Inability to Pay Debts supports winding-up where contract, guarantees, dishonoured cheques and correspondence prove default.

A company petition for winding up on inability to pay debts is maintainable where the debt is substantiated by the contract, dishonoured cheques, guarantees and correspondence, and the defence is not bona fide. The note states that the respondent-company had undertaken responsibility for realisation of export proceeds, but failed to honour its payment obligations despite extensions, adjustments and direct remittances in some transactions. It further notes that arbitration, a pending summary suit and an alleged tripartite arrangement did not bar admission of the petition, because winding-up is not a mere recovery action and parallel proceedings do not defeat a proved debt and default.

---

---

Issues: Whether the respondent-company was unable to pay its admitted debts and whether the winding-up petitions were liable to be admitted.

Analysis: The parties had a contractual arrangement under which the respondent undertook responsibility for realization of export proceeds and was liable if the foreign buyers failed to pay. The petitioner had released the agreed finance, the respondent had issued post-dated cheques which were dishonoured, and the corporate and personal guarantees were not honoured. The correspondence showed that the respondent sought extensions and adjustments, received direct remittances in some transactions, but failed to pay the petitioner or its bankers. The defence based on arbitration, pending summary suit, and alleged tripartite arrangement was found to be unsubstantial and moonshine. A winding-up proceeding is not a mere recovery action, and the existence of parallel proceedings did not bar admission where the debt and default were established.

Conclusion: The respondent-company was held unable to pay its debts, and the winding-up petitions were admitted.

Ratio Decidendi: Where the debt is substantiated by the contract, guarantees, dishonoured cheques, and correspondence, and the defence is not bona fide, a company petition for winding up on inability to pay debts is maintainable notwithstanding parallel arbitral or summary proceedings.

---