Winding-up petition admission turns on prima facie debt and substantial defence, despite pending debt recovery proceedings.

Pendency of debt recovery proceedings did not bar a winding-up petition, because proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Companies Act, 1956 were treated as distinct and independent. The respondent's claim that transfer of pledged shares discharged the loan required fuller enquiry, as the effect on beneficial ownership, voting rights and liability could not be decided at admission. Applying the prima facie case standard and the need for a bona fide substantial defence, the Court found the petitioner had shown debt and default, and the respondent's defence was insufficient to defeat admission. The winding-up petition was admitted to proceed.

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Issues: Whether the company petition for winding up could be entertained despite the pending debt recovery proceedings and the respondent's plea that the debt stood discharged by transfer of pledged shares; and whether the petitioner had made out a prima facie case for admission of the winding-up petition.

Analysis: The proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 and the Companies Act, 1956 were held to be distinct and independent, and the pendency of an application before the Debt Recovery Tribunal did not bar a winding-up petition under section 433(e) of the Companies Act, 1956. The respondent's plea that transfer of the pledged shares amounted to discharge of the loan was treated as a matter requiring fuller enquiry, because the effect of transfer, beneficial ownership, voting rights, and discharge of liability could not be conclusively decided at the admission stage. The correspondence relied upon by the petitioner showed the respondent's inability to repay the loan and supported the existence of a prima facie debt and default. Applying the settled principle that admission depends on a prima facie case and a bona fide substantial defence, the Court found the respondent's defence not sufficient to defeat admission at that stage.

Conclusion: The company petition was admitted, and the winding-up proceedings were directed to go forward.

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