Disputed debt and lack of corporate authority defeated winding-up petition based on an uncrystallised settlement.

A winding-up petition based on debt cannot succeed unless the alleged liability is a definite, undisputed and crystallised company debt. Here, the memorandum of understanding was treated as a personal settlement, not a corporate obligation, because the managing director lacked actual authority in the absence of board or constitutional approval; the company was therefore not bound by it. Once the settlement was rescinded, the remaining claims were disputed rather than enforceable debt. The statutory test of inability to pay debts was not met, and the petition failed on merits.

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Issues: (i) Whether the memorandum of understanding created a binding company liability enforceable in winding-up proceedings; (ii) Whether the respondent-company was shown to be unable to pay a definite and undisputed debt so as to justify winding up.

Issue (i): Whether the memorandum of understanding created a binding company liability enforceable in winding-up proceedings.

Analysis: The settlement was treated as one between individuals and not as a corporate contract binding the company. The managing director was held not to have actual authority, in the absence of board or constitutional authorization, to bind the company by such a settlement. The subsequent conduct and correspondence showed that the arrangement was not approved by the company and was later rescinded by the petitioner himself.

Conclusion: The memorandum of understanding did not bind the respondent-company.

Issue (ii): Whether the respondent-company was shown to be unable to pay a definite and undisputed debt so as to justify winding up.

Analysis: Winding up under the company-law debt provisions requires a definite, determined and undisputed debt. After the settlement was cancelled, what remained were disputed claims, not a crystallised debt. In these circumstances, the statutory foundation for winding up was absent, and the company's financial position also did not support the plea of inability to pay.

Conclusion: The respondent-company was not shown to be unable to pay a definite and undisputed debt.

Final Conclusion: The winding-up petition failed on merits because the claimed liability was not a binding company debt and the statutory test of inability to pay debts was not satisfied.

Ratio Decidendi: A winding-up petition based on debt cannot succeed where the alleged liability is disputed, uncrystallised, or arises from a settlement not validly authorized to bind the company.

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