LEGAL PRINCIPLE: COMPANY LAW — Winding-Up — Inability to Pay Debts — Denial of Debt Amounts to Disputation Requiring Resolution Before Winding-Up
PRINCIPLE STATEMENT
Where the debt is not paid within the time allowed and the debt is bona fide disputed, a winding-up order may not be made. The creditor has a remedy of establishing his claim in the normal way.
RATIO DECIDENDI (SOURCE)
Per Kalgo, JSC, in Air Via Ltd. v. Oriental Airlines Ltd. (2004) NLC-132000(SC) at p. 29; Paras A–B.
"In a case where the debt is not paid within the time allowed and the debt is bona fide disputed, a winding-up order may not be made. In such a case the creditor has a remedy of establishing or proving his claim before the court in the normal way."
EXPLANATION / SCOPE
Denial of debt constitutes a disputation requiring resolution. The principle applies to company law. Winding-up cannot proceed on a disputed debt. The rule ensures proper adjudication. The creditor must file an ordinary action. The principle is well-established.
