Undisputed debt: winding-up petition dismissed where bona fide disputed liabilities and prima facie defences require full trial.

Winding-up petition sought on grounds of inability to pay and just and equitable winding up, but court applied the principle that a debt must be undisputed before a compulsory winding up can proceed and that where liability is contested the defence must be bona fide and supported by prima facie evidence. The respondent raised limitation, set-off and challenged authority for claimed interest, producing prima facie material and uncontested adjustment allegations; accordingly the petition could not be decided on assumed undisputed liability and was dismissed pending full trial of the contested issues.

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Issues: Whether the petition for winding up the respondent company under sections 433(e) and (f), 434 and 439 of the Companies Act should be allowed on the grounds that the company is unable to pay its debts and that it is just and equitable to wind it up.

Analysis: The petition rests on allegations of undisputed debt arising from a security deposit with interest and other claimed sums, and on multiple similar petitions filed against the company. Where liability is disputed the principles in Madhusudan Gordhandas require the court to examine whether the defence is in good faith, is of substance, is likely to succeed in law and whether prima facie proof supports the defence. The respondent disputed liability, pleaded limitation and set-off, and produced prima facie material: (a) the claim of Rs. 11,254.81 for deductions is time-barred and the alleged letter does not constitute an acknowledgment restarting limitation; (b) the respondent pleaded that the security deposit stood adjusted against a sum of Rs. 16,495.78 for goods supplied by the respondent to the petitioner, an allegation not specifically controverted and thus impliedly admitted; (c) the petitioner's claim to interest relied on a credit note whose authority to bind the company was disputed and not prima facie established. Given these disputes and the existence of bona fide defenses supported by prima facie evidence, the petition cannot be disposed of by treating the debt as undisputed and cannot sustain a winding up order without a full trial.

Conclusion: The petition for winding up is dismissed; the petitioner has not established an undisputed debt or shown that it is just and equitable to wind up the company in the face of the respondent's bona fide and prima facie defenses.

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