Pre-existing dispute defeats Section 9 insolvency admission where dealings are on a running-account basis.

A Section 9 Insolvency and Bankruptcy Code petition was held liable to rejection where the record showed a genuine pre-existing dispute before the demand notice. The Tribunal noted that the dispute arose from rejection of a consignment in transit, a police report, and a related claim by the corporate debtor, while the parties' payments were made in consolidated fashion across multiple invoices, indicating a running account rather than isolated transactions. On that basis, the operational creditor failed to establish an undisputed operational debt due in the manner required for admission, and the petition was treated as not maintainable.

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Issues: Whether the petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 was liable to be rejected for existence of a pre-existing dispute and a running account between the parties.

Analysis: The parties' records showed a prior dispute arising from rejection of one consignment in transit, issuance of a police report and a claim by the corporate debtor under the carriage arrangement. The Tribunal also noted that the corporate debtor had made payments in consolidated fashion after multiple invoices were raised, which supported the conclusion that the dealings were in the nature of a running account rather than isolated invoice-wise transactions. On that basis, the Tribunal found that there was a dispute in existence well before the demand notice and that the operational creditor had not established an undisputed debt payable in the manner required for admission under Section 9.

Conclusion: The petition was not maintainable under Section 9 and was liable to be rejected because a pre-existing dispute existed prior to the demand notice.

Ratio Decidendi: An application under Section 9 of the Insolvency and Bankruptcy Code, 2016 must be rejected where the record shows a genuine pre-existing dispute between the parties prior to the demand notice, including where the dealings are on a running-account basis and the debt is not shown to be undisputed.

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