Pre-existing dispute defeats section 9 insolvency claim despite limitation being within time

The company petition was found to be within limitation because the extended completion date of the work order was treated as 28.02.2015 and the petition was filed on 09.01.2018, within three years; the limitation objection was rejected. However, pre-existing disputes were held to exist because, before the demand notice, the respondent had complained of defects, deficient work and delay, and the correspondence showed that these issues were already in controversy. As the dispute pre-dated the demand notice, the section 9 operational debt claim was not maintainable and the insolvency petition was dismissed, with other lawful remedies left open.

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Issues: (i) Whether the company petition was filed within limitation. (ii) Whether there were pre-existing disputes between the parties in respect of the claimed operational debt.

Issue (i): Whether the company petition was filed within limitation.

Analysis: The extended date for completion of the work order was treated as 28.02.2015, and the petition was filed on 09.01.2018. On that basis, the petition was within the three-year period. The record also contained material indicating that the extended completion date was admitted by the respondent in its audit report.

Conclusion: The limitation objection was rejected.

Issue (ii): Whether there were pre-existing disputes between the parties in respect of the claimed operational debt.

Analysis: The relevant date for examining dispute was the date of the demand notice. Before that notice, the respondent had raised complaints regarding defects, deficient work, and delay, and the correspondence showed that the petitioner itself acknowledged those issues and sought to complete work subject to payment. The materials did not establish that the alleged defects had been rectified or that the contractual work had been completed without dispute.

Conclusion: Pre-existing disputes were held to exist, and the operational creditor's section 9 petition was not maintainable.

Final Conclusion: The insolvency petition could not proceed because the dispute between the parties pre-dated the demand notice, and the petition was dismissed, leaving other lawful remedies open.

Ratio Decidendi: A section 9 insolvency petition is not maintainable where there is a genuine pre-existing dispute between the parties before issuance of the demand notice.

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