Pre-existing dispute bars section 9 IBC admission where arbitration on the same debt remains pending and unresolved.

An operational creditor's section 9 IBC application is not maintainable where a genuine pre-existing dispute exists before the demand notice and filing of the petition. Pending arbitration over the same underlying claims, coupled with a reply disputing liability and referring to the continuing arbitral process, showed that the dispute had not ended. The Adjudicating Authority therefore could not admit the application under section 9(5)(ii)(d). The settlement and part-payment relied on by the operational creditor did not by themselves extinguish the dispute, and the application was rejected.

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Issues: Whether the operational creditor's application under section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable in the presence of a pre-existing dispute and pending arbitration proceedings.

Analysis: The record showed that the parties had invoked arbitration in relation to the same underlying claims, had nominated arbitrators, and had not obtained any order bringing the arbitral process to an end. The corporate debtor's reply to the demand notice disputed the liability and referred to the continuing arbitral process. In such circumstances, a dispute within the meaning of section 5(6) existed before the filing of the petition, and the Adjudicating Authority could not admit the application under section 9(5)(ii)(d). The settlement and part-payment relied upon by the operational creditor did not, by themselves, establish that the dispute had ceased to exist.

Conclusion: The application was not maintainable and was rejected in favour of the corporate debtor.

Ratio Decidendi: A section 9 insolvency application cannot be admitted where a genuine pre-existing dispute, including pending arbitration relating to the same debt, is shown to exist before issuance of the demand notice and filing of the petition.

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