Bona fide debt dispute bars winding-up petition where the company raises a substantial good-faith defence and civil remedy is appropriate.

A winding-up petition cannot be used to enforce a debt that is bona fide disputed; where the company raises a substantial and good-faith defence, the creditor must pursue civil remedies instead. Here, the company challenged liability with prima facie material, including allegations of manipulated book entries, absence of cash transactions, discrepancies in accounts, and circumstances suggesting fabrication of liabilities. The creditor's reliance on balance-sheet entries and book records was insufficient to displace that defence, and there was no finding that the dispute was a mere cloak for insolvency. The debt was therefore treated as bona fide disputed and the winding-up petition was not maintainable.

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Issues: Whether the debt alleged by the creditor was bona fide disputed by the company and, if so, whether the winding-up petition was maintainable.

Analysis: A winding-up petition is not a legitimate means of enforcing payment of a debt that is bona fide disputed. If the dispute is substantial and raised in good faith, the proper remedy is a civil action. On the facts, the company raised a serious challenge to the alleged liability, including allegations of manipulated book entries, absence of cash transactions, discrepancies in the accounts, and surrounding circumstances indicating strained relations and possible fabrication of liabilities. The creditor's reliance on book entries and balance-sheet references was not sufficient, at this stage, to displace the bona fide nature of the defence. The company also showed prima facie material supporting its stand and there was no finding that the defence was a camouflage for insolvency.

Conclusion: The debt was held to be bona fide disputed and the winding-up petition was held to be not maintainable.

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