Disputed interest claims do not justify winding up when principal is paid and no written interest agreement exists.

A winding up petition under section 433(e) of the Companies Act, 1956 should not be used to enforce a disputed claim for interest where the principal has already been paid and no written agreement fixes the interest rate. The court treated the company's denial of liability, the absence of a contractual basis for 24% interest, and the payment of principal during proceedings as indicators of a bona fide dispute rather than an admitted debt. In such circumstances, the claim is better pursued in a civil forum, and disputed interest does not by itself establish inability to pay debts or justify winding up.

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Issues: Whether a winding up petition under section 433(e) of the Companies Act, 1956 could be maintained on the basis of a disputed claim for interest at 24% per annum when the principal amount had been paid during the proceedings and there was no written agreement fixing interest.

Analysis: A winding up proceeding is a drastic remedy and is not to be used as a substitute for recovery of money. Where the company raises a bona fide dispute regarding liability, particularly as to interest, the Court will not exercise winding up jurisdiction merely to quantify or enforce such claim. The absence of a written contract specifying interest, the denial of liability by the company, and the circumstance that the principal amount was paid during the proceedings did not convert the disputed interest claim into an admitted debt. The Court followed the view that a claim for interest in such circumstances is better left to a civil forum and that the company court should not treat non-payment of the disputed interest as inability to pay debts. The authorities relied on by the petitioner were found distinguishable on facts.

Conclusion: The claim for interest did not constitute an admitted debt justifying winding up, and the petition was not maintainable.

Ratio Decidendi: A winding up petition cannot succeed where the alleged debt is substantially disputed, especially as to interest, and the company court will not convert a contested claim for interest into an admitted debt for the purpose of section 433(e) of the Companies Act, 1956.

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