Acceptance of bills of exchange makes the acceptor primarily liable, and a disputed accommodation-bill defence did not defeat admission.

After acceptance of a bill of exchange, the acceptor is primarily liable to the holder in due course, and a winding-up petition based on dishonoured cheques issued towards that liability was treated as maintainable. The respondent-company's plea that the bills were accommodation bills, and that disputes with the drawer created a bona fide defence, did not bar admission because such disputes could not defeat the bank's claim against the acceptor. Earlier acknowledgments of liability and the failure to offer any deposit also supported the conclusion that the defence was frivolous and not bona fide, so the petition was admitted.

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Issues: Whether the winding up petition was maintainable on the basis of the respondent-company's liability under accepted bills of exchange, and whether the defence of accommodation bills and pending disputes between the company and the drawer constituted a bona fide dispute barring admission of the petition.

Analysis: The petition invoked section 433(e) of the Companies Act, 1956 on the footing that the respondent-company had accepted the bills and had issued cheques in discharge of the liability, which were dishonoured. The legal position under the Negotiable Instruments Act, 1881 was that after acceptance of a bill of exchange, the acceptor is primarily liable, and the holder in due course is entitled to proceed against the acceptor. Even on the respondent's own case that the bills were accommodation bills, the company would at least remain liable as acceptor and, in any event, the dispute between the company and the drawer could not defeat the bank's claim. The Court also found that the respondent's conduct, including earlier acknowledgments and failure to show bona fides by offering any deposit, supported the inference that the defence was not genuine.

Conclusion: The defence was held to be frivolous and not bona fide, and the petition was held maintainable for admission.

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