Disputed and unreconciled accounts can defeat Section 9 insolvency admission when debt and default remain uncrystallized.

An application under Section 9 of the Insolvency and Bankruptcy Code, 2016 cannot be admitted unless the operational creditor establishes a clear operational debt and a crystallized default. Where invoices and ledger entries are met by the corporate debtor's contrary accounts, the correspondence shows a liability dispute, and the debit and credit entries remain unreconciled, the alleged debt is not ascertainable in summary insolvency proceedings. In that situation, the claim is better left to civil proceedings or arbitration rather than insolvency admission.

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Issues: (i) Whether the operational creditor had established an operational debt and default so as to maintain an application under Section 9 of the Insolvency and Bankruptcy Code, 2016; (ii) Whether the existence of disputed and unreconciled accounts prevented admission of the insolvency application.

Issue (i): Whether the operational creditor had established an operational debt and default so as to maintain an application under Section 9 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The records showed invoices and ledger entries relied upon by the operational creditor, but the corporate debtor produced its own accounts reflecting a substantially different balance. The correspondence between the parties, including the reply to the demand notice, showed that liability was disputed. The claimed amount had not been reconciled or conclusively admitted, and the material on record did not establish a clear, crystallized default.

Conclusion: The issue was answered against the operational creditor and in favour of the corporate debtor.

Issue (ii): Whether the existence of disputed and unreconciled accounts prevented admission of the insolvency application.

Analysis: The divergence between the parties' statements of account and the unresolved debit and credit entries made the exact debt incapable of ascertainment in summary proceedings. Since the amount due could be determined only after reconciliation, the application could not be admitted on the basis of an uncrystallized claim, and the matter was more appropriately left to civil proceedings or arbitration.

Conclusion: The issue was answered against admission of the application and in favour of the corporate debtor.

Final Conclusion: The insolvency application failed for want of established default and ascertainable debt, and the parties were left to pursue appropriate alternative proceedings.

Ratio Decidendi: An application under Section 9 of the Insolvency and Bankruptcy Code, 2016 cannot be admitted where the alleged operational debt and default remain disputed and cannot be conclusively ascertained in summary jurisdiction because the accounts between the parties are unreconciled.

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