Pre-existing operational dispute defeats insolvency admission where goods quality and pricing were genuinely contested.

A section 9 Insolvency and Bankruptcy Code petition could not be admitted because the claimed operational debt was not undisputed. Contemporaneous objections on the quality and performance of the supplied goods, supported by email correspondence, showed a bona fide pre-existing dispute, and substantial part-payments further indicated that the claim was contested. The tribunal also noted that the respondent was financially viable, reinforcing that the proceeding was being used as a debt recovery mechanism rather than for insolvency resolution. As the requirement of an undisputed default was not met, the petition was held not maintainable and dismissed.

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Issues: Whether the operational creditor established an undisputed operational debt and default so as to admit the petition under section 9 of the Insolvency and Bankruptcy Code, 2016, or whether the existence of a bona fide pre-existing dispute regarding quality of goods and pricing rendered the petition inadmissible.

Analysis: The Respondent had raised contemporaneous objections regarding the quality and performance of the supplied products, referred to email correspondence reflecting those disputes, and had made substantial part-payments against the supplies. The record also showed that the Respondent was a profit-making and financially viable company. In these circumstances, the unpaid amount was not treated as an undisputed debt suitable for insolvency initiation, and the proceeding was found to be in the nature of debt recovery rather than resolution of insolvency. The requirement of an undisputed debt for section 9 admission was not satisfied.

Conclusion: The petition was not maintainable and was dismissed in favour of the Respondent.

Ratio Decidendi: A section 9 petition under the Insolvency and Bankruptcy Code, 2016 cannot be admitted where there is a bona fide pre-existing dispute and the claimed dues are essentially sought to be recovered as a debt, rather than on account of an undisputed default.

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