Court grants winding-up petition upon appeal due to undisputed debt exceeding threshold, respondent's payment failure signals insolvency.

The Court allowed the appeal and granted the winding-up petition as the appellant company demonstrated that the debt was undisputed, exceeding the statutory threshold. The respondent company's failure to pay within the specified period indicated an inability to pay, leading to the Court's decision in favor of the appellant.

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Issues Involved:
1. Statutory Notice Compliance
2. Bona Fide Dispute of Debt
3. Limitation of Claims
4. Quantum of Debt
5. Inability to Pay Debt

Issue-wise Detailed Analysis:

1. Statutory Notice Compliance:
The appellant company argued that proper statutory notice was served on the respondent company before filing the winding-up petition. The learned Judge accepted that there was service of notice before the petition was filed, fulfilling statutory compliance. The respondent company did not challenge this finding, leading the Court to proceed without further examination of this issue.

2. Bona Fide Dispute of Debt:
The appellant contended that the respondent company had acknowledged the outstanding amount in their letter dated 21-3-2002 and did not dispute the debt. The appellant issued multiple notices, which the respondent did not contest. The Court emphasized that a winding-up petition is not a legitimate means of enforcing a debt that is bona fide disputed. The defense must be substantial and not mere moonshine. The Court referred to several precedents, including *Amalgamated Commercial Traders (P.) Ltd. v. A.C.K. Krishnaswami* and *Madhusudan Gordhandas & Co. v. Madhu Woollen Industries (P.) Ltd.*, highlighting that if a debt is bona fide disputed, the petition for winding up should be dismissed.

3. Limitation of Claims:
The respondent argued that claims from 1998 and 1999 were barred by limitation and should not be included in the balance confirmation statement. However, the Court noted that even excluding these amounts, the remaining claim was still within the limitation period and exceeded Rs. 1 lakh, meeting the requirement under section 433(e) of the Act.

4. Quantum of Debt:
The respondent company disputed the quantum of debt, arguing that the appellant was not sure of the actual amount due, as indicated in a note requesting confirmation of the balance. The Court found no response from the respondent disputing the balance confirmation statement. The appellant relied on the respondent's communication dated 21-3-2002, indicating an undertaking to settle outstanding bills, which suggested no dispute over the debt. The Court concluded that the appellant had established a debt exceeding Rs. 1 lakh, with no bona fide dispute from the respondent.

5. Inability to Pay Debt:
The appellant invoked section 434(1)(a) of the Act, arguing that the respondent company's failure to pay the debt within three weeks of receiving the statutory notice indicated an inability to pay. The Court agreed, stating that the respondent's failure to honor the statutory notice by making payment deemed them unable to pay the debts, as per the deeming clause in section 434(1)(a).

Conclusion:
The Court concluded that the appellant company had proven the debt was undisputed and exceeded the statutory threshold. The respondent company's failure to pay the debt within the stipulated period indicated an inability to pay. Consequently, the appeal was allowed, and the winding-up petition was granted.

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