Guarantor liability and winding up: matured debt, no bona fide dispute, and no fresh notice needed on these facts.

A guarantor's liability may be treated as co-extensive with that of the principal debtor under the Indian Contract Act, 1872, so a creditor is not confined to a merely contingent claim once default has occurred and demand has been made. Later arbitration proceedings do not, by themselves, establish a bona fide dispute if the underlying liability is not specifically denied and the defence is only that recovery should first be pursued elsewhere. Subsequent awards or payments may affect quantification or recovery mechanics without extinguishing the existing debt. Earlier notice and later communications, read with continuing settlement dealings, may be sufficient on the facts, and a fresh formal notice may not be essential.

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Issues: Whether the petitioner could maintain a winding up petition against the guarantor as a contingent creditor; whether the debt was bona fide disputed so as to bar winding up; and whether want of a fresh notice after the arbitration award defeated maintainability against the respondents.

Analysis: The agreement and the subsequent notice showed that the principal borrower had defaulted and the guarantor's liability had become enforceable on demand. The guarantor's obligation was treated as co-extensive with that of the principal debtor under the Indian Contract Act, 1872, and the petitioner was therefore not confined to a merely contingent claim. The circumstance that the parties later went to arbitration did not, by itself, establish a bona fide dispute because the liability to the petitioner under the original arrangement was not specifically denied and the defence was essentially that recovery should first be pursued against another party. The award and later payments were treated as subsequent events affecting the quantification and mode of recovery, not as destroying the existing indebtedness. On notice, the Court held that the earlier notice and the later communications, read with the continuing settlement proceedings, were sufficient in the facts of the case, and a fresh formal notice was not essential to non-suit the petitioner.

Conclusion: The petition was maintainable against the respondents, and the objections based on contingent debt, disputed debt, and absence of a fresh notice were rejected.

Final Conclusion: The petitioner was held entitled to proceed with the winding up petitions on the basis of the respondents' subsisting liability, and the petitions were directed to be admitted and advertised with interim relief.

Ratio Decidendi: A guarantor who becomes liable on the principal debtor's default is not merely a contingent debtor where the debt has matured and been demanded, and a winding up petition will not fail merely because the parties later entered arbitration or because a further formal notice was not issued when the liability remained existing and enforceable.

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