Pre-existing dispute under insolvency law is not established merely by pending cheque-dishonour proceedings.

Pendency of proceedings under Section 138 of the Negotiable Instruments Act, 1881 does not, by itself, constitute a pre-existing dispute for resisting an application under Section 9 of the Insolvency and Bankruptcy Code, 2016. A pre-existing dispute must exist before receipt of the demand notice, and mere recovery or cheque-dishonour proceedings are insufficient to show such a dispute. On the facts, the pending Section 138 proceedings were treated as an admission of debt rather than evidence of a real dispute, so the operational creditor's application remained maintainable and the appeal failed.

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Issues: Whether pendency of proceedings under Section 138 of the Negotiable Instruments Act, 1881 constituted a pre-existing dispute so as to render the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 not maintainable.

Analysis: The operational creditor's application had been admitted after finding debt and default. Under the scheme of the Insolvency and Bankruptcy Code, 2016, a pre-existing dispute must be shown to exist before receipt of the demand notice, and mere pendency of a proceeding for recovery or enforcement based on dishonour of cheque does not by itself establish such a dispute. On the facts, the pendency of the Section 138 proceedings was treated as an admission of debt rather than evidence of a real dispute pending before a court of law.

Conclusion: The pendency of proceedings under Section 138 of the Negotiable Instruments Act, 1881 did not amount to a pre-existing dispute, and the appeal failed.

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