A winding-up order should be granted when the debtor is unable to pay its debts unless a bona fide dispute exists, both subjectively and objectively supported by substantial grounds.

[1] This is an appeal against the dismissal of the appellant's petition to wind up the respondent company pursuant to the provisions of s 218(1)(e) and (i) of the Companies Act 1965 (CA), which read as follows:

"218. Circumstances in which company may be wound up by court.

(1) the court may order the winding up if - ...

(e) the company is unable to pay its debts;...

(i) the court is of opinion that it is just an equitable that the company be wound up;"

[2] That petition was founded on the alleged inability of the respondent to pay its debt to the appellant. By letter dated 1 August 2007, the respondent proposed to settle its debt of RM53,701. 65 (it being, RM50,000. 00 as principal, and RM3,701. 65 as accrued interest) in eight instalments (see p 57 of the Appeal Record). On the same day, the appellant accepted that proposal but counter-proposed a further term - the imposition of interest until full payment of the debt (see 58AR). By letter dated 12 August 2007, the respondent accepted those terms of the appellant and forwarded the 1st instalment to the appellant (see 59AR). By the terms of the settlement, those eight instalments were payable in eight consecutive months, the 1st of which was payable in July 2007. The respondent defaulted on the payment of the instalments. On 8 April 2008, the appellant issued a s 218 notice on the respondent (see 64AR). On 20 August 2008, the respondent belatedly paid the 3rd instalment (see 126AR), which the appellant acknowledged on 18 September 2008 (see 233AR). Meantime, on 2 September 2008, the appellant had presented the said petition which stated that the debt was RM36,574. 58 for goods sold and delivered, and that the accrued interest was RM7,302. 08 as at 3 April 2008. Later, by affidavit dated 17 October 2008, the appellant corrected the petition to reflect the payment of the 3rd instalment which had reduced the outstanding debt for goods sold and delivered, from RM36,574. 58 to RM29,861. 87.

[3] In the court below, the respondent resisted the petition on the following grounds: (i) the s 218 notice was bad, for reason that the computation of the debt and interest was wrong; (ii) the s 218 notice was premature, as the settlement had not been terminated; and (iii) the respondent was solvent on 31 December 2006, as its current assets exceeded its current liabilities.

[4] And those grounds found favour with the court below which approached the petition, first with the general remark that "the discretion whether to make an order for winding-up lies with the court ... a strong case has to be made out before the court will grant a petition", and then with the findings (i) that in view of the settlement, it was doubtful as to whether the debt as stated in the petition was due (see 24AR), (ii) that the debt was disputed and that therefore there was a reasonable explanation for non-payment (see 21AR and 24AR), (iii) that the settlement remained in force even after issuance of the s 218 notice (see 24AR), (iv) that the respondent was an ongoing and solvent company (see 24AR), (v) that the respondent was able to meet the terms of settlement, though late, and any delay in payment could be covered by the imposition of interest (see 25AR), and (vi) that a strong case for winding up had not been made out (see 24AR).

[5] Before us, it was again contended by the respondent that there was a bona fide dispute as to the debt. The finding of the court below was that there was a bona fide dispute as to the debt. But it was also at the same time the finding of the court below that the deb