Bona Fide Dispute in Winding-Up: Belated defect claims cannot defeat admitted debt where liability remains unpaid after notice.

A belated allegation of defective supply, raised only after statutory notice and unsupported by contemporaneous complaint, independent technical evidence, or reliable proof, is not a bona fide dispute capable of defeating a winding-up petition. Where correspondence and a balance confirmation indicate acknowledgment of substantial liability, and the company neither pays nor secures the admitted debt after notice, the debt is treated as due and payable. The article also notes that severe losses and erosion of net worth may support the conclusion that the company is unable to pay its debts in winding-up proceedings under the Companies Act, 1956.

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Issues: Whether the respondent-company had raised a bona fide dispute as to the petitioner's claim so as to defeat a winding-up petition, and whether the company was unable to pay its admitted debt after service of statutory notice.

Analysis: The petition was founded on sections 433(e), 434 and 439 of the Companies Act, 1956. The Court found that the correspondence exchanged between the parties, including the respondent's own communications acknowledging substantial outstanding liability and seeking time to clear dues, belied the later plea that the goods supplied were defective or substandard. The alleged quality dispute was raised only belatedly after legal notice and the filing of the petition, with no contemporaneous complaint, no independent technical report, and no reliable proof that the claimed debit note or return documents genuinely established defective supplies. The balance confirmation certificate and surrounding material reinforced the conclusion that the debt was admitted, while the respondent's financial statements also showed severe losses and erosion of net worth. Despite service of statutory notice, the respondent neither paid nor secured the admitted debt.

Conclusion: The alleged quality dispute was not bona fide, the debt was due and payable, and the respondent-company was unable to pay its debts. The winding-up petition was maintainable and deserved admission.

Final Conclusion: The company was ordered to be wound up, with the official liquidator appointed to take charge of its assets and records.

Ratio Decidendi: A belated and unsupported allegation of defective supply, raised only after statutory notice and unaccompanied by contemporaneous complaint or independent proof, does not constitute a bona fide dispute sufficient to resist winding up where liability is otherwise admitted and remains unpaid.

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