Section 9 insolvency petition rejected where foreign forum clause and pre-existing dispute showed no crystallised operational debt.

A section 9 Insolvency and Bankruptcy Code petition was found not maintainable where the contract vested interpretation and jurisdiction in Italy and parallel proceedings were already pending before the Tribunal of Vicenza. The dispute concerned payment adjustments, commission, and account reconciliation, making the controversy one for the agreed foreign forum rather than insolvency adjudication in India. The petition also failed because the claimed operational debt remained subject to reconciliation, set-off, and adjustment, with a pre-existing genuine dispute and no crystallised, undisputed default at the time of the demand notice. Insolvency proceedings could not be used to recover a disputed claim.

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Issues: (i) Whether the petition under section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable in view of the exclusive jurisdiction clause and the pending proceedings before the Italian forum. (ii) Whether a clear and undisputed operational debt existed so as to permit admission of the petition under section 9 of the Insolvency and Bankruptcy Code, 2016.

Issue (i): Whether the petition under section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable in view of the exclusive jurisdiction clause and the pending proceedings before the Italian forum.

Analysis: The agreement between the parties provided for interpretation in terms of the Italian version of the contract and vested jurisdiction in the courts in Italy. The dispute arose out of that agreement and related to payment adjustments, commission, and reconciliation of accounts. Proceedings were already pending before the Tribunal of Vicenza in Italy. The territorial and contractual setting showed that the controversy was one for the Italian forum and not for adjudication under the insolvency jurisdiction in India.

Conclusion: The issue was decided against the petitioner and in favour of the respondent; the petition was held not maintainable on jurisdictional grounds.

Issue (ii): Whether a clear and undisputed operational debt existed so as to permit admission of the petition under section 9 of the Insolvency and Bankruptcy Code, 2016.

Analysis: The liability claimed by the operational creditor was subject to reconciliation, set-off, and adjustment under the trade arrangement. The corporate debtor had sought reconciliation before the demand notice and had also made a part payment. On the record, the debt had not crystallised into an undisputed amount at the time of the demand notice. The dispute was genuine and pre-existing, and the petition was in substance an attempt to recover a disputed amount through insolvency proceedings.

Conclusion: The issue was decided against the petitioner and in favour of the respondent; no undisputed operational debt or actionable default was established for admission under section 9.

Final Conclusion: The petition could not be admitted because the dispute fell within the agreed foreign forum and the claim did not rest on a clear, undisputed and crystallised operational debt.

Ratio Decidendi: A section 9 insolvency petition is not maintainable where the claim is governed by a pre-existing bona fide dispute requiring reconciliation or adjudication, and insolvency jurisdiction cannot be used to recover an uncrystallised debt.

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