Disputed damages claim cannot support winding up unless breach and quantified debt are first adjudicated.

A winding up petition based on inability to pay debts is not maintainable where the alleged liability arises only from a disputed contractual breach and a claimed damages assessment. A damages claim, whether liquidated or unliquidated, does not itself constitute an ascertained debt or existing pecuniary obligation; it becomes a debt only after adjudication establishes breach and quantifies liability. Even a contractual formula for calculating loss does not convert a unilateral computation into a debt when issues of breach, loss, and mitigation remain unresolved. The claim therefore remained disputed damages outside winding up jurisdiction.

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Issues: Whether a winding up petition under section 433(e) and (f) of the Companies Act, 1956 is maintainable where the claim is founded on alleged contractual breach and the amount demanded is quantified by the claimant as damages, including resale loss, interest, godown rent, insurance charges and extension charges.

Analysis: A petition for winding up on the ground of inability to pay debts requires a prima facie showing of an ascertained debt and inability to pay it. A claim for damages, whether liquidated or unliquidated, does not by itself create a debt or existing pecuniary liability; liability arises only after adjudication by a competent court or arbitrator that breach occurred and damages are payable. Even where a contract provides a formula for computing loss on default, the claimant's unilateral calculation does not convert a disputed damages claim into a debt. The amounts claimed here depended on proof of breach, the existence and extent of loss, and mitigation issues, all of which required adjudication outside winding up proceedings.

Conclusion: The claim was only for disputed damages and not a debt due; the winding up petition was therefore not maintainable and the admission order was liable to be set aside.

Ratio Decidendi: Inability to pay debts under section 433(e) cannot be invoked on the basis of a disputed claim for damages, because a debt requires an existing pecuniary obligation, and a damages claim becomes a debt only after adjudication establishing breach and quantifying liability.

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