Pre-existing dispute bars Section 9 insolvency action where claimed dues arise from contested contractual arrangements.

A Section 9 IBC application is not maintainable where a genuine pre-existing dispute exists before the demand notice, because insolvency proceedings cannot be used to recover contested contractual claims. The dispute here arose from a memorandum of understanding and settlement deed concerning transfer of properties and reciprocal obligations, with notices, replies and correspondence already showing disagreement. The presence of an arbitration clause and the contractual nature of the controversy indicated that the alleged debt was not a straightforward operational debt for CIRP initiation. The Tribunal therefore held that the summary insolvency jurisdiction was not attracted and rejected the request to commence CIRP.

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Issues: Whether the application under Section 9 of the Insolvency and Bankruptcy Code, 2016 was maintainable in view of the alleged pre-existing dispute and whether the debt claimed could be treated as an operational debt for initiation of CIRP.

Analysis: The claim arose out of a Memorandum of Understanding and a Settlement Deed concerning transfer of properties and reciprocal obligations between the parties. The record showed exchange of notices, replies, and correspondence raising dispute before presentation of the demand notice. The existence of an arbitration clause and the nature of the dispute indicated that the controversy concerned enforcement of contractual and corporate arrangements rather than a straightforward unpaid operational debt. The Tribunal applied the settled principle that insolvency proceedings under Section 9 cannot be used as a recovery mechanism and that, where a real dispute exists, the summary jurisdiction under the Code is not attracted.

Conclusion: The application was not maintainable and the request to commence CIRP was rejected.

Final Conclusion: The petition failed because the dispute was found to be substantive and outside the scope of Section 9 insolvency adjudication, leaving the parties to pursue other lawful remedies.

Ratio Decidendi: A Section 9 application cannot be admitted where a genuine pre-existing dispute exists regarding the claimed dues, as insolvency proceedings are not meant for recovery of contested contractual claims.

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