Disputed debt cannot ground winding up where liability is contested and the company's inability to pay is not established.

A winding-up petition based on alleged unpaid debt cannot proceed where the debt is seriously disputed on facts. The respondent challenged liability by asserting that the supplied goods were defective and substandard, that notice had been given, and that the confirmation letter was not genuine. Because acceptance of goods, defects, and related correspondence raised contested factual issues, the court noted that a winding-up proceeding cannot be used to try a debt dispute without evidence. The record also indicated that the company had sufficient financial capacity to meet liabilities, so the ground of inability to pay debts was not made out. The petition was therefore not maintainable on the facts proved.

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Issues: Whether the respondent-company could be wound up on the ground of inability to pay its debts and on the just and equitable ground when the alleged liability was seriously disputed.

Analysis: The petition was founded on an asserted admitted debt, but the respondent specifically disputed liability by alleging that the goods supplied were defective and substandard, and that timely intimation had been given to the petitioner. The record showed contested questions of fact regarding acceptance of goods, alleged defect, correspondence between the parties, and the genuineness of the confirmation letter. In a winding-up proceeding, such disputed factual issues cannot be resolved without evidence, and the remedy cannot be converted into a trial of a debt dispute. The material on record also indicated that the respondent-company had sufficient financial capacity to meet its liabilities, so the statutory ground of inability to pay debts was not established.

Conclusion: The petition for winding up was not maintainable on the facts proved, and the relief was declined in favour of the respondent-company.

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