Belated NBFC status and an unsupported arbitration filing do not by themselves create a pre-existing dispute under the IBC.

A belated NBFC objection will not by itself defeat maintainability under the IBC where the transaction was entered into through a corporate entity and the respondent did not disclose that status at the time of contracting or in the demand notice response. The note also explains that a mere application for interim relief under section 9 of the Arbitration and Conciliation Act, without commenced arbitration or supporting material showing a real dispute, does not establish a pre-existing dispute. On that reasoning, the insolvency petition was admitted, CIRP commenced, moratorium operated, and an interim resolution professional was appointed.

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Issues: (i) Whether the respondent, though registered as an NBFC, could be treated as a corporate debtor for the transaction in question and an application under section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable. (ii) Whether the reply notice and the pendency of proceedings under section 9 of the Arbitration and Conciliation Act, 1996 disclosed a pre-existing dispute so as to defeat the insolvency application.

Issue (i): Whether the respondent, though registered as an NBFC, could be treated as a corporate debtor for the transaction in question and an application under section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable.

Analysis: The respondent had entered the trading relationship in the name of a private limited company and executed the KYC documentation for trading in securities. Although the respondent held a certificate of registration from the RBI to carry on business as a non-banking financial institution and its objects included financial activities, that status had not been disclosed to the applicant at the time of the transaction or in the reply to the statutory notice. The Tribunal held that, for the transaction under consideration, the respondent could not escape liability by later raising the NBFC objection.

Conclusion: The respondent was treated as a corporate debtor for the present transaction and the application under section 9 was maintainable.

Issue (ii): Whether the reply notice and the pendency of proceedings under section 9 of the Arbitration and Conciliation Act, 1996 disclosed a pre-existing dispute so as to defeat the insolvency application.

Analysis: Mere filing of an application for interim relief under section 9 of the Arbitration and Conciliation Act, 1996, without commencement of arbitration or supporting material showing an actual dispute, did not establish the existence of a pre-existing dispute. The Tribunal applied the principle that the dispute must be real, supported by evidence, and not a spurious or feeble defence. On the record, the alleged counterclaim and the asserted dispute were unsupported, and the response to the demand notice did not displace the operational creditor's claim.

Conclusion: No legally effective pre-existing dispute was shown, and the defence was rejected.

Final Conclusion: The insolvency petition was admitted, CIRP was initiated, moratorium followed, and an interim resolution professional was appointed.

Ratio Decidendi: A belated assertion of NBFC status, not disclosed at the time of the transaction, will not by itself defeat maintainability under section 9 where the respondent contracted as a corporate entity, and a mere section 9 arbitration application without commenced arbitral proceedings does not constitute a pre-existing dispute under the IBC.

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