Microsoft Corp said it is suing Britain's second-largest electricals retailer Comet for allegedly creating and selling counterfeit recovery CDs of its flagship Windows operating system.

In a statement on its website, Microsoft said the retailer created more than 94,000 sets of Windows Vista and XP recovery CDs and sold them to customers buying Windows-loaded PCs and laptops.

Comet is owned by Kesa Electricals, Europe's No. 3 electricals retailer, but is in the process of being sold to private equity group OpCapita.

A Kesa spokesman told Reuters that Comet provided the disks as a service to its customers between March 2008 and December 2009. It stopped the practice when Microsoft raised objections.

Consumers buying PCs or laptops could create their own recovery CDs but many did not, and faced problems when their computers failed, he said.

Microsoft, or the PC manufacturer, used to provide the recovery disks but stopped doing that in 2007, the spokesman said.

There was a number of disks made, on which there was a cost and Comet charged this to the customer.

Comet believes the supply of the recovery CDs was in the best interests of its customers and has a good sense of its claim and will defend its position vigorously, he said.

Kesa shares were down 6 percent at 67 pence at 2:02 p.m. on the London Stock Exchange on Wednesday. Microsoft shares closed at $26.77 on Tuesday on Nasdaq.

(Reporting by Himank Sharma and Tresa Sherin Morera in Bangalore; Editing by Maju Samuel)