Bona fide money-lending defence bars winding-up where triable issues exist on loan character, cheque nexus and solvency.

A winding-up petition cannot proceed in summary jurisdiction where the respondent raises a bona fide triable defence based on unlicensed money-lending under the Bombay Money-Lenders Act, 1946. On the admitted receipt of principal, execution of the agreement and dishonour of cheques, the Court found prima facie material suggesting systematic lending and interest income, shifting the burden to the petitioner to show it was not a money lender. It also treated the negotiable-instrument exception as requiring a direct nexus between the advance and the cheque, which was disputed on the petitioner's own version. The respondent's material on solvency and the absence of contrary evidence also supported the defence, so the petition was not maintainable.

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Issues: Whether a winding-up petition could be entertained when the respondent raised a prima facie defence that the petitioner was carrying on an unlicensed money-lending business and that the transaction was a money-lending transaction, and whether the respondent had shown a bona fide triable defence.

Analysis: The receipt of the principal amount, the execution of the agreement, and dishonour of cheques were not in dispute, but the respondent raised a defence founded on the Bombay Money-Lenders Act, 1946. The Court held that where basic facts are placed on record showing systematic advancement of loans and receipt of substantial interest, the burden shifts to the petitioner to show that it is not a money lender. The balance-sheets and annual reports prima facie indicated that interest on loans and advances formed a major source of income, and the petitioner's own pleadings and agreement described the advance as a loan. The Court further held that the exception for advances made on the basis of negotiable instruments required a direct nexus between the advance and the cheque, and on the petitioner's own version the amount had been advanced much before the post-dated cheques were issued, making this a triable issue. The contention based on insufficient stamping was noticed, but it was not gone into in detail because the first two defences were sufficient to test maintainability. On solvency, the respondent had placed material showing financial soundness, while the petitioner had led no contra-material.

Conclusion: The respondent had raised a bona fide and substantial defence that required evidence and could not be rejected in summary winding-up jurisdiction, so the petition was not maintainable.

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