Bona fide debt dispute in winding-up fails where the buyer retains goods and raises quality objections only after demand.

A winding-up petition is not maintainable where the debt is genuinely and bona fide disputed, but the dispute must be shown to be in good faith, supported by substance, and backed by prima facie material. On the facts, the company had admitted receipt of the goods and did not dispute the invoice value in earlier replies, then raised sub-standard quality only after payment was demanded, without timely complaint or return of the goods. Applying the Sale of Goods Act, 1930, retention of goods without rejection within a reasonable time amounted to acceptance and left the buyer liable to pay. The later inconsistent defence was not bona fide, the debt was treated as due and payable, and a prima facie case for winding-up was made out.

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Issues: Whether the alleged debt was bona fide disputed so as to bar a winding-up petition, and whether the company was unable to pay its debts within the meaning of the Companies Act, 1956.

Analysis: A winding-up petition cannot be used as a device for recovery of a genuinely disputed debt. The defence must be shown to be in good faith, of substance, likely to succeed in law, and supported by prima facie material. On the facts, the company had admitted receipt of the goods and did not dispute the invoice value in its earlier replies, but raised the plea of sub-standard goods only after demand for payment, without returning the goods or making timely complaint. Under the Sale of Goods Act, 1930, the buyer who retains goods without rejection within a reasonable time is deemed to have accepted them and remains liable to pay. The later inconsistent stand in the reply to the petition lacked concrete support and did not establish a bona fide dispute.

Conclusion: The defence was not bona fide, the debt was treated as due and payable, and a prima facie case for winding-up was made out in favour of the petitioner.

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