Pre-existing dispute under the IBC defeats a section 9 insolvency petition where liability and quantum remain contested.

A section 9 IBC application is not maintainable where a pre-existing dispute on liability or quantum exists before the demand notice and petition. The record showed continuing contest over the amount payable, including prior proceedings in the executing court, High Court and Supreme Court, and the corporate debtor had already raised the dispute in response to the notice. Because the dispute was real and not spurious, hypothetical or illusory, the Adjudicating Authority must reject the insolvency application. The petition was therefore liable to be rejected against the operational creditor.

---

---

Issues: Whether the petition under section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable in view of a pre-existing dispute regarding the quantum of liability.

Analysis: The petition was founded on an award and subsequent execution proceedings, but the record showed continued contest between the parties on the quantum payable. Prior proceedings before the executing court, the High Court and the Supreme Court demonstrated that the amount due was still under adjudication and that the corporate debtor had already raised a dispute in response to the demand notice. Under section 9, once a genuine dispute exists and is not spurious, hypothetical or illusory, the Adjudicating Authority must reject the application. The evidence showed a real dispute on liability and quantum existing before the petition.

Conclusion: The petition was not maintainable and was liable to be rejected against the operational creditor.

---