Bona fide debt dispute defeats winding up petition where reciprocal dealings showed no commercial insolvency.

A company's bona fide dispute over an alleged debt can defeat a winding up petition based on inability to pay debts where the dispute is raised at the first available opportunity and is supported by prior correspondence. Long-standing reciprocal dealings and subsequent transactions may indicate that the debt claim does not establish commercial insolvency. On the record, the dispute was found to be genuine and the company's commercial solvency was not shown to be in jeopardy, so the winding up petition was rejected.

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Issues: Whether the respondent-company's dispute regarding the alleged debt was reasonable and bona fide so as to defeat a winding up petition on the ground of inability to pay debts.

Analysis: The parties had long-standing business dealings, and the material showed that the respondent had raised its dispute and counter-claim at the first available opportunity, supported by prior correspondence. The existence of substantial reciprocal dealings and subsequent transactions between the parties also indicated that the debt claim was not such as to establish commercial insolvency. On the record, no prima facie case was made out that the respondent-company's commercial solvency was in jeopardy.

Conclusion: The dispute was held to be bona fide, and the winding up petition was rejected.

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