Bona fide debt dispute defeats winding-up where contractual claims are in arbitration and liability remains seriously contested.

A winding-up petition for non-payment of debt will not be entertained where the company raises a bona fide and substantial defence requiring adjudication of disputed facts. The dispute here concerned execution, commissioning, defects, and alleged non-performance of a sulphuric acid plant, and the record showed a serious contest on liability. The parties had also referred the controversy to arbitration under their agreement, with an arbitrator appointed and objections to the award pending, which reinforced that the matter belonged in the proper forum. The petition was therefore not maintainable, and the defence of the respondent-company was treated as bona fide and substantial.

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Issues: Whether a winding-up petition under section 433 of the Companies Act, 1956 was maintainable when the respondent-company raised a bona fide and substantial dispute regarding the debt and the parties had also resorted to arbitration under their agreement.

Analysis: The dispute between the parties concerned the execution, commissioning, defects, and alleged non-performance of the sulphuric acid plant, and the material on record showed a serious contest on liability. The defence raised by the respondent-company was found to be in good faith and one of substance, making the matter unsuitable for determination in winding-up proceedings. The subsequent reference of the dispute to arbitration under the agreement, the appointment of an arbitrator, and the pendency of objections to the award further supported the view that the controversy should be resolved in the proper forum rather than in company jurisdiction.

Conclusion: The winding-up petition was not maintainable and the defence of the respondent-company was accepted as bona fide and substantial.

Final Conclusion: The appeal failed because the dispute required adjudication in the appropriate forum and did not justify interference with the order dismissing the winding-up petition.

Ratio Decidendi: A winding-up petition for non-payment of debt will not be entertained where the company raises a bona fide and substantial defence that requires adjudication on disputed facts, particularly when the underlying contractual dispute is referable to arbitration.

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