Prima Facie Debt and Bona Fide Dispute: petition may be admitted but stayed if admitted debt paid and security furnished.

A creditor's winding up petition may be admitted on proof of a prima facie quantum of debt where the company cannot show a bona fide, quantifiable dispute requiring trial; vague or unquantified counter-claims do not defeat admission. The Court found an indisputable admitted liability of Rs. 60 lakhs and additional acknowledged indebtedness, admitted the petition for Rs. 2.10 crores, and prescribed that the company can avert winding up by paying the Rs. 60 lakhs with interest within six weeks and depositing Rs. 1.5 crore as cash security within eight weeks, failing which winding up steps will follow.

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Issues: Whether a creditor's petition for winding up should be admitted where the company disputes the quantum of indebtedness and asserts counter-claims, and if admitted, whether the petition should be stayed on the company furnishing payment and security.

Analysis: The statutory scheme governing creditor's winding up petitions permits admission where the creditor establishes a prima facie quantum of debt such that the company can be given the option of payment or security to prevent representative winding up consequences. A bona fide dispute as to liability or quantum that requires detailed account-taking or a substantive trial can restrain the petition at the preliminary stage; however, mere vague or unquantified counter-claims do not preclude a prima facie finding of debt. Evidence in the record shows the petitioner established an indisputable admitted liability of Rs. 60 lakhs as at March 2002 and, independently, the company's correspondence acknowledged a nett indebtedness in excess of Rs. 2 crores while asserting indeterminate adjustments. The company failed to demonstrate a bona fide, quantifiable dispute that would negate the petitioner's prima facie case as to at least Rs. 60 lakhs and did not adduce definite figures to reduce materially the crores claimed by the petitioner. Given the limited nature of summary proceedings in the Company Court, the appropriate course where some doubt raised by a defendant remains is to admit the petition for the quantified sum but permit the company to avert winding up by paying the admitted amount and furnishing security for the balance provisionally admitted by the Court.

Conclusion: The petition is admitted for Rs. 2.10 crores composed of Rs. 60 lakhs (with interest at 8% per annum from 18-3-2002 on the Rs. 60 lakhs) plus Rs. 1.5 crore to be furnished as cash security. If the company pays Rs. 60 lakhs with interest within six weeks and deposits Rs. 1.5 crore as cash security within eight weeks, the petition shall be permanently stayed and the petitioner's remaining claim (other than the Rs. 60 lakhs and interest) relegated to a suit; otherwise the petition will proceed to advertisement and further steps for winding up.

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