Winding up petition on admitted debt admitted despite pending suit and rejected RBI-prohibition defence

In a winding up petition, an admitted debt and the absence of a bona fide, substantial dispute justified admission of the petition. The settlement agreement was read as creating an enforceable payment obligation, and the respondent's reliance on an alleged RBI permission requirement for a guarantee in favour of a foreign sister concern failed because the prohibition was not absolute and no permission had been sought. A pending summary suit did not bar admission where liability had not been genuinely disputed and the statutory notice amount remained unpaid. The petition was admitted, statutory advertisement was directed, and a provisional liquidator was appointed, with a short stay of operation.

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Issues: (i) Whether the respondent company had a bona fide defence to the winding up petition on the basis of the settlement agreement and the asserted requirement of RBI permission for a guarantee in favour of a foreign company. (ii) Whether the pending summary suit and the respondent company's non-payment of the admitted liability prevented admission of the winding up petition.

Issue (i): Whether the respondent company had a bona fide defence to the winding up petition on the basis of the settlement agreement and the asserted requirement of RBI permission for a guarantee in favour of a foreign company.

Analysis: The agreement recorded an admitted liability of the respondent company and provided for payment either in lump sum or according to a payment schedule. Read as a whole, the clauses showed an enforceable obligation to pay, while the cargo release obligation of the petitioner was only the reciprocal consideration. The plea that the respondent could not guarantee the debt of its foreign sister concern was rejected because the alleged regulatory prohibition was not absolute and no application for permission had been made to the RBI. Having taken benefit under the agreement and having induced release of part of the cargo, the respondent could not avoid the obligation by setting up a defence that lacked bona fides.

Conclusion: The defence was not bona fide and the respondent remained liable on the admitted debt.

Issue (ii): Whether the pending summary suit and the respondent company's non-payment of the admitted liability prevented admission of the winding up petition.

Analysis: The existence of a pending suit did not bar the winding up petition at the stage of admission, particularly when no adjudication had yet been made in that suit. The Court applied the test whether there was a genuine and substantial dispute as to liability. On the material before it, the respondent had not raised a genuine dispute and had failed to pay the amount demanded under the statutory notice.

Conclusion: The pending suit did not prevent admission of the petition, and the petition was maintainable for admission.

Final Conclusion: The winding up petition was admitted, statutory advertisement was directed, and a provisional liquidator was appointed, with a short stay of operation granted.

Ratio Decidendi: In a winding up petition, where the debt is admitted and the company fails to show a bona fide, substantial dispute, the Court may admit the petition notwithstanding a pending suit, and a defence founded on an unavailed regulatory prohibition will not suffice to defeat liability.

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