Winding-up on admitted debt: balance-sheet acknowledgments can extend limitation and arbitration will not bar the petition.

A winding-up petition may proceed where the company's own balance-sheets, statements and affidavits disclose a substantial unpaid liability and show inability to meet clear debts. Pendency of arbitration does not bar winding up where the debt remains admitted and no effective stay or bona fide defence exists. On limitation, later acknowledgments of liability in balance-sheets and affidavits can extend time under the Limitation Act, so the claim may remain within time when winding up is sought. The company was therefore ordered to be wound up, with the official liquidator appointed to realise and administer its affairs according to law.

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Issues: (i) whether the respondent company's liability to the petitioner was a clear and substantial debt and whether the company was unable to pay its debts; (ii) whether the pendency of arbitration proceedings barred the winding-up petition; and (iii) whether the claim was barred by limitation or saved by acknowledgment.

Issue (i): whether the respondent company's liability to the petitioner was a clear and substantial debt and whether the company was unable to pay its debts.

Analysis: The debt was supported by the company's own balance-sheets, statements and affidavits, which disclosed a substantial liability to the petitioner. The objections raised against incidental charges and interest did not displace the admitted core indebtedness. The company's inability to comply with earlier court directions to furnish substantial payment and security also indicated financial distress and inability to meet clear debts. A winding-up court can act where there is a real and substantial unpaid liability and no bona fide answer to it.

Conclusion: The debt was found to be substantial and the respondent company was held unable to pay its debts.

Issue (ii): whether the pendency of arbitration proceedings barred the winding-up petition.

Analysis: The arbitration proceedings had not remained effectively alive in view of the final orders passed in the civil proceedings, and no stay of the winding-up proceedings was sought on a legally effective basis. In any event, the existence of arbitration did not answer the substantial debt or provide a plausible ground to withhold winding up where the company had failed to pay an admitted liability.

Conclusion: The arbitration proceedings did not bar the winding-up petition.

Issue (iii): whether the claim was barred by limitation or saved by acknowledgment.

Analysis: Although the respondent contended that the debt had become time-barred by the date of the winding-up order, the court followed the binding Division Bench view that this did not defeat the petition. Independently, the respondent's later balance-sheet disclosures and affidavits constituted acknowledgments of liability within the meaning of the Limitation Act, extending the limitation period. The claim was therefore not barred when the winding-up order was made.

Conclusion: The plea of limitation was rejected and the claim was held to be within time.

Final Conclusion: The respondent company was ordered to be wound up, the official liquidator was appointed, and the company's affairs were directed to be realised and administered according to law.

Ratio Decidendi: A winding-up order may be made where a company's substantial debt is not met and no bona fide defence exists, and a later acknowledgment of liability can extend limitation so as to preserve the creditor's right to seek winding up.

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