Acknowledgement of liability and statutory demand can trigger the presumption of inability to pay debts in winding-up matters.

A statutory demand notice, an uncontroverted response seeking time to pay, and contemporaneous correspondence confirming the balance and prioritising settlement were treated as acknowledgements of liability. The text explains that, where such material is unsupported by credible contemporaneous evidence to the contrary, the statutory presumption of inability to pay debts arises and is not rebutted. It also notes that assertions that acknowledgements were obtained in haste, or that the other side had first breached the agreement, will not displace that presumption without reliable supporting material.

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Issues: Whether the respondent company was deemed unable to pay its debts and liable to be wound up on the basis of the statutory notice, the acknowledgements of liability, and the surrounding correspondence.

Analysis: A demand notice under section 434 of the Companies Act was served, and the response did not dispute the debt but only sought time for payment. The contemporaneous letters, including the confirmations of balance and later assurances that settlement of the dues was a top priority, were treated as acknowledgements of liability. The defence that the acknowledgements were obtained in haste, or that the petitioner had itself breached the agreement, was found unsupported by contemporaneous material and not credible. The Court held that the statutory presumption of inability to pay debts arose and was not rebutted.

Conclusion: The respondent company was held to be indebted to the petitioner and unable to pay its debts, and the winding up petition was allowed.

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