Bona fide debt dispute bars winding-up petition where the company shows a substantial defence supported by material.

A winding-up petition is not maintainable where the alleged debt is bona fide disputed and supported by prima facie material. The High Court of Madras noted that winding-up jurisdiction is discretionary and cannot be used as a pressure tactic for recovery of a contested claim. On the facts discussed, the company showed a genuine dispute over the quality of goods, debit notes, and an alleged settlement of liability, so the debt could not be treated as an undisputed or determined sum. The proper remedy in such circumstances is a civil action for adjudication of the claim, and the existence of a substantial defence was sufficient to decline winding-up relief.

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Issues: Whether a winding-up petition under the Companies Act, 1956 is maintainable when the alleged debt is bona fide disputed by the company.

Analysis: A winding-up petition is a discretionary remedy and cannot be used merely as a pressure tactic for recovery of a disputed debt. Where the company places documents and circumstances showing a genuine dispute regarding quality of goods, debit notes, and an alleged settlement of liability, the debt cannot be treated as an undisputed or determined sum. In such a situation, the proper remedy is a civil action for adjudication of the disputed claim rather than invocation of winding-up jurisdiction. The existence of a substantial and bona fide defence is sufficient to decline the winding-up relief.

Conclusion: The petition was not maintainable and the request to wind up the company was rejected.

Ratio Decidendi: A winding-up petition will not be entertained where the debt is bona fide disputed and the company raises a substantial defence supported by prima facie material.

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