Bona fide dispute over debt defeats winding-up petition where company records and correspondence support settlement of liability.

A winding-up petition under section 433(e) of the Companies Act, 1956 is not maintainable where the alleged debt is bona fide disputed. Here, the company produced contemporaneous records and correspondence showing that the creditor was another person and that the liability had been settled by delivery of goods. Because the dispute was supported by company documents and was not a mere sham, the winding-up court was not the proper forum to determine the truth of the debt. The petition therefore failed on the ground that inability to pay debts was not established.

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Issues: Whether a winding-up petition under section 433(e) of the Companies Act, 1956 could be maintained when the alleged debt was bona fide disputed.

Analysis: The petition was founded on an alleged advance of money, but the company produced contemporaneous documents showing that the creditor was another person and that the liability had been settled by delivery of goods. The dispute was supported by company records and correspondence, and was therefore held to be bona fide. In such circumstances, the winding-up court was not the proper forum to adjudicate upon the truth of the debt.

Conclusion: The petition was not maintainable on the ground of inability to pay debts because the alleged debt was bona fide disputed.

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