Bona fide dispute in winding up proceedings must be supported by prima facie material before advertisement is ordered

In a creditor's winding up petition, a company resisting the petition must show a bona fide and substantial dispute supported by prima facie material. A defence based on alleged inferior quality of goods and overpricing failed because the supporting letters and rejection records were not shown to have been dispatched or served, the objections appeared belated, and the company's own debit entries indicated substantial liability. On that material, the Court treated the dispute as not genuine or substantial and held that the petition could proceed. The petition was directed to be advertised, reflecting that a sufficient prima facie case existed for continuation of the winding up proceedings.

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Issues: (i) Whether the respondent-company had raised a bona fide and substantial dispute sufficient to resist the winding up petition. (ii) Whether, on the material before the Court, the winding up petition should be directed to be advertised.

Issue (i): Whether the respondent-company had raised a bona fide and substantial dispute sufficient to resist the winding up petition.

Analysis: The defence based on inferior quality of goods and alleged overpricing was not supported by prima facie material. The alleged letters and rejection of goods were not shown to have been dispatched or served on the petitioner-company, and the objections appeared to have been raised belatedly. The respondent-company had itself made debit entries in its accounts, which indicated admission of substantial liability. In the absence of credible material showing a genuine dispute, the defence could not be treated as one in good faith and of substance.

Conclusion: The defence was held to be not bona fide and not sufficient to defeat the petition.

Issue (ii): Whether, on the material before the Court, the winding up petition should be directed to be advertised.

Analysis: Since the respondent-company had failed to discharge the admitted liability and had not established a valid defence, the case fell within the principles governing creditor's winding up petitions. The Court found that the petitioner had shown a sufficient case for further steps in the winding up proceedings, and advertisement was warranted under the applicable company court procedure.

Conclusion: The petition was directed to be advertised in the specified newspapers and listed for further hearing.

Final Conclusion: The matter was not finally terminated, but the petitioner succeeded in establishing a sufficient prima facie case for continuation of the winding up proceedings through advertisement.

Ratio Decidendi: In a winding up petition based on indebtedness, a defence must be supported by prima facie material and must be bona fide and substantial; a mere assertion of dispute, without proof, will not prevent the Court from directing advertisement of the petition.

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