Bona fide debt dispute bars winding up where the company raises a substantial defence requiring civil adjudication.

A winding up petition on inability to pay debts is maintainable only where an existing debt and non-payment after statutory notice are shown; it is not a substitute for debt recovery. Where the company raises a bona fide dispute supported by prima facie material and a substantial defence, the winding up jurisdiction should not be used. Here, the respondent disputed liability and quantum, relying on counter-claims and alleged retention of consignments by the petitioner, so the controversy required civil adjudication rather than summary company proceedings. The petition was therefore not maintainable.

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Issues: Whether the company petition for winding up was maintainable when the alleged debt was bona fide disputed and the respondent raised a substantial defence to the claim.

Analysis: A petition for winding up on the ground of inability to pay debts requires proof of an existing debt and failure to pay after statutory notice. The remedy is discretionary and is not intended to be used merely as a means of debt recovery. Where the company shows that the claim is bona fide disputed and the defence is substantial, supported by prima facie material, the winding up jurisdiction is not to be invoked. On the facts, the respondent raised a real dispute regarding liability and quantum, including counter-claims and the petitioner's alleged retention of consignments, and the controversy was found unsuitable for summary adjudication in company proceedings.

Conclusion: The dispute was bona fide and substantial, so the winding up petition was not maintainable.

Ratio Decidendi: A winding up petition under the inability-to-pay-debts ground must be dismissed where the alleged debt is genuinely disputed and the company establishes a substantial defence requiring adjudication in a civil forum.

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