Winding up for inability to pay debts upheld where no bona fide dispute was shown after statutory notice.

A winding up petition under the Companies Act, 1956 was found maintainable where the company had not paid an admitted debt after statutory notice and had failed to raise a bona fide or substantial dispute. The Court relied on the settlement agreement, payment schedule, dishonoured post-dated cheques and demand notice, and rejected the respondent's plea of reconciliation and confirmation because it was unsupported by documentary material and appeared to be an afterthought. On that basis, the Court held that non-payment of the debt attracted the winding up jurisdiction for inability to pay debts, admitted the petition and directed publication of notices.

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Issues: Whether the winding up petition was maintainable under section 433(e) read with section 434(1)(a) of the Companies Act, 1956 on the ground that the company had failed to pay an admitted debt and had not raised a bona fide dispute.

Analysis: The petitioner relied on the settlement agreement and payment schedule, under which post-dated cheques were issued and later dishonoured, followed by a statutory notice demanding payment. The respondent's plea of reconciliation and confirmation was not supported by any documentary material. The Court found that the defence raised in reply did not prima facie establish a genuine dispute and appeared to be an afterthought. It held that failure to pay a debt after statutory notice, in the absence of a bona fide and substantial defence, attracts the winding up jurisdiction for inability to pay debts.

Conclusion: The petition was held maintainable and the respondent-company was found prima facie unable to pay its debts; the winding up petition was admitted and notices were directed to be published.

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