Bona fide debt dispute defeats winding-up petition when liability is already under arbitration

A winding-up petition under the Companies Act, 1956 cannot be admitted in summary jurisdiction where the company raises a bona fide, substantial dispute as to liability. A mere failure to reply to the statutory notice does not by itself make the debt admitted or trigger the deeming consequence under section 434. Here, liability for basic facility charges during the shut-down period was specifically disputed and was already pending before an arbitrator by consent, so the company court could not conclusively determine the debt in winding-up proceedings. The petition was therefore not maintainable on the basis of an admitted debt.

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Issues: Whether a winding-up petition under the Companies Act, 1956 could be admitted when the company raised a bona fide dispute regarding liability to pay basic facility charges for the shut-down period, and the same dispute was already referred to arbitration.

Analysis: A winding-up petition is dealt with in summary jurisdiction, and the company court does not undertake a trial of disputed questions of liability. If the company shows a prima facie, bona fide defence that is substantial and capable of succeeding in law, the debt cannot be treated as an admitted debt and the deeming consequence under section 434 does not automatically follow merely because there was no reply to the statutory notice. Here, the petitioner's claim for basic facility charges during the shut-down period was specifically disputed by the respondent, and that very issue was pending adjudication before the sole arbitrator pursuant to the parties' consent. On those facts, the dispute was not one that could be conclusively decided in winding-up proceedings.

Conclusion: The dispute regarding liability to pay the basic facility charges was bona fide and required adjudication in arbitration, so the winding-up petition was not maintainable on the basis of an admitted debt.

Final Conclusion: The petition failed because the respondent established a genuine and substantial dispute as to liability, and the company court declined to invoke its winding-up jurisdiction in a summary proceeding.

Ratio Decidendi: Where the debt is genuinely disputed on bona fide and substantial grounds, the company court should not admit or proceed with a winding-up petition under the summary jurisdiction applicable to inability-to-pay-debts cases.

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