Pre-existing dispute bars Section 9 insolvency remedy despite a SEBI order, as maintainability fails on disputed operational debt.

A genuine pre-existing dispute over invoices raised by the operational creditor prevents invocation of the insolvency process under Section 9 of the Insolvency and Bankruptcy Code, 2016, because such a dispute goes to the root of maintainability. A regulatory order issued by SEBI does not, by itself, defeat the statutory remedy under the Code or operate as a standalone ground to reject the insolvency application. The practical effect is that the application failed on maintainability due to the prior dispute, even though the SEBI order could not independently bar initiation of the insolvency process.

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Issues: (i) Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable in view of an alleged pre-existing dispute regarding the invoices raised by the operational creditor. (ii) Whether an order passed by the Securities and Exchange Board of India could by itself defeat initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable in view of an alleged pre-existing dispute regarding the invoices raised by the operational creditor.

Analysis: The existence of a dispute prior to the demand notice was brought on record on the basis of arbitration proceedings and contest to the invoices. Where a genuine pre-existing dispute exists, the operational creditor cannot invoke the insolvency process under Section 9. The presence of such dispute goes to the root of maintainability.

Conclusion: The application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was not maintainable.

Issue (ii): Whether an order passed by the Securities and Exchange Board of India could by itself defeat initiation of corporate insolvency resolution process under the Insolvency and Bankruptcy Code, 2016.

Analysis: A regulatory order by SEBI cannot, by itself, nullify the statutory remedy under the Insolvency and Bankruptcy Code, 2016. However, that circumstance did not assist the appellant because the application still failed on the ground of pre-existing dispute.

Conclusion: The SEBI order was not a valid standalone ground to reject the insolvency application, but the appeal still failed on maintainability.

Final Conclusion: The insolvency application was rejected for want of maintainability due to the pre-existing dispute, and the appeal was dismissed.

Ratio Decidendi: A pre-existing dispute regarding the operational debt renders an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 not maintainable, and such an application cannot be sustained merely because a regulatory order exists.

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