Contractual interest as debt in winding-up proceedings where principal liability is admitted and only quantification is disputed.

Unpaid contractual interest on admitted supply dues can form part of a debt for winding-up purposes where the principal liability is not disputed and the materials show acknowledgment of the outstanding dues. A debt under sections 433 and 434 of the Companies Act, 1956 is not defeated merely because the exact quantum is contested, if the existence of liability is established. Contractual, admitted, or otherwise legally payable interest may be included in the debt, and a later denial will not by itself create a bona fide dispute. Where only the rate or quantification of interest is questioned, the company may still be treated as unable to pay its debts.

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Issues: Whether unpaid contractual interest on admitted supply dues can constitute a debt for the purpose of a winding-up petition under sections 433 and 434 of the Companies Act, 1956.

Analysis: The liability to pay the principal amount was not in dispute, and the correspondence, invoices signed by the respondent's representative, and the minutes of the parties' meeting showed acknowledgment of the outstanding dues and a promise to compensate for delay in payment. A debt under the winding-up provisions need not be rejected merely because the exact amount is disputed, where the existence of liability is established. Interest may itself form part of the debt where it is contractually agreed, admitted, or otherwise legally payable. A mere denial at a later stage does not erase earlier admissions or render the claim a bona fide dispute so as to defeat a winding-up petition. The winding-up jurisdiction is not to be used as a substitute for a civil suit, but where the debt is admitted in substance and only the quantification of interest is questioned, the company may still be treated as unable to pay its debts.

Conclusion: The claim for interest was capable of constituting a debt for winding-up purposes, and the respondent's later denial did not create a bona fide dispute sufficient to defeat the petition.

Final Conclusion: The High Court's order was set aside, and the appeal succeeded, with the respondent directed to pay interest on the admitted amount within the time fixed by the Court.

Ratio Decidendi: Where liability for the principal debt is admitted and contractual or otherwise legally payable interest forms part of the outstanding dues, a dispute only about the quantum or rate of interest does not by itself negate the existence of a debt for the purpose of winding-up proceedings.

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