Bona fide dispute over debt prevents use of winding-up proceedings as a substitute for ordinary civil litigation.

A winding-up petition under the Companies Act, 1956 was held inappropriate where the alleged debt was bona fide disputed and triable issues existed over delivery of goods. The court reaffirmed that the phrase "unable to pay its debts" refers to financial inability, not a mere refusal to pay or a genuine contest as to liability. Because the alleged liability itself depended on disputed questions of fact, the summary winding-up jurisdiction could not be used in place of ordinary civil proceedings to compel payment. The petition was therefore not maintainable on the facts and was dismissed.

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Issues: Whether a winding-up petition under the Companies Act, 1956 could be entertained when the liability to pay the alleged debt was bona fide disputed and triable issues existed regarding delivery of goods.

Analysis: The petition was founded on an alleged admitted debt arising from supply of a transformer, but the respondent disputed delivery of the goods and, consequently, its liability to pay the balance amount. The Court found that the controversy involved disputed questions of fact which could not be resolved in summary winding-up proceedings. It reiterated that the expression "unable to pay its debts" under the winding-up provisions refers to inability arising from the company's financial inability, and not a case where payment is refused or liability is bona fide contested. Where the debt itself is disputed on substantial grounds, the winding-up jurisdiction cannot be used as a substitute for ordinary civil proceedings to pressure payment.

Conclusion: The winding-up petition was not maintainable on the facts and was dismissed.

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