Pre-existing dispute defeats Section 9 IBC claim where objections arose before the demand notice and were documented.

An operational creditor's Section 9 IBC application based on unpaid service invoices was rejected because the corporate debtor had raised a genuine pre-existing dispute before the demand notice. Emails and prior correspondence showed objections about manpower shortage, bill deficiencies, labour-law compliance, and the correctness of the amounts claimed, and the operational creditor's own admissions confirmed related labour complaints. Applying the settled rule that a dispute must predate receipt of the demand notice, the NCLT held the application not maintainable.

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Issues: Whether the operational creditor's application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was barred by a pre-existing dispute between the parties.

Analysis: The application was based on unpaid invoices for services rendered under the parties' agreements. The corporate debtor had, before the demand notice, repeatedly raised objections through emails regarding shortage of manpower, deficiency in bills, non-compliance with labour-law obligations, and the correctness of the amounts claimed. The record also showed correspondence predating the demand notice and admissions by the operational creditor that the employees had approached the Labour Commissioner. Applying the settled principle that a dispute must exist prior to receipt of the demand notice and that the adjudicating authority must reject a Section 9 application where such dispute is shown, the objection was held to be a genuine pre-existing dispute.

Conclusion: The Section 9 application was not maintainable and was rejected because a pre-existing dispute existed before the demand notice.

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