Winding-Up Petition Cannot Be Used to Recover Debt Where a Genuine Commercial Dispute Exists: High Court
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| Non-payment for supplied goods does not, by itself, establish a company's inability to pay its debts; winding-up petition dismissed due to a defective statutory notice and a bona fide, substantial dispute over the alleged debt. |
The High Court Division, comprising Justice Md. Toufiq Inam, delivered the judgment on 30 August 2026 in Company Matter No. 442 of 2022, dismissing the winding-up petition. A copy of the full judgment was published on the Supreme Court's website on 13 October 2026.
Background of the Case
The petitioner, A.F.M. Shahidul Islam Mamun, proprietor of Mars Trading Co., filed a winding-up petition against Sigma Fashions Ltd. According to the petitioner, an order was placed for 18,935 yards of various types of fabric intended for supply to readymade garment manufacturers, with a total value of US$14,718.20.
A documentary credit was opened for the transaction on 18 December 2019. The petitioner claimed that the fabrics were delivered in several consignments during January and February 2020 and were received by an authorised representative of the relevant company. However, despite the submission of the necessary documents for acceptance of the bills of exchange and determination of the payment maturity date, the respondents allegedly failed to accept the documents or settle the payment.
The petitioner further claimed that repeated demands and an approach to Bangladesh Bank did not result in payment of the outstanding amount. Consequently, the petitioner sought the winding up of the company under section 241(v) of the Companies Act, 1994, on the ground of its alleged inability to pay its debts.
The Company's Arguments
Opposing the petition, Sigma Fashions Ltd. argued that the alleged debt was subject to a genuine and substantial commercial dispute.
According to the company, the petitioner was required to deliver the goods by 30 January 2020 but supplied certain consignments on 13 and 20 February 2020. The company alleged that the delay resulted in the cancellation of an export order by a foreign buyer, causing financial losses.
The company also raised questions concerning the quality and conformity of the supplied goods, compliance with the contractual terms, and subsequent discussions between the parties regarding the adjustment or waiver of part of the claim.
The company's counsel further challenged the statutory notice dated 24 April 2022, arguing that it required payment within seven days, whereas section 242 of the Companies Act, 1994, requires a period of at least three weeks for compliance with such a demand.
Court's Observations
The High Court observed that although the receipt of goods was acknowledged, this fact alone did not establish an unconditional liability to pay the entire amount claimed.
Whether the goods were delivered within the stipulated period, whether their quality conformed to the contractual specifications, whether the delay caused any loss, and whether the parties subsequently agreed to any adjustment or settlement were matters requiring determination on the basis of evidence.
The Court considered that these allegations could not, at that stage, be characterised as merely sham or frivolous disputes. They arose directly from the underlying commercial transaction. Accordingly, the Court held that the company could not be ordered to be wound up by treating the claimed amount as an undisputed debt without resolving those issues.
The judgment further emphasised that the winding-up jurisdiction is not intended to serve as a summary forum for adjudicating disputed commercial claims. A creditor cannot ordinarily invoke winding-up proceedings merely because a company has failed to pay a claimed amount when the company raises a genuine and substantial dispute regarding the existence or extent of its liability.
Legal Defect in the Statutory Notice
The Court also examined the validity of the statutory notice relied upon by the petitioner.
Under section 242(1)(i) of the Companies Act, 1994, a company must be given the statutory period to pay, secure, or compound for the debt to the reasonable satisfaction of the creditor.
The High Court found substance in the objection that the relevant notice required payment within seven days, rather than the three-week period contemplated by law. Consequently, the notice could not be treated as satisfying the statutory requirements for invoking the relevant presumption of inability to pay debts.
The Court also noted ambiguity in the notice regarding the identification of the bank and the debtor company, further weakening the petitioner's reliance on it.
The Court added that non-payment of a claimed amount does not, by itself, establish a company's general inability to pay its debts. In the present case, the petitioner had failed to produce sufficient material demonstrating that the respondent company was commercially unable to meet its debts generally.
Decision of the Court
The High Court held that the petitioner had failed to establish a clear, undisputed, and presently enforceable debt of US$14,718.20 against Sigma Fashions Ltd. The statutory notice also failed to satisfy the requirements of section 242(1)(i) of the Companies Act, 1994.
The Court clarified that dismissing the winding-up petition did not amount to a final determination of the merits of the petitioner's underlying claim. The petitioner remains entitled to pursue any other remedy available under the law to recover an amount that may ultimately be established as due and payable before the appropriate forum.
Considering these circumstances, the High Court found insufficient grounds to wind up the company under sections 241(v) and 242 of the Companies Act, 1994. Accordingly, Company Matter No. 442 of 2022 was dismissed, and the Court directed that the relevant RJSC record be returned forthwith.
Case Details: Company Matter No. 442 of 2022; Justice Md. Toufiq Inam; Judgment delivered on 30 August 2026; Relevant provisions: Sections 241(v), 242 and 245 of the Companies Act, 1994.
BDLawPost / Masum
