Section 9 insolvency requires clear, undisputed debt and default; it cannot be used as a recovery tool against a solvent debtor.

A Section 9 insolvency petition requires a clear, undisputed operational debt and default. Where invoices and correspondence do not show any mutual agreement on payment terms or interest, one-sided demands cannot establish the debt or default required to trigger CIRP. The existence of a dispute over delayed supplies and the basis for interest further shows that the claim is contested. Insolvency proceedings also cannot be used as a debt recovery mechanism against a solvent corporate debtor, especially where the record does not show insolvency or loss of substratum. On these facts, the petition was held not maintainable.

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Issues: (i) Whether the petitioning operational creditor established a clear and undisputed operational debt and default so as to invoke the insolvency process under Section 9; (ii) Whether a Section 9 petition can be used as a recovery mechanism against a solvent corporate debtor when the payment terms and interest claim are not supported by a mutual agreement.

Issue (i): Whether the petitioning operational creditor established a clear and undisputed operational debt and default so as to invoke the insolvency process under Section 9.

Analysis: The invoices and correspondence did not establish any mutual agreement on payment terms or on charging interest at 24% per annum. In the absence of an agreed contractual framework, one-sided invoices and emails could not create a unilateral right to claim interest or found a default in the manner required under the insolvency framework. The existence of a dispute regarding delayed supplies and the basis for the claimed interest further indicated that the debt was not clear and undisputed.

Conclusion: The operational creditor did not establish a clear and undisputed debt and default for the purposes of Section 9.

Issue (ii): Whether a Section 9 petition can be used as a recovery mechanism against a solvent corporate debtor when the payment terms and interest claim are not supported by a mutual agreement.

Analysis: The insolvency regime is intended to resolve genuine insolvency and not to function as a debt recovery forum. The corporate debtor had indicated willingness to pay according to a schedule, and the material on record did not show that it had become insolvent or that its substratum had been lost. In these circumstances, triggering CIRP to secure recovery of a disputed claim, particularly on the basis of an excessive interest demand unsupported by agreement, was inconsistent with the object of the Code.

Conclusion: The petition could not be maintained as a recovery device against a solvent corporate debtor.

Final Conclusion: The insolvency petition was not made out on the facts and law, and the request to commence CIRP failed.

Ratio Decidendi: A Section 9 insolvency petition lies only where there is a clear, undisputed operational debt and default, and it cannot be invoked as a substitute for debt recovery or to press an unsupported interest claim against a solvent debtor.

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