Bona fide debt dispute defeats winding up petition where contractual obligations remained contested and payment was not clearly undisputed.

A winding up petition for alleged non-payment of debt will not lie where the respondent shows a bona fide and substantial dispute supported by the contractual record and the parties' conduct. The Court found that the alleged admissions in the minutes of settlement did not extinguish continuing disputes, and the agreed payments formed part of a broader arrangement involving reciprocal obligations on performance and rectification of defects. The respondent's defence was not shown to be a sham raised merely to defeat notice, and prior payment of a large part of the contract value also weighed against any inference of inability to pay. The petition therefore failed at the threshold.

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Issues: Whether the winding up petition was maintainable in view of the respondent's plea that the alleged debt was genuinely disputed and that the petition did not establish inability to pay debts.

Analysis: The petition was founded on unpaid amounts said to be admitted in the minutes of settlement, but the record showed continuing disputes between the parties even after the settlement meeting. The agreed payments were part of a broader arrangement in which the petitioner also assumed reciprocal obligations relating to performance and rectification of defects. The respondent's stand that payment could not be isolated from those continuing disputes was not shown to be a sham or a device raised only to defeat the winding up notice. The Court applied the settled principle that winding up will not be ordered when the debt is bona fide disputed and the defence is substantial. The fact that a large proportion of the contract value had already been paid also militated against any inference of commercial inability to pay.

Conclusion: The dispute was held to be bona fide and substantial, and the petition for winding up was not made out.

Final Conclusion: The company was not directed to be wound up, as the petition failed at the threshold on the existence of a genuine dispute.

Ratio Decidendi: A winding up petition for non-payment of debt cannot succeed where the respondent raises a bona fide and substantial dispute supported by the surrounding contractual record and conduct of the parties.

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