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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: (i) whether the operational creditor had established default so as to maintain an application for initiation of corporate insolvency resolution process under the insolvency code; (ii) whether the respondent's plea of pre-existing dispute and limitation barred admission of the petition.
Issue (i): whether the operational creditor had established default so as to maintain an application for initiation of corporate insolvency resolution process under the insolvency code.
Analysis: The admitted issuance of the cheque for the claimed amount, its dishonour for insufficiency of funds, and the absence of any contemporaneous protest or documentary challenge to the debt were treated as evidence of liability. The reasoning proceeded on the basis that once a debt and default are shown, an operational creditor is entitled to seek admission of the application.
Conclusion: Yes. Default was held to be established and the petition was maintainable.
Issue (ii): whether the respondent's plea of pre-existing dispute and limitation barred admission of the petition.
Analysis: The alleged dispute was treated as an afterthought because it was not raised at the earliest stage and was unsupported by convincing contemporaneous material. The limitation objection was rejected on the footing that the cheque issued in 2017 evidenced subsisting liability and the application was filed within time.
Conclusion: No. The pleas of pre-existing dispute and limitation were rejected.
Final Conclusion: The application was admitted, CIRP was ordered to commence, and moratorium followed.
Ratio Decidendi: A dishonoured cheque acknowledging a subsisting operational liability, coupled with no credible contemporaneous evidence of dispute, is sufficient to establish default and defeat a plea of pre-existing dispute at the admission stage under the insolvency framework.
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