Limitation under SICA and absence of pre-existing dispute supported admission of an insolvency petition under the IBC.

An operational creditor's claim was treated as within limitation because the erstwhile SICA bar suspended recovery proceedings until the reference abated, and limitation was computed from the date that bar ceased. The debtor's quality objection was not accepted as a pre-existing dispute because it was raised only after statutory notice and no contemporaneous dispute was shown, so admission was not defeated on that ground. On the invoices and account materials, operational debt and default were found established, and the insolvency petition was admitted with CIRP and moratorium directions under the IBC.

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Issues: (i) Whether the operational creditor's claim was barred by limitation in view of the erstwhile sickness reference under the Sick Industrial Companies (Special Provisions) Act, 1985. (ii) Whether the defence regarding inferior quality of goods constituted a pre-existing dispute so as to defeat admission under the Insolvency and Bankruptcy Code, 2016. (iii) Whether the debt and default stood established for admission of the insolvency petition.

Issue (i): Whether the operational creditor's claim was barred by limitation in view of the erstwhile sickness reference under the Sick Industrial Companies (Special Provisions) Act, 1985.

Analysis: The claim arose while the corporate debtor was under SICA reference, and the bar under section 22 was treated as suspending recovery proceedings during that period. Since the reference stood abated only on 01.12.2016 and no sanctioned scheme had been shown to exclude the claim, the creditor was held entitled to compute limitation from the date the bar ceased to operate.

Conclusion: The claim was held to be within limitation, in favour of the operational creditor.

Issue (ii): Whether the defence regarding inferior quality of goods constituted a pre-existing dispute so as to defeat admission under the Insolvency and Bankruptcy Code, 2016.

Analysis: The alleged quality objection was raised only after receipt of the statutory notice, and no prior suit, proceeding, or contemporaneous dispute was shown. The objection was therefore treated as a belated defence and not a genuine dispute existing before the demand notice.

Conclusion: No pre-existing dispute was found, in favour of the operational creditor.

Issue (iii): Whether the debt and default stood established for admission of the insolvency petition.

Analysis: The invoices and account materials showed supply of goods and non-payment of dues, and the debtor's own reply did not displace the default. On the materials before it, the Bench found that operational debt and default were established and that the petition satisfied the requirements for admission.

Conclusion: Debt and default were held established, in favour of the operational creditor.

Final Conclusion: The petition was admitted and corporate insolvency resolution process commenced, with moratorium and consequential directions issued under the Insolvency and Bankruptcy Code, 2016.

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