Winding up for debt: bona fide defence failed, and the admitted petition amount was revised for payments received.

In winding up proceedings based on inability to pay a debt, a debtor must show a bona fide defence supported by contemporaneous material; inconsistent denials, acknowledgments of liability, post-dated cheques and admissions undermined the company's resistance, so the defence failed. Where payments had been made but were not clearly allocated against specific invoices, credit had to be given for the admitted remittances and the petition could proceed only for the proved outstanding balance. The admitted amount was therefore revised to reflect the balance remaining after such credit.

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Issues: (i) whether the company had raised a bona fide and sustainable defence to resist the winding up petition under the law relating to inability to pay a debt; (ii) whether the winding up application ought to have been admitted for the full amount claimed or only for the lesser amount after giving credit for payments already received.

Issue (i): whether the company had raised a bona fide and sustainable defence to resist the winding up petition under the law relating to inability to pay a debt

Analysis: The company's denial of liability was found inconsistent with its own conduct. It had received notice of assignment, acknowledged the obligation to pay the creditor, issued post-dated cheques, substituted the cheque after earlier arrangements, and its managing director made an express admission of liability before the criminal court. The alleged payments to the borrower company were not supported by contemporaneous communication to the creditor or by particulars showing that those payments related to the invoices in question. On these facts, the defence was held to lack bona fides and good faith.

Conclusion: The defence was not bona fide and did not defeat the winding up proceedings.

Issue (ii): whether the winding up application ought to have been admitted for the full amount claimed or only for the lesser amount after giving credit for payments already received

Analysis: The creditor had received two demand drafts aggregating to Rs. 1 crore, and the documents did not clearly earmark those payments against particular invoices. In that situation, credit had to be given for the admitted payment, but the balance of the liability still remained established on the materials before the Court. The learned Single Judge's admission of the winding up application for Rs. 3,00,06,655/- was therefore modified to reflect the admitted outstanding balance of Rs. 4,00,06,655.52/-.

Conclusion: The application was to be admitted for Rs. 4,00,06,655.52/-.

Final Conclusion: The company appeal failed, the creditor's appeal succeeded to the extent of enhancing the admitted amount, and the winding up proceeding was permitted to continue for the revised admitted debt.

Ratio Decidendi: In winding up proceedings based on debt, a debtor's defence must be bona fide and supported by contemporaneous material; where the debtor's own acknowledgments, conduct, and unchallenged admissions establish liability, the court may admit the petition for the proved outstanding balance after crediting payments actually received.

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