Corporate guarantee disputes can bar winding up when execution and authority are seriously contested and require proper adjudication.

A winding up petition will not be entertained where the debt is founded on a corporate guarantee whose execution, authority of the signatory, or supporting resolutions are seriously and bona fide disputed. In such circumstances, the company court should not resolve contested questions of fact or title, because disputed issues requiring evidence must be tried in the proper forum, including pending arbitration or connected proceedings. The absence of a reply to a statutory notice, by itself, is insufficient to establish inability to pay debts or to treat the defence as a sham. The creditor may still pursue ordinary adjudication of the guarantee dispute before the appropriate forum.

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Issues: Whether the winding up petitions against the alleged corporate guarantor companies were maintainable when the execution and authority for the corporate guarantee were seriously disputed and the same issues were already pending in arbitration.

Analysis: A winding up petition is not a substitute for a full trial, and the company court will not adjudicate disputed questions of fact or title where the defence is bona fide and substantial. The creditor may proceed against a guarantor in law, but where the very existence and validity of the corporate guarantee, including the authority of the signatory and alleged fabrication of company resolutions, are in serious dispute, the matter requires evidence and proper adjudication in the pending arbitration and connected proceedings. The absence of a reply to the statutory notice by itself was held insufficient, in the facts, to conclude inability to pay debts or to treat the defence as moonshine.

Conclusion: The petitions were not maintainable at this stage and were dismissed, leaving the parties to agitate the dispute regarding validity of the guarantee before the appropriate forum.

Final Conclusion: A bona fide and substantial dispute touching the very basis of the alleged corporate guarantee barred admission of the winding up petitions, and the creditor was left to pursue adjudication in arbitration.

Ratio Decidendi: Where the debt is founded on a corporate guarantee whose execution and authority are seriously and bona fide disputed, the company court should decline winding up jurisdiction and leave the parties to ordinary adjudication.

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