Proof of legally enforceable debt is essential before a winding-up petition based on alleged loan indebtedness can succeed.

A winding-up petition based on alleged indebtedness requires reliable material showing a legally enforceable debt. The appellant could not prove that the amount advanced was a loan, as the surrounding circumstances, subsequent issue of shares with prior RBI permission, and the absence of evidence of repayment terms or interest did not support a debt claim. The court therefore upheld the dismissal of the petition, while leaving the appellant free to pursue other recovery remedies.

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Issues: Whether the appellant proved that the amount of 10,000 pounds sterling was advanced as a loan so as to justify winding up of the respondent-company under the Companies Act, 1956.

Analysis: The appellant's claim was examined against the surrounding circumstances, the subsequent issue of shares with prior permission of the Reserve Bank of India, and the absence of material showing that the amount was repayable as a loan with interest. The Court found no legal infirmity in the company judge's conclusion that the appellant had not established the existence of a debt due from the respondent-company.

Conclusion: The appellant failed to prove advancement of a loan and, consequently, failed to make out a case for winding up.

Final Conclusion: The dismissal of the winding-up petition was upheld, while the appellant was left at liberty to pursue other remedies for recovery of the amount.

Ratio Decidendi: A winding-up petition based on alleged indebtedness cannot succeed unless the petitioner establishes, on reliable material, that the company owes a legally enforceable debt.

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