Pre-existing dispute defeats section 9 insolvency claim, while enhanced threshold did not bar a pre-notification default-based petition.

The enhanced insolvency threshold of Rs. 1 crore did not bar the section 9 application because the relevant date for applying the threshold was the date of default, and the default here arose from 03.06.2017 onwards, leaving the petition maintainable for consideration. However, the record disclosed a genuine pre-existing dispute on quality of goods and related payment issues, supported by emails, internal correspondence, and meeting minutes predating the demand notice. As a real dispute had already been raised before the notice, the Adjudicating Authority could not conduct a detailed factual inquiry or treat insolvency as a recovery forum, and CIRP was declined.

---

---

Issues: (i) Whether the enhancement of the insolvency threshold to Rs. 1 crore barred the petition filed before the notification date, and (ii) whether the petition under section 9 of the Insolvency and Bankruptcy Code, 2016 was liable to be rejected for existence of a pre-existing dispute and lack of a fit case for initiation of CIRP.

Issue (i): Whether the enhancement of the insolvency threshold to Rs. 1 crore barred the petition filed before the notification date.

Analysis: The relevant date for applying the enhanced threshold is the date of default and not the date of filing of the petition. Since the default had arisen from 03.06.2017 onwards, the petition remained maintainable for consideration on merits notwithstanding the later notification.

Conclusion: The objection based on the enhanced threshold was rejected.

Issue (ii): Whether the petition under section 9 of the Insolvency and Bankruptcy Code, 2016 was liable to be rejected for existence of a pre-existing dispute and lack of a fit case for initiation of CIRP.

Analysis: The material on record showed a genuine dispute on quality of goods and related payment issues from 2017 itself, including emails, internal correspondence, and minutes of meeting preceding the demand notice. The dispute had already been taken to the MSME forum and was not a mere sham dispute. In section 9 proceedings, the existence of a real pre-existing dispute is sufficient to decline admission, and the Adjudicating Authority cannot enter a detailed factual inquiry or use the insolvency process as a recovery forum. The respondent's commercial solvency also weighed against initiation of CIRP.

Conclusion: The petition was not admitted and CIRP was declined against the corporate debtor.

Final Conclusion: The application failed on the ground of a genuine pre-existing dispute and the matter was left to be settled or pursued in appropriate proceedings outside the insolvency process.

Ratio Decidendi: A section 9 application must be rejected where the record discloses a real pre-existing dispute prior to the demand notice, because insolvency proceedings cannot be used as a substitute for debt recovery.

---