Bona fide dispute over decretal debt can block immediate winding up when ultra vires and jurisdiction objections are substantial.

A winding-up petition based on a decretal debt should not proceed immediately where the debtor shows a bona fide dispute on substantial grounds. A decree creates a strong presumption of indebtedness, but it is not conclusive in insolvency proceedings, and the court may look beyond it if the challenge is genuine rather than a device to delay payment. Objections that the underlying guarantee was ultra vires and that the consent decree suffered from want of jurisdiction were treated as serious disputes, because the company's objects clause did not clearly authorise the guarantee and the jurisdictional objection was not frivolous. In such circumstances, the proper course is to leave the dispute for determination in appropriate proceedings.

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Issues: (i) Whether a winding-up petition based on a decretal debt can be adjourned where the debt is shown to be bona fide disputed on substantial grounds; (ii) Whether objections of ultra vires and want of jurisdiction in the consent decree raised a substantial dispute sufficient to prevent immediate winding up.

Issue (i): Whether a winding-up petition based on a decretal debt can be adjourned where the debt is shown to be bona fide disputed on substantial grounds.

Analysis: A decree raises a strong presumption of indebtedness, but it is not conclusive in winding-up proceedings. The court may go behind the decree where the challenge is not a mere cloak to evade payment but rests on substantial grounds. The governing principle applied was that non-payment of a bona fide disputed debt does not prove insolvency, and in such cases the proper course is not to wind up the company at once but to have the dispute resolved in appropriate proceedings.

Conclusion: The decretal debt did not, by itself, justify winding up because a bona fide dispute on substantial grounds was found to exist.

Issue (ii): Whether objections of ultra vires and want of jurisdiction in the consent decree raised a substantial dispute sufficient to prevent immediate winding up.

Analysis: The company's guarantee of the sister concern's debt was examined against the memorandum of association, and the court held that the relevant objects clauses did not clearly empower such a guarantee. That contention was therefore treated as raising a substantial question of law. The objection that the earlier decree was without jurisdiction also raised a serious dispute, because the plaint combined a money claim with a claim affecting immovable property outside jurisdiction, and the court accepted that the jurisdictional point was not frivolous. These objections were sufficient to prevent the winding-up court from treating the decree as unassailable at this stage.

Conclusion: The objections of ultra vires and want of jurisdiction disclosed a bona fide and substantial dispute.

Final Conclusion: The winding-up petition was not finally adjudicated on merits at this stage and was held over pending the outcome of the related suit, with interim arrangements maintained in the meantime.

Ratio Decidendi: In winding-up proceedings, even a decretal debt may be disregarded for immediate liquidation purposes where the debtor shows a bona fide dispute on substantial grounds, including a serious challenge that the underlying obligation or decree is ultra vires or without jurisdiction.

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