller referred to in the clause quoted is the petitioning creditor. Similarly, in Clause 7 of the document, it is stated :
" That the undersigned do hereby agree to be and shall at all times hereafter, until repayment of this debt of Rs. 14,17,554.50, remain responsible to the said seller for and guarantee payment of the said sum of Rs. 14,17,554.50 as the price for the sawn timber balau sold and delivered to the undersigned."
37. This defence of the company is, therefore, also rejected.
38. The other aspect bf this defence, namely, that winding up proceedings being a proceeding in execution was not saved by Section 47(3)(b) of the Foreign Exchange Regulation Act proce'eds on a misconception of the nature of an application for winding up. Section 47(3) specifically permits legal proceedings being brought in India to recover any sum the receipt of which is prohibited under the Act whether as a debt, damages, or otherwise. The only restriction is that any judgment or order for the payment of any sum in such legal proceeding cannot be enforced except with the permission of the Reserve Bank (see Section 47(3)(b)). A winding up proceeding is a legal proceeding based on the claim for recovery of a debt but the order which is passed on such a proceeding is not a judgment or an order for payment but an order declaring the company insolvent. The enforcement of this order would result ultimately in the sale of the company's assets by the official liquidator. It would be only after the company's assets had been realised and the sale proceeds distributed in the order of priority in terms of Sections 529A and 530 of the Companies Act, 1956, that there would be any question of the petitioning creditor receiving payment of any sum on a rateable distribution with the other creditors of the company in liquidation. It would be only at that stage that there may be a question of obtaining the permission of the Reserve Bank for remitting the petitioner's share in the proceeds of the company's assets in liquidation. It is in this sense that the Supreme Court approved the description of winding up proceedings as a form of equitable execution, in the case of Harinagar Sugar Mills Co. Ltd. v. M.W. Pradhan .
39. In the application for winding up the prayer is not for enforcing any judgment or order for payment. The prayer is to declare the company insolvent. The description of a winding up proceeding as an equitable mode of execution does not mean that a winding up petition culminates in an order for payment of money. It may be that in order to avoid a declaration of insolvency the company may voluntarily agree to pay or secure or compound the debt of the petitioning creditor. But such a voluntary submission would not be a judgment or order for payment.
40. In the case of Dhanrajamal Gobindram v. Shamji Kalidas and Co., , the Supreme Court was called upon to consider
whether an application under Section 20 of the Arbitration Act, 1940 (by which a foreign seller sought to have a dispute in respect of its claim on account of contract by a Indian buyer referred to arbitration), was violative of Section 5 of the Foreign Exchange Regulation Act, 1947 (equivalent to Section 9 of the Foreign Exchange Regulation Act, 1973).
41. It was contended by the Indian buyer that the application under Section 20 could not be made as^t would involve a violation of Section 5 of the Foreign Exchange Regulation Act, 1947. The Supreme Court, after considering the provision of Section 5, held (at page 1290) :
" The effect of these provisions is to prevent the very thing which is claimed here, namely, that the Foreign Exchange Regulation Act arms persons against performance of their contracts by setting up the shield of illegality. An implied term is engrafted upon the contract of parties by the second part of Sub-section (2), and by Sub-section (3), the responsibility of obtaining the permission of the Reserve Bank before enforcing judgment, decree or order of court, is transferred to the decree-holder. The section is perfectly plain, though perhaps it might have been worded better for which a model existed in England."
42. Therefore, even if the arbitration proceedings would ultimately result in a possible payment in foreign exchange, this did not mean that the application under Section 20 was debarred. Similarly, even if the winding up application may ultimately result in payment to the petitioning creditor in foreign exchange, this would not mean that the proceeding itself is prohibited.
43. In any event, the judgment or order which is passed on a winding up proceeding filed at the instance of a creditor is not a judgment or order which enures to the benefit of the petitioning creditor alone. The order enures to the benefit of all the creditors of the company. As stated by Buckley J. in Crigglestone Coal Company Ltd., In re  2 Ch. 327, 331 :
"... that the order which the petitioner seeks is not an order for his benefit, but an order for the benefit of a class of which he is a member. The right ex debito justitiae is not his individual right, but his representative right."
44. For all these reasons, I am of the view that a winding up proceeding does not come within the exception to the general permission as enunciated in Clause (b) of Sub-section (3) of Section 47 of the Foreign Exchange Regulation Act, 1973.
