Pre-existing dispute bars insolvency petition under the IBC where operational debt is genuinely contested and not undisputed.

Section 9 of the Insolvency and Bankruptcy Code, 2016 is maintainable only where an operational debt is unpaid and no pre-existing dispute is shown before service of the demand notice. A genuine, earlier and consistently maintained dispute, especially one supported by prior proceedings or adverse adjudications, takes the matter outside insolvency resolution and prevents the process from being used as a debt recovery tool. On the stated facts, the operational creditor's claim had already been rejected in earlier proceedings and liability remained disputed, so the basis for admitting the petition was absent; the Appellate Tribunal's interim order was therefore unsustainable.

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Issues: Whether a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable in the face of a pre-existing dispute and absence of an undisputed operational debt, and whether the Appellate Tribunal's interim order could stand.

Analysis: Section 9 can be invoked only when the operational creditor establishes an unpaid operational debt and the corporate debtor has not brought to notice any pre-existing dispute or record of dispute before receipt of the demand notice. The existence of a real dispute, supported by prior proceedings and earlier adjudications, takes the matter outside the scope of insolvency resolution. The insolvency process cannot be used as a substitute for recovery where the debt itself is seriously contested and the dispute is not spurious or illusory. On the facts, the claim had already been rejected in prior proceedings and the corporate debtor had consistently disputed liability, so the foundation for admission of the insolvency petition was absent.

Conclusion: The petition under Section 9 was not maintainable and the order of the Appellate Tribunal could not be sustained.

Final Conclusion: The appeal succeeded, the Appellate Tribunal's order was set aside, and the dismissal of the insolvency petition was affirmed.

Ratio Decidendi: Where a pre-existing and genuine dispute regarding the operational debt exists, the adjudicating authority must reject an application under Section 9 of the Insolvency and Bankruptcy Code, 2016 and insolvency proceedings cannot be used as a debt recovery mechanism.

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