Bona fide disputed debt defeats winding up where liability depends on factual issues requiring evidence, not summary adjudication.

A winding up petition under the Companies Act, 1956 is not maintainable where the alleged debt is bona fide disputed and the dispute turns on factual questions requiring evidence, such as the effect of the agreement, claimed extra expenses, recoverability, and deductions. The company court cannot conduct a summary trial to resolve such controversies in winding up jurisdiction. An application under Section 8 of the Arbitration and Conciliation Act, 1996 was also held misconceived in this setting, because the question whether the company should be wound up falls within the company court's special jurisdiction and is not an arbitrable dispute in that proceeding.

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Issues: (i) Whether the winding up petition was maintainable when the alleged debt was seriously disputed and the controversy required trial; (ii) whether the application seeking reference to arbitration in the company proceedings was maintainable.

Issue (i): Whether the winding up petition was maintainable when the alleged debt was seriously disputed and the controversy required trial.

Analysis: The petition was founded on Sections 433(e) and 434 of the Companies Act, 1956, which permit winding up for inability to pay debts, but only where the debt is not subject to a bona fide dispute. The materials showed disputed questions regarding the effect of the memorandum of understanding, the alleged additional and unforeseen expenses, the amount actually recoverable, and the basis on which deductions were made. These questions involved factual investigation and evidence. In a winding up petition, the company court cannot undertake such a summary enquiry or resolve complex factual controversies as though conducting a trial.

Conclusion: The alleged debt was bona fide disputed, and the winding up petition was not maintainable.

Issue (ii): Whether the application seeking reference to arbitration in the company proceedings was maintainable.

Analysis: The application under Section 8 of the Arbitration and Conciliation Act, 1996 was filed in the context of a company petition asking whether the company should be wound up. That issue was one for the company court exercising its special jurisdiction and was not a dispute available to the civil court or arbitrator for adjudication in that proceeding. The arbitration request was therefore misconceived in the company jurisdiction.

Conclusion: The application for reference to arbitration was not maintainable and was dismissed.

Final Conclusion: The petition failed because the alleged liability required a factual trial and did not justify winding up in company jurisdiction, and the arbitration application was also rejected as misconceived.

Ratio Decidendi: A winding up petition based on an alleged debt will be dismissed where the liability is bona fide disputed and the controversy turns on complex questions of fact requiring evidence, since such issues lie beyond the summary jurisdiction of the company court.

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