Pre-existing dispute bars insolvency admission where service deficiency complaints and invoice disputes arose before the demand notice.

An application under section 9 of the Insolvency and Bankruptcy Code was found not maintainable because contemporaneous e-mails and communications showed a pre-existing dispute over deficient services, machine breakdown, loss of work, and disputed invoices. The record indicated that these complaints were raised before the demand notice and before filing of the section 9 application, satisfying the requirement that the dispute must exist prior to the notice. Applying the settled principles for operational creditor claims, admission cannot be ordered where a prior dispute is evidenced on record, and the admission order was stated to be liable to be set aside.

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Issues: Whether the application under section 9 of the Insolvency and Bankruptcy Code, 2016 was liable to be admitted in the face of a pre-existing dispute between the parties regarding deficiency of service and the invoices raised.

Analysis: The record showed contemporaneous e-mails and communications from the corporate debtor raising complaints about defective and insufficient services, breakdown of the machine, loss of work, and disputing the bills well before issuance of the demand notice and filing of the section 9 application. The dispute was thus shown to exist prior to the demand notice, satisfying the test that the existence of dispute must be pre-existing. Applying the settled principles governing section 9, an application by an operational creditor cannot be admitted where such prior dispute is evidenced on record.

Conclusion: The section 9 application was not maintainable and the admission order was liable to be set aside in favour of the appellant.

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