Pre-existing dispute bars insolvency admission where only disputed MSME interest remains after principal payment.

A section 9 insolvency application was treated as non-maintainable where the principal debt was paid during pendency and the only surviving claim was disputed statutory interest under the MSME law. The adjudicating authority applied the principle that a real, plausible pre-existing dispute bars admission under the Insolvency and Bankruptcy Code. It also noted that the debtor's challenge to the creditor's MSME registration and related interest entitlement raised issues that could not be decided in insolvency proceedings like a civil suit. The application was therefore not admissible.

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Issues: Whether a petition under section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable when the principal dues had been paid during pendency and the only surviving claim was disputed interest claimed under the Micro, Small and Medium Enterprises Development Act, 2006; and whether the dispute regarding MSME registration constituted a pre-existing dispute barring admission.

Analysis: The principal amount stood paid during the pendency of the petition, leaving only the claim for interest. The claim for interest was founded on the Micro, Small and Medium Enterprises Development Act, 2006, but the Corporate Debtor disputed the Operational Creditor's MSME registration and contended that the entitlement to such interest required further examination. Applying the principle that the adjudicating authority must reject a section 9 application where there exists a real dispute supported by a plausible contention, the Authority found that the objection raised by the Corporate Debtor was not a patently feeble or unsupported defence. The Authority further held that it could not adjudicate upon the disputed entitlement to MSME benefits as a civil court would.

Conclusion: The dispute was held to be a pre-existing and plausible dispute, and the section 9 application was not admissible.

Final Conclusion: The insolvency petition failed because the surviving claim was only a disputed statutory interest claim, and the existence of a genuine dispute barred initiation of the corporate insolvency resolution process.

Ratio Decidendi: A section 9 petition must be rejected where, after payment of the principal amount, the remaining claim for interest is itself subject to a real and plausible dispute, including a dispute as to MSME entitlement, because the existence of such dispute bars admission under the Code.

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