Winding-up for unpaid debt fails where liability is bona fide disputed and the company shows commercial solvency.

A winding-up petition based on inability to pay debts will not lie where the company raises a bona fide dispute on liability and shows commercial solvency. In summary winding-up proceedings, a disputed supply claim requiring adjudication on merits cannot be converted into a debt recovery action, especially where the respondent relies on a tenable defence and audited accounts indicating financial soundness. On these facts, the petition was treated as not maintainable, and the creditor was left to pursue civil recovery proceedings if advised.

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Issues: Whether a winding-up order should be passed against a company on the ground of inability to pay debts where the company asserts a bona fide defence and its commercial solvency is shown.

Analysis: The petition sought winding up under section 433(e) and (f) read with section 439(1)(b) of the Companies Act, 1956 on the basis of an unpaid supply claim. The respondent denied liability, alleged fraud in the billing process, and relied on its audited balance-sheet to show financial soundness. In summary winding-up proceedings, disputed claims requiring adjudication on merits are not to be converted into a recovery action, particularly where the company appears commercially solvent and has a tenable defence to the claim.

Conclusion: The petition for winding up was not maintainable on the facts shown and was rejected; the petitioner was left to pursue a civil suit for recovery, if so advised.

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