45. The final submission of the company is also misconceived. The mere fact that the interlocutory court has allowed leave to defend to Pradip Saraf in the suit filed by the petitioner against him, would not debar this court from finding for the petitioning creditor in the winding up proceeding against the company. Firstly, the claim of the petitioning creditor is against Pradip Saraf and not the company. Secondly, the claim in the suit is based on a guarantee. Various defences had been taken by Pradip Saraf in the application for summary judgment filed by the petitioning creditor. The court on a consideration of all the defences felt that there was a triable issue. Although the court has noted the defence of Pradip Saraf that the agreement to make payment to the petitioning creditor was violative of the Foreign Exchange Regulation Act, 1973, there was no discussion by the learned judge of this issue.
46. Even assuming that the issue raised in the suit filed by the petitioning creditor against Pradip Saraf and the issue raised in the winding up proceeding relating to the applicability of the Foreign Exchange Regulation Act to the transaction in question were the same, the nature of the consideration of a court in deciding whether a triable issue exists in summary proceedings under Order 37 is very different from the nature of the consideration of a company court in assessing the actual bona fides of the defence. In the first case, the court is merely called upon to see whether the defence raised was not "moonshine". In the second case, the court is called upon to determine the defence itself.
47. A similar case came up for consideration before the Court of Appeal in Welsh Brick Industries Ltd., In re  2 All ER 197. In that case, the petitioning creditor had filed a suit against the company itself and had applied for summary judgment. Unconditional leave to defend was given to the company by the Registrar who, in England, is competent to hear and determine such summary proceedings. The petitioning creditor then filed winding up proceedings against the company. It was contended by the company before the company court, that unconditional leave having been granted in the summary proceedings, there was no question of the winding up application being proceeded with. Lord Greene M. R. said (at page 198) :
" I cannot accept the proposition that, merely because unconditional leave to defend is given, that of itself must be taken as establishing that there is a bona fide dispute or that there is some substantial ground of defence. The fact that such an order is made is no doubt a matter which the winding-up court will take into consideration and to which the winding up court will in due course pay respect, but I cannot regard it as in any way precluding a winding-up judge from going into the matter himself on the evidence before him and considering whether or not the dispute is a bona fide dispute, or, putting it in another way, whether or not there is some substantial ground for defending the action. An order, of course, can be made under R.S.C., Ord. 14, giving unconditional leave to defend on grounds which fall far short of the establishment of a substantial ground of defence to the satisfaction of the registrar or the master, as the case may be."
48. Morton L. J., who concurred with the decision of Lord Greene M. R., stated (at page 200) :
"... the decision of the registrar in giving leave to defend does not amount to more than this--that he thought, on the .evidence before him, that there was at least a fair probability that the company had a bona fide defence. To my mind it is quite impossible to regard such a finding by the registrar as a bar in itself to a finding of fact by the county court judge that there was no bona fide dispute as to this debt at all."
49. I respectfully adopt the reasoning of the Court of Appeal in the case of Welsh Brick Industries Ltd., In re  2 All ER 197 (CA) and I see no reason to hold to the contrary.
50. The submission that even if the company's view that the payment under the contract with the petitioning creditor was forbidden under the Foreign Exchange Regulation Act is found to be wrong, nevertheless it was a possible view, and was, therefore, bona fide is not acceptable to this court. Even if the company bona fide held the view that no payment could be made because of the Foreign Exchange Regulation Act why did it not secure the claim or even bother to reply to the statutory notice ? No argument whatsoever, has been advanced by the company as to why it did not at least even attempt to secure or compound the claim of the petitioning creditor even if it thought that no payment could be made. It may be noted that even at the hearing the company did not offer to secure the claim of the petitioner in any manner at all.
51. In my view, the company has displayed a singular lack of bona fides in its conduct and its defence to the winding up proceedings. The presumption of insolvency raised by virtue of its failure to secure or compound the claim of the petitioning creditor pursuant to the notice under Section 434 of the Act has not been rebutted. In that view of the matter the winding up petition is admitted subject to the amount of Rs. 13,17,554.50 together with interest at 18 per cent. per annum from the due dates of the instalments under the document dated May 24, 1989, until the date of this order and costs assessed at 25 G.Ms. The petitioner will advertise the petition once in The Telegraph and once in The Statesman. Publication in the Official Gazette is dispensed with. The matter is returnable six weeks hence.
52. Prayer for stay of this judgment land an order is made which is granted for a period of two weeks from today.
53. The injunction already granted on June 1, 1992, restraining the petitioning creditor from filing any suit in respect of the subject-matter of the claim in the winding up petition will continue for a period of a fortnight or until further order by any other appropriate forum.
54. Let a xerox copy of this judgment be given to the parties upon their undertaking to apply for the certified copy of the judgment and on payment of usual charges.
55. The parties are to act on a signed copy of the operative part of this judgment on the usual undertaking.