Undisputed debt and dishonoured cheques justified winding up when an oral defence could not vary the written agreement.

An alleged oral understanding, set-off and account adjustment could not displace the written agreement and prior acknowledgments of liability, and section 92 of the Indian Evidence Act barred reliance on oral evidence to vary the contract. The company therefore failed to show a bona fide, substantial defence to resist winding up. The court also treated the debt as undisputed, noted dishonoured cheques and non-compliance with statutory demand, and held that the conditions for winding up were satisfied under the Companies Act, 1956. The petition succeeded and the company was ordered to be wound up with the Official Liquidator appointed.

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Issues: (i) Whether the company had shown a bona fide and substantial defence to the petitioners' claim so as to resist winding up; (ii) Whether the admitted liability and dishonour of cheques justified winding up under the Companies Act, 1956.

Issue (i): Whether the company had shown a bona fide and substantial defence to the petitioners' claim so as to resist winding up.

Analysis: The defence based on an alleged oral understanding, security arrangement, set-off, and further adjustment of accounts was found inconsistent with the written agreement of 14 August 1989 and the earlier written acknowledgments of liability. The Court held that the company's version was unsupported by prima facie proof, was not shown to be a defence of substance, and was not bona fide. Section 92 of the Indian Evidence Act, 1872 barred reliance on oral evidence to vary the effect of the written contract in the manner suggested by the company.

Conclusion: The company failed to establish a bona fide defence; the dispute was not a genuine ground to resist winding up.

Issue (ii): Whether the admitted liability and dishonour of cheques justified winding up under the Companies Act, 1956.

Analysis: The Court treated the sum of Rs. 41 lakhs as a confirmed debt arising from interest-free financial assistance and the additional sum of Rs. 25 lakhs as agreed compensation under the settlement. The cheques issued towards the debt were dishonoured, statutory demand was not complied with, and the Court held that once a debt is undisputed and the company fails to pay after notice, the creditor is entitled to winding up ex debito justitiae under sections 433 and 434(1)(a) of the Companies Act, 1956.

Conclusion: The statutory conditions for winding up were satisfied and the company was liable to be wound up.

Final Conclusion: The petition succeeded, and the company was ordered to be wound up with the Official Liquidator appointed to take charge of its property and effects.

Ratio Decidendi: In winding-up proceedings, an undisputed debt supported by written acknowledgments and dishonoured cheques cannot be defeated by a non-bona fide oral defence, and failure to comply with statutory demand under section 434(1)(a) of the Companies Act, 1956 warrants a winding-up order.

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