Winding up on a challenged arbitral award is not maintainable where liability remains bona fide disputed.

A winding up petition cannot be sustained where the alleged debt rests solely on an arbitral award that is still under challenge and has not attained finality. Because the award's validity remained pending before the competent civil court, the debt was not conclusively established and the company's liability remained bona fide disputed. The court noted that admitting and advertising winding up proceedings in such circumstances could unfairly prejudice the company if the award were later set aside. The petition was therefore held not maintainable on the basis of an award under active challenge.

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Issues: Whether a winding up petition could be maintained on the basis of an arbitral award that was under challenge before the civil court and had not yet been made a rule of the court.

Analysis: The petition was founded entirely on the arbitral award. The award had been challenged by objections under the Arbitration Act and its validity was still pending adjudication before the competent civil court. In such a situation, the existence of the alleged debt was not finally established. The Court noted that if the award were ultimately set aside, admission of the winding up petition and its advertisement would unnecessarily prejudice the company. The defence raised by the company could not be said to be wholly without substance, and the matter involved disputed questions of law and fact requiring determination in the proper forum.

Conclusion: The winding up petition was not maintainable on the basis of an award that was still under challenge, and the petition failed.

Ratio Decidendi: A winding up petition should not be entertained where the alleged debt rests solely on an arbitral award whose validity is pending adjudication and where the liability remains bona fide disputed.

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