Pre-existing dispute defeats Section 9 insolvency admission where supply quality, damages, and set-off were already contested.

A Section 9 CIRP petition is maintainable only where operational debt is due and payable and no pre-existing dispute exists. Here, the corporate debtor had raised complaints about defective and inferior supplies before the demand notice, issued notices claiming damages, and pursued mediation, showing that the dispute over quality, compensation, and set-off was bona fide and not an afterthought. On that basis, the insolvency process could not be used as a recovery mechanism, and the petition was not maintainable for admission.

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Issues: Whether the Section 9 petition for initiation of Corporate Insolvency Resolution Process was maintainable in view of the pre-existing dispute between the parties.

Analysis: The petitioning creditor sought admission on the basis of alleged unpaid operational debt arising from supply transactions. The corporate debtor had, before issuance of the demand notice, already raised detailed complaints regarding defective and inferior supplies, issued legal notices claiming damages, and initiated mediation proceedings. On the record, the dispute was not an afterthought and existed prior to the demand notice. The statutory test governing admission of a Section 9 application requires the Adjudicating Authority to be satisfied that an operational debt is due and payable and that no pre-existing dispute exists. The material placed showed a bona fide dispute concerning quality, compensation, and set-off, and the insolvency process could not be used as a recovery mechanism.

Conclusion: The petition was not maintainable and could not be admitted for initiation of CIRP.

